Amazon Consultant Pleads Guilty in Bribe Plot to Aid Merchants
(Bloomberg) -- A prominent Amazon.com Inc. consultant pleaded guilty Thursday to bribing company employees in a scheme to give online sellers a competitive advantage that prosecutors say were worth $100 million.
Most Read from Bloomberg
Toronto-Dominion Becomes Biggest Bank Short With $3.7 Billion on the Line
China’s Yuan Replaces Dollar as Most Traded Currency in Russia
Ephraim “Ed” Rosenberg was the final holdout among five US-based defendants accused of paying off Amazon employees in exchange for confidential company data that, among other things, helped them steer business to some merchants and shut out their competitors.
Four other people have already pleaded guilty, and two of those were sentenced to prison. One former Amazon employee who lives in India and allegedly accepted bribes was indicted but never arraigned.
The scheme, which began as early as 2017, seemed plucked from a Hollywood script, with payments criss-crossing the globe via MoneyGram, PayPal and suitcases stuffed with cash sent via Uber.
Rosenberg, 47, apologized for his actions Monday in a LinkedIn post, reversing earlier statements insisting he was innocent. The highest-profile of the defendants, he hosted networking events for Amazon sellers in hometown New York and also runs a Facebook page with 10,000 followers that features tips about selling on Amazon.
“On some occasions, I paid bribes, directly and indirectly, to Amazon employees,” Rosenberg said. “These actions were against the law.”
Amazon Merchant Kicked Off Website Spent $200,000 to Get Justice
Federal officials in 2020 charged Rosenberg and other consultants with paying Amazon employees in India more than $100,000 in bribes to give select Amazon merchants an advantage over competitors selling goods ranging from electronics to dietary supplements.
Some of the defendants got products removed for safety issues put back on the site, according to the indictment. For a few hundred dollars merchants could get an Amazon insider to erase negative customer reviews about their products. And $5,000 would buy a “takedown,” in which company consultants conspired to eliminate a competitor from the site by buying its products and leaving negative feedback that they knew would trigger a suspension of the product.
Rosenberg could face up to five years in prison and a fine of as much as $250,000. His sentencing, scheduled for a later date, will close an embarrassing chapter for Amazon that revealed the Wild West mayhem playing out behind the scenes on the popular web store, where some 2 million merchants compete for a piece of the $746 billion shoppers spend there annually.
Amazon maintains its algorithms and customer reviews steer shoppers to the best products offered at the best prices. The bribery scheme showed how company employees can make money on the side by manipulating the system. Amazon consultant Chris McCabe, who previously worked for Amazon, said the company should be more transparent about what it does to enforce rules on the site and monitor its own employees to make sure they aren’t taking bribes.
“A dangerous precedent has been set,” said McCabe, who specializes in helping merchants appeal account suspensions. “Amazon employees know they can have a lucrative side hustle selling internal information.”
Amazon spokesperson Mira Dix said the company notified law enforcement about the scheme and cooperated with the investigation.
“We have robust systems in place to detect suspicious behavior that we regularly improve upon, and teams who investigate, stop prohibited activity, and proactively report this information to law enforcement and the relevant authorities,” she said.
Rosenberg still has sympathizers among merchants critical of Amazon’s practices, which can include shutting businesses down without warning or a clear explanation. Amazon suspends merchants for selling counterfeit or dangerous products and violating other policies, but some merchants allege they’ve been kicked off the site unfairly and have little recourse, leaving them locked out of their businesses.
“I have seen a lot of sellers that were unfairly suspended by Amazon,” said Chad Rubin, who sold vacuum cleaner parts on Amazon and now sells software to online merchants. “They got their livelihoods back with Ed Rosenberg’s help. This does not invalidate the bad things he did, but he has had a positive impact as well.”
Others were less forgiving because the ring sabotaged competitors, which is taboo in the tight-knit community of Amazon merchants.
“This isn’t some Robin Hood fantasy,” said James Thomson, a former Amazon executive who is now an e-commerce consultant. “He found a way in and exploited it to make a lot of money for himself and his clients all while pretending to be a leader of this community.”
Most Read from Bloomberg Businessweek
Paris’s Air Taxi Stations Could Be Ready Before the Taxis Are
Thanks to Putin, Business Is Booming for Germany’s Defense Contractors
©2023 Bloomberg L.P.