A Campaign to Take Down Amazon

Wall Street Journal

Business

A ‘Grass-Roots’ Campaign to Take Down Amazon Is Funded by Amazon’s Biggest Rivals

Walmart, Oracle and mall owner Simon Property Group are secret funders behind a nonprofit that has been highly critical of the e-commerce giant.

By James V. Grimaldi

September 20, 2019 11:40 EDT

Walmart, Oracle and mall owner Simon Property Group are secret funders behind a nonprofit that has been highly critical of the e-commerce giant

About 18 months ago a new nonprofit group called Free and Fair Markets Initiative launched a national campaign criticizing the business practices of one powerful company: Amazon.com Inc.

Free and Fair Markets accused Amazon of stifling competition and innovation, inhibiting consumer choice, gorging on government subsidies, endangering its warehouse workers and exposing consumer data to privacy breaches. It claimed to have grass-roots support from average citizens across the U.S, citing a labor union, a Boston management professor and a California businessman.

What the group did not say is that it received backing from some of Amazon’s chief corporate rivals. They include shopping mall owner Simon Property Group Inc. , retailer Walmart Inc. and software giant Oracle Corp. , according to people involved with and briefed on the project. Simon Property is fighting to keep shoppers who now prefer to buy what they need on Amazon; Walmart is competing with Amazon over retail sales; and Oracle is battling Amazon over a $10 billion Pentagon cloud-computing contract.

The grass-roots support cited by the group was also not what it appeared to be. The labor union says it was listed as a member of the group without permission and says a document purporting to show that it gave permission has a forged signature. The Boston professor says the group, with his permission, ghost-wrote an op-ed for him about Amazon but that he didn’t know he would be named as a member. The California businessman was dead for months before his name was removed from the group’s website this year.

Free and Fair Markets, or FFMI, declined to reveal its funders or disclose if it has directors or a chief executive.

“The bottom line is that FFMI is focusing on the substantive issues and putting a spotlight on the way companies like Amazon undermine the public good—something that media outlets, activists, and politicians in both parties are also doing with increasing frequency,” it said in a statement in response to questions from The Wall Street Journal. “If Amazon can not take the heat then it should stay out of the kitchen.”

The creation of a group aimed solely at Amazon is an indication of the degree to which competing companies have coalesced to counter the growing and accumulated power of Amazon and how far competitors are increasingly willing to go to counter-strike. Lobbyists that exaggerate the extent of their grass-roots support—a practice known as “AstroTurf lobbying”—are common in Washington, but it is rare for a nonprofit group to be created for the sole purpose of going after a single firm.

Amazon is facing additional opaque opposition as well, with websites and articles popping up portraying the software giant as the Evil Empire. The website Monopolyamazon.com, which does not disclose who is behind it and registered its web address anonymously, includes a handful of articles calling on the Defense Department to reject Amazon’s bid for a $10 billion cloud-computing contract. For months last year, an anti-Amazon dossier circulated in Washington alleging conflicts of interest in the Pentagon procurement process and a chart from the document later reached President Trump before he asked for a review of the Amazon bid.

Free and Fair Markets is run by a strategic communications firm, Marathon Strategies, that works for large corporations, including Amazon rivals. Marathon founder Phil Singer is a veteran political operative who has worked as a top aide to Democrats Sen. Chuck Schumer of New York and President Bill Clinton.

In a statement, Mr. Singer defended the group. “FFMI is not obligated to disclose its donors and it does not,” Mr. Singer said.

Marathon initially asked for a fee of $250,000 per company to fund the anti-Amazon group, according to a person at one of the companies approached. Among those invited to fund the group but declined were a trade association that includes members who compete with Amazon, and International Business Machines Corp., according to people familiar with the contacts. IBM, which declined to comment, previously was a client of Marathon.

In a statement, Amazon said, “The Free & Fair Markets Initiative appears to be little more than a well-oiled front group run by a high-priced public affairs firm and funded by self-interested parties with the sole objective of spreading misinformation about Amazon.”

Simon Property, the world’s largest mall landlord, declined to comment. Simon does not have any brick-and-mortar Amazon stores in its roughly 200 malls, outlets and open-air centers in the U.S., whereas its peers with smaller portfolios count multiple Amazon stores in theirs. The Indianapolis-based landlord recently launched its own online shopping platform, Premiumoutlets.com.

Walmart funds the organization indirectly by paying an intermediary that pays for Free and Fair Markets, according to sources familiar with the arrangement. Walmart is a client of Marathon.

Walmart spokesman Randy Hargrove said, “We are not financial supporters of the FFMI but we share concerns about issues they have raised.” Mr. Hargrove declined to comment further.

The group’s aim is to sully Amazon’s image on competition, data-security and workplace issues, while creating a sense of grass-roots support for increased government regulatory and antitrust enforcement, according to people familiar with the campaign.

