Astroturf Exposé Reveals “Swampetition” at Work
A story in Friday’s Wall Street Journal uncovered that competitors of Amazon surreptitiously funded a front group masquerading as a grassroots nonprofit to attack the Seattle-based retailer. The story provides another example of “swampetition,” the “strategy of persuading regulators to hamstring competitive rivals, competing not in the market but in the political swamp.”
As revealed by the Journal, Amazon rivals including Oracle, Walmart, and shopping mall owner Simon Property Group all backed the “Free and Fair Markets Initiative,” to exhort regulators into taking various actions against Amazon. In at least one case, support for the group was masked by funneling it through an intermediary. While the group claimed to have grassroots support, individuals contacted by the Journal generally denied being members. (In one case the individual was long dead.) The Journal article explains that this strategy of falsifying grassroots support is commonly referred to as “AstroTurf lobbying” — sometimes simply “astroturfing.”
At times, established firms that face serious competitive challenges in the market will turn to political economy, aiming to manipulate regulators into undermining an agile and disruptive competitor. Criticism of the disruptive competitor is often dressed up as consumer protection, while the competitor’s role in the narrative is downplayed, or, like here, disguised with front organizations. Here, the front group’s attacks contended that Amazon’s aggressive price-cutting was detrimental to the public good, and aimed to “sully Amazon’s image on competition, data-security, and work place issues.” (This is not Oracle’s first foray into backing a shadow group to attack a rival; it previously funded an anti-Google entity called the “Campaign for Accountability.”)
The tactic is not unique to Oracle or Amazon’s competitors, however. For example, industries threatened by sharing economy developments have recently used this strategy with some success, backing groups to criticize their upstart online rivals. A hospitality sector-backed anti-Airbnb group attacked short-term rental services with deceptive ads in New York and Washington, DC. (Hotels celebrated their ability to raise prices after successfully hamstringing Airbnb in New York City.) Ridesharing services have encountered similar tactics, as taxicab providers sought to persuade municipal regulators into hobbling their online competitors.  . And, as discussed here before, horse-related industries used the same ploy a century ago, slowing the adoption of automobiles in cities across America.
The revelations in the Journal article help to explain a curious phenomenon in Washington, DC: the growing disconnect between policymaker and public sentiment about prominent Internet services. While Washington is consumed with a noisy debate about the value of leading Internet firms in society, consumers regularly rate these companies among their most admired, and workers identify these companies as where they would most like to work. The policymaker-oriented focus of astroturf efforts such as the one exposed by the Journal on Friday may provide some explanation for this.