Johnson & Johnson (NYSE: JNJ) is in the midst of a product battle with Amazon.com Inc. (NASDAQ: AMZN). Johnson & Johnson, a company involved in various aspects of health care from research to production, has been facing off against the internet sales superstore. Speaking to people knowledgable of the discussions, the Wall Street Journal reports that Johnson & Johnson is concerned Amazon.com is not preventing third-party vendors from selling expired Johnson & Johnson products, such as Tylenol.
The paper further reports that Johnson & Johnson attempted to pull products from the website earlier this year, but has resumed selling certain products directly to Amazon.com. A spokeswoman for Johnson & Johnson’s consumer-products unit, Sandra Pound, said ”The most important thing for us is that the products reaching our consumers’ hands are the quality they expect and give them the experience they deserve.”
The sources explain this was not the experience they found using third-party associates of Amazon.com. Instead, products were sold that were within a year of expiring, or shipped in damaged packaging. Two complaints earlier this year on Amazon.com for “Tylenol Extra Strength” indicate recalled, and knockoff painkillers may have been sent.
Johnson & Johnson filed its third-quarter earnings report on November 4. Sales for the quarter were $17.6 billion, a 3.1 percent year-over-year increase. Pharmaceutical sales accounted for $7 billion, an increase of 9.9 percent from third-quarter 2012. Legal battles over copy rights, and product liability still plague the company according to the earnings report.
In 2011, Johnson & Johnson came under FDA scrutiny and the government eventually stepped in at three Johnson & Johnson Tylenol plants. At the time, FDA spokesman Christopher Kelly explained in an e-mail to CNNMoney the decision came about because, ”the company has failed to correct certain quality control and procedural problems documented in prior inspections and cited in a January 2010 warning letter to the company.” If Johnson & Johnson is seeking tighter control over products on Amazon.com to avoid further costly legal battles over products and liability, they may have little recourse over the growing third-party sector of Amazon.com’s business.
Amazon.com’s 2012 annual report says that its “primary source of revenue is the sale of a wide range of products and services to customers.” These products are items they have purchased to sell and “those offered by third-party sellers.” The report says third-parties “fulfill an increasing portion of our customers’ orders, and we are increasingly reliant on the reliability.”