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INSIGHT: Watching Amazon—How a Hill Investigation Can Morph Into Criminal Inquiry

June 19, 2020, 8:00 AM

Amazon’s regulatory headache became a migraine in May when the House Committee on the Judiciary notified Amazon CEO Jeff Bezos that the company’s statements to Congress about its business practices “appear to be misleading, and possibly criminally false or perjurious.”

The committee called on Bezos to testify personally, threatening to subpoena him if he did not do so voluntarily.

The Judiciary’s letter was an unambiguous reminder that a congressional investigation into business practices can quickly transform into a criminal inquiry if the government believes the company or its representatives lied or obstructed the investigation. Bezos is going to face tough decisions about his own potential testimony, if and when it occurs, and all of them carry significant risks.

News Article Spurs Renewed Attention to Congressional Investigation

Congress has been investigating for almost a year whether Amazon used sales data from its independent, third-party sellers to develop its own competing private-label products. Its May 1 letter to Bezos was spurred by a Wall Street Journal article in late April reporting that Amazon in fact relied upon sellers’ proprietary data to price its private-label products at a competitive advantage in the marketplace. Amazon told the Journal that such activity by employees cited in the article would violate its policies and that it had opened an internal investigation.

The reported activity, if accurate, could call into question the July 2019 testimony of Amazon Associate General Counsel Nate Sutton before the Judiciary Subcommittee on Antitrust. Sutton told the subcommittee that Amazon does not use data from individual sellers to compete with them or to launch private products. The Judiciary Committee noted in the May 1 letter that Amazon also “submitted numerous written responses to the same effect to the Committee.”

Judiciary’s Threats and Potential for Criminal Prosecution

In its letter to Bezos, the Judiciary Committee invoked two federal criminal statutes that might apply in a potential criminal referral related to Amazon or its executives’ prior testimony: 18 U.S.C. § 1001 (false statements) and 18 U.S.C. § 1621 (perjury).

Interestingly, the Judiciary Committee did not cite 18 U.S.C. § 1505, which is the obstruction statute before congressional committees that also arguably applies. Sections 1001 and 1621 are favored tools in complex investigations because they allow prosecutors to charge defendants with lying rather than for any underlying criminal conduct. The committee clearly intended to put Amazon on notice that it might consider making a criminal referral to the Department of Justice if its concerns were not assuaged.

Any criminal prosecution of Amazon or its executives, whether pursuant to a referral from Congress or of the DOJ’s own initiative, would first have to contend with the public perception that the DOJ was carrying out threats that President Trump frequently levels at Amazon and Bezos.

After that, though, any prosecution would follow the typical false statement playbook. For a successful prosecution under either statute, the falsehood must be “material,” meaning that it has the “natural tendency to influence or [is] capable of influencing, the decision of the decision-making body to which it is addressed.” The Amazon executive’s prior testimony arguably would meet this standard since it’s centered on the subcommittee’s primary question: whether Amazon used third-party sellers’ data in developing its own products.

Importantly, neither statute has a recantation defense. Even where a timely recantation negates the criminal intent element of willfulness, that defense only applies when authorities have not learned of the false statements (not the case here).

Other common defenses, such as inadvertence, honest mistake, or carelessness also may be difficult for Amazon to invoke given the consistency of Amazon’s responses to the committee, both in oral testimony and in written responses. The DOJ would likely also interview any Amazon employees it could identify from the Journal’s reporting.

Tough Decisions Regarding Potential Future Testimony

Unlike CEOs from other tech giants, Bezos has avoided the congressional hot seat to date. It is unclear whether that streak will continue, however, given the current demand from Judiciary. Given the committee’s clear threat of potential prosecution, however, the risks of testifying are heightened even beyond normal.

The committee’s May 1 letter leaves Bezos and Amazon in a difficult predicament that they presumably will work through with extensive preparation with counsel. The committee has already indicated that it believes the company’s prior responses were criminally false or perjurious, so testimony consistent with them puts him in risky territory.

He could walk back prior blanket statements and responses by the company and its executives, but that still might not avoid a false statement prosecution related to the earlier statements. Perhaps the least likely scenario is one in which he invokes his Fifth Amendment rights rather than submit to questioning.

Either way, Amazon’s response will be worth watching for anyone interested in congressional investigations or the company’s future.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Bradley A. Marcus, counsel in the Washington, D.C., office of Buckley LLP, is a white collar and complex civil litigator representing corporate and individual clients in high-stakes civil and criminal enforcement actions and investigations. He also has extensive experience representing clients in the parallel and related civil proceedings that often stem from criminal or regulatory investigations.

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