Free and Fair Markets has lobbied the government for legislationand investigations of Amazon, sent dozens of letters and reports to Congress and staff, according to congressional staffers, published scores of op-eds in local and online media and tweeted hundreds of social media posts blasting Amazon.

Over the past year, many of the actions advocated by the group have gained traction. Amazon has come under increasing antitrust scrutinyfrom the Department of Justice, Federal Trade Commission, states attorneys general and the European Union. In New York, Amazon backed out of plansto open a second headquarters in Long Island City after facing political opposition. Free and Fair Markets campaigned against government subsidies to support the site and tweeted more than 300 times on the topic.

Oracle provided financial support as part of an all-out strategy to stop Amazon from getting a $10 billion mega-contract to handle cloud computing for the Defense Department. The Pentagon eliminated Oracle as a bidder in the first round. Kenneth Glueck, who runs Oracle’s office in Washington, confirmed that the computer technology firm has contributed to the effort.

A goal of the organization was achieved in July when President Trump said he wanted to conduct a review of the contract. In August, the secretary of defense said he was investigating conflict-of-interest allegations surrounding the $10 billion contract known as Joint Enterprise Defense Infrastructure, or JEDI. At the urging of President Trump, the bid award has been put on hold during the review.

Mr. Trump, a frequent critic of Amazon, cited complaints about the project from several of Amazon’s competitors, which in addition to Oracle included IBM and Microsoft Corp., saying he had heard the contract “wasn’t competitively bid.” The contract has not been awarded and Microsoft remains one of the two remaining bidders.

Though Free and Fair Markets has contacted members of Congress and the administration, it has not registered as a lobbying organization. Such groups are required to file with Congress if more than 20% of their work involves lobbying. Marathon said it complies with lobby disclosure rules.

The group’s chief spokesman is Robert Engel, the retired chief executive of CoBank, an agriculture bank in Denver. Mr. Engel has published more than 20 op-eds blasting Amazon in print and online news publications across the country including in The Philadelphia Inquirer, Pittsburgh Post-Gazette, Houston Chronicle, The Hill and RealClearPolicy.com.

None of the articles notes that Mr. Engel’s group is funded by rivals of Amazon.

A spokeswoman for The Hill said the publication was unaware of the funding sources and failure to disclose such payments violates a standard written agreement all op-ed writers are required to sign.

Sandy Shea, managing editor of opinion for the Inquirer’s parent company, the Philadelphia Media Network, said, “We aren’t equipped to investigate the makeup or structure of a nonprofit that submits a piece.”

Bill Zeiser, RealClearPolicy editor, said RealClearMedia publishes “commentary on politics and public policy from a wide array of sources. These submissions are assessed on their editorial merits.”

Representatives of the Post-Gazette and Chronicle did not respond to emails.

In an interview earlier this year, Mr. Engel said the motive of the group was not to promote the views of Amazon’s rivals. He said Amazon has been the only target because its business tactics run counter to the group’s goal of free and fair markets. “The one organization that feels it stands above that is Amazon,” Mr. Engel said.

Marathon did not make Mr. Engel available for comment a second time after the Journal determined that rivals were funding the group.

Mr. Engel and his group have been quoted in publications, including once each in The Wall Street Journal and The New York Times. None said who funded the group.

One article about Free and Fair Markets was commissioned by Marathon.

Last October, an Iowa writer and consultant, Jeff Patch, published an article on RealClearPolicy.com, a news website known for political coverage, about a report by Free and Fair Markets critical of Amazon’s record of hiring and firing women. “Many [women] were fired after Amazon concocted pretexts for their terminations,” Mr. Patch wrote.

Mr. Patch, who has worked as a journalist and a staffer for a Republican congressman and conservative think tanks, did not disclose in his article at the time that he was a paid contractor for Marathon.

Bank statements and invoices reviewed by the Journal show that Mr. Patch billed Marathon, and was paid thousands of dollars for promoting a variety of Marathon projects. One line item on Mr. Patch’s spreadsheet of outstanding invoices noted $1,175 for placing an article, subject: “Amazon piece.”

Mr. Patch said the documents referred to by the Journal were “unrecognizable” and said “I have been the target of an ongoing misinformation campaign.” He did not address directly the question of whether he was paid by Marathon.

Marathon said it has “engaged Mr. Patch for editorial and research services in the past.”

RealClearMedia Group executive editor Carl Cannon said the article was an unpaid guest op-ed. The editors who published the piece are no longer with RealClearPolicy and Mr. Zeiser, the current editor, said his predecessors “were unaware that the author was being paid by Amazon’s business competitors.”

Free and Fair Markets has tweeted more than 1,060 times and produced glossy videos, some of which it has circulated through thousands of dollars in paid advertising, according to Pathmatics, an independent company that tracks social-media ads. A review of the tweets shows that aside from four tweets about FoxConn Technology Group, which assembles Amazon’s smart speakers, all of the tweets are about Amazon or an Amazon-related issue. The tweets have attacked Amazon on several fronts, including antitrust, worker rights, data privacy, soliciting subsidies from local governments for its second headquarters and its bid for the Pentagon cloud contract.

