Documents unearthed by Congress offer new window into Amazon’s war against one-time rival

Amazon CEO Jeff Bezos. (GeekWire File Photo / Kevin Lisota)

Amazon’s aggressive strategy to beat out a competitor a decade ago came back to haunt the company Wednesday in a Congressional hearing with CEO Jeff Bezos and other tech leaders.

Members of the House subcommittee on antitrust grilled Bezos on a heated price war Amazon fought with Diapers.com — and internal documents released by the panel Wednesday provide a window into the e-commerce giant’s strategy at the time.

Amazon viewed Diapers.com parent Quidsi as a top competitor, fearing new parents would be lured in by baby supplies and then become customers of the company’s other verticle, Soap.com.

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“These guys are our #1 short term competitor … [W]e need to match pricing on these guys no matter what the cost,” said Amazon executive Doug Herrington in an email released by the committee.

As detailed in Brad Stone’s 2013 book about Amazon, “The Everything Store,” Bezos reportedly threatened to eat massive losses and drive diaper prices to zero in order to win. The company also rolled out a new Prime-like subscription for moms and used other tactics to attract new parents.

“We had already initiated a more aggressive ‘plan to win’ against diapers.com in the diaper/baby space, which includes market-leading pricing on diapers … a free PRIME offering for new Moms, and a structured and marketed ‘Amazon Mom’ program … To the extent this plan undercuts the core diapers business for diapers.com, it will slow the adoption of soap.com,” another email from Herrington says.

Amazon was willing to lose $200 million in one month, Rep. Mary Gay Scanlon said during Wednesday’s hearing.

Scanlon asked, “Mr. Bezos how much money was Amazon willing to lose on this campaign to undermine Diapers.com?” Bezos said he didn’t recall.

“They expect to lose lots of money over the txt few yrs-this will make it worse,” said Peter Krawiec, another Amazon VP, in an email released by the subcommittee. “They also expect a lot of their growth to come from soap.com which is unproven and less growth from diapers.”

Amid the price war, Amazon acquired Quidsi for $545 million only to shut the company down less than seven years later.

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“After buying your leading competitor here Amazon cut promotions like Amazon.Mom and the steep discounts it used to lure customers away from Diapers.com and then increased prices of diapers for new moms and dads,” Scanlon said during the hearing. “Mr. Bezos did you personally sign off on the plan to raise prices after Amazon eliminated its competition?”

“I don’t remember that at all,” Bezos replied. “What I remember is we matched competitor prices.”

Though the documents and incident in question date back more than a decade, they’re relevant today as federal lawmakers and regulators consider whether antitrust laws are sufficient in the digital era.

Apple CEO Tim Cook, Facebook CEO Mark Zuckerberg, and Google CEO Sundar Pichai testified alongside Bezos during a hearing that capped off a year-long inquiry into the companies. It’s one of several investigations into the market dominance of Big Tech that could lead to new laws if Congress takes action or penalties by enforcers like the FTC and DOJ.

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