A founding Amazon employee supports the idea of splitting Jeff Bezos' empire in two

AP Photo/Wilfredo Lee

Amazon's role as a marketplace for merchants and a direct seller has become one of the most contentious areas of the business.

• One of Amazon's first employees is supporting calls to split the company in two.
• Former programmer Paul Davis told Recode that it is "not good" for the company to operate as both a direct seller and a marketplace. "They have complete access to every single piece of data and can use that to shape their own retail marketplace," he said.
• Amazon's role as both a direct seller and a platform for other merchants has come under intense scrutiny in recent months, prompting investigations from both US and EU regulators.
• Visit Business Insider's homepage for more stories.

One of Amazon's first employees, who was part of the founding team that set the company up in 1994, has come out in support of recent calls to split the company in two.

In an interview with Recode's Jason Del Rey, Paul Davis, a former programmer at Amazon and the second employee that Amazon hired, said he believes Amazon's marketplace for third-party sellers should be split out from its core retail business.

"There's clearly a public good to have something that functions like the Amazon Marketplace," he told Recode on Friday. "If this didn't exist, you'd want it to be built. What's not valuable, and what's not good, is that the company that operates the marketplace is also a retailer. They have complete access to every single piece of data and can use that to shape their own retail marketplace."

He added: "They're not breaking any agreements. They're just violating what most people would assume was how this is going to work: 'I sell stuff though your system [and] you're not going to steal our sales.'"

Amazon's role as both a direct seller and a platform for other merchants has come under intense scrutiny in recent months and been called out by both politicians and US and EU regulators after reports surfaced that Amazon was using the data from its top sellers to create its own private label products.

Amazon has previously denied that it uses individual sellers' data to determine which private label products to launch; it told regulators in November that it uses only "aggregated data" from its third-party sellers to improve its overall business.

A spokesperson for Amazon did not immediately respond to Business Insider's request for comment.

The main concern for regulators is whether the company is so dominant that it's impossible for others to compete.

"We need to ensure that large online platforms don't eliminate these benefits through anticompetitive behavior," Competition Commissioner Margrethe Vestager, who is leading a EU investigation into its dual role as a marketplace and a seller, said in a statement in July. "I have therefore decided to take a very close look at Amazon's business practices and its dual role as marketplace and retailer, to assess its compliance with EU competition rules," she added.

Amazon's third-party platform has become an important area of its business and has been outpacing its core business for years - third-party sellers now make up for more than 58% of the physical gross merchandise sold on Amazon and sales have grown from $0.1 billion in 1999 to $160 billion in 2018.

"To put it bluntly: Third-party sellers are kicking our first-party butt. Badly," Amazon CEO Jeff Bezos said when reporting these numbers in April.

While Davis hasn't been at the company for over two decades he told Recode that he still feels some responsibility for the power that Amazon wields today.

"I doubt there's a single line of code or concept that dates back to when I was there," he said, adding: "Emotionally, I do feel some kind of culpability."

Business Insider reached out to Davis on LinkedIn for additional comment but did not immediately hear back.

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