Marathon officials said the group will expand to address other companies’ abuses. “The organization has started looking at FoxConn and is preparing to scrutinize other tech giants,” Marathon’s statement read. Taiwan-based FoxConn, a major supplier also to Apple Inc., got $4 billion in public support to locate some of its operations in Wisconsin.

More than two dozen tweets are particularly critical of Amazon’s bid for the cloud-computing JEDI contract.

One tweet said, “As if $1.5 billion in state and local corporate welfare wasn’t enough, @amazon wants $10 billion more from American taxpayers to host the @DeptofDefense most sensitive data,” and then linked to a list of stories that recounted the complaints of a primary opponent for the contract, Oracle—mainly that the technical specifications in the JEDI request for bids had been “rigged in favor of a single provider: Amazon.” Oracle sued in an attempt to block the Pentagon from awarding the contract, but a federal judge ruled in July that the bid could proceed.

Amazon has previously said that Oracle’s claims are “meritless and a desperate attempt to distort the facts”

None of the members listed by Free and Fair Markets on its website seemed to have an obvious issue with the cloud-computing contract or several other of the group’s issues. 

When the Journal began inquiring with the members about their reasons for being listed—some did not know their names were posted on the website—the group took them down.

Marathon said, “The names of the groups listed on the site were removed at their request after we heard complaints about some receiving harassing phone calls” from journalists.

One listed member, Aubrey Stone, was founder and head of the California Black Chamber of Commerce. He died in September 2018. His name remained listed as member until at least June and wasn’t removed until the Journal contacted the group.

Maria Gillette, a member of the largely inactive Carbondale Tea Party outside of Scranton, Pa., is listed as an advisory member of Free and Fair Markets. Ms. Gillette, known in her small community for appearing in national media in 1974 after seeing an unidentified flying object, said she thought the group was about free trade—not Amazon.

The New England Convenience Store & Energy Marketers Association is listed as a member, and Jonathan Shaer, executive director, said the group is aligned with its stated principles but does not share the anti-Amazon animus. Mr. Shaer said his association “hasn’t had any active involvement in any of the Initiative’s activities.”

Benyamin Lichtenstein, a business professor at the University of Massachusetts Boston, said he was contacted out of the blue by a Boston corporate public relations firm last year about signing his name to an op-ed opposed to Boston’s bid for Amazon’s second headquarters. The firm sent a draft of the op-ed that called on Boston politicians to “reject an Amazon headquarters for the sake of small businesses.” The PR official wrote in an email to Mr. Lichtenstein, “If you are happy with the draft we can submit it as is,” according to a copy of the email reviewed by the Journal. The article was pitched to Boston newspapers and was eventually published in DigBoston.com.

Chris Faraone, editor-in-chief of DigBoston, said Mr. Lichtenstein first submitted the article, but that DigBoston didn’t publish it until receiving an email from the same public-relations representative who had initially contacted the professor.

“As for whether Lichtenstein wrote the piece himself, we assumed that was the case, but if it wasn’t, we assure you that we’re no more surprised to hear that than we are when politicians or celebrities use ghostwriters,” Mr. Faraone said.

Mr. Lichtenstein said he agreed to sign his name to the article, to which he made some changes and checked citations, because he believes in advocating for small businesses.

Told he was listed online as a member of the group, Mr. Lichtenstein said, “Wow. I had no idea.” He said the group had inflated his role.

In a statement, Marathon said, “All of the individuals and groups that we work with have full editorial control and input on any materials they put their names on. In fact, those who play a more formal role with the group sign agreements that clearly spell out the mission and vision of the group.”

Mr. Singer provided the Journal a copy of Mr. Lichtenstein’s signed agreement.

Service Employees International Union Local 721, which represents more than 95,000 workers in Southern California, was named as a member without permission, said Coral Itzcalli, communications director. “We have zero involvement with that organization,” she said. After being contacted by the Journal, the union’s attorney sent a cease-and-desist letter demanding the removal of the union from the list of members. A few days later, it was.

Asked for comment, Marathon emailed to the Journal a membership agreement that the agency said had been signed by Gilda Valdez, the chief of staff for the union local, dated July 23, 2018. The firm also provided a statement from Juan Carlos Mendez, president of Churches In Action, a Christian community group in South Gate, Calif., stating that he had asked Ms. Valdez to join the group and had “secured her signature of FFMI’s consent form.”

But Ms. Valdez said that the signature on the documents provided by Marathon was not hers.

“I did not sign on with this group,” she said. “Their real motive for listing us as supporters remains unknown to us.”

—Sarah Nassauer, Esther Fung and Jay Greene contributed to this article.