Amazon Versus The White House: Counterfeits and Contract Disputes

Amazon (NASDAQ: AMZN) has once again been in the news recently, with further tensions between the online marketplace and the federal government's efforts to tackle the trade in counterfeit online. The White House and federal agencies insist that this is simply part of a broader effort to crack-down on the trade in counterfeit goods, that other platforms such as Alibaba (NYSE: BABA) and eBay (NASDAQ: EBAY) will likewise be affected.

However, this is likely to be cold comfort to the tech giant whose CEO, Jeff Bezos, also owns The Washington Post. Particularly damaging is the threat, tabled in December, to add Amazon's overseas websites to the U.S. Trade Representative's Office (USTR) annual list of 'Notorious Markets' known to facilitate trade in counterfeit goods, and thereby subject to particularly strong scrutiny. It's worth noting that this list has previously included Taobao.com, which is owned and operated by the Alibaba holding group.

Citing the damage counterfeiting does to "brick-and-mortar retailers," as well as workers, intellectual property rights holders, White House trade advisor Peter Navarro defended the action. The actions taken to clamp down on the trade of counterfeit goods, he outlined, would be taken indiscriminately, and are a result of the signing of a "phase one" trade deal between the U.S. and China by President Trump. The deal, signed in January, includes stipulations that require both countries to "combat the prevalence of counterfeit or pirated goods" by taking "effective action" when platforms fail to prevent intellectual property infringement.

A pattern of discrimination? 

However, for Bezos, this may represent little more than the latest in a longstanding series of discriminatory acts Amazon has faced under the Trump administration. More noteworthy, and according to Amazon, blatant was their loss of a $10 billion contract to provide cloud computing services to the Pentagon, a decision which was fraught by controversy even before it was made. Amazon alleges that the decision to pick Microsoft (NASDAQ: MSFT) over them for the JEDI project was the result of personal attacks by Trump behind the scenes.

Amazon has since officially appealed the decision, citing discrimination despite claiming to be better qualified than Microsoft to provide the required services. It is not, however, a simple one-sided story; Oracle (NYSE: ORCL), since the beginning mounted a vocal lobbying campaign decrying the cozy relationship between the Pentagon and Amazon, pointing to Defense Department employees who had done work for Amazon Web Services (AWS). 

The crux of the issue.

What, then is the origin of this apparent dispute between the two billionaires? If you were to read Twitter, you might be led to believe that the President merely wants Amazon to pay more tax. However, given Trump's own stance toward paying tax, that would seem to expose him to charges of hypocrisy. Or perhaps it is Bezos' ownership of The Washington Post, frequently seen as an opponent of the Trump administration. What is clear is that the longstanding bitterness between the pair isn't going to go away any time soon.

Whatever the cause behind this tenacious bitterness between the pair, it would seem that Amazon's stock is more than resilient to disputes with the President and setbacks like that caused by the loss of the JEDI contract. Spurred by unprecedented demand as the COVID-19 crisis drags on, its stock price hit an all-time high of $2,283.32 per share, making Amazon's market cap more than $1.1 trillion.

So, if it's merely a matter of keeping the tech giants on their toes, other targets, such as Apple (NASDAQ: AAPL) or Facebook (NASDAQ: FB), which remains the subject of ongoing scrutiny may be more appropriate until fortunes change for Amazon.

MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.