"Why doesn't Amazon stop this from happening?" is a different question from "How does this happen?".
Any system Amazon puts in place will have a lot of false positives that require human review. And that is entirely aside from the fact that underhanded sellers will try to flood such a system with automated disputes until Amazon relents.
> The ones I've seen are WAY off when you look deeper.
You're assuming these disparate merges happen in a single step.
> 1. Repurposing product listings for something unrelated and keeping the old sales data and reviews
Sure - but this seems trivially solvable by Amazon - you can't tell that a product listing for a knife set is not a tech product??
> 2. Merging product listings to aggregate unrelated sales data and reviews
Again - def happens I think. But can't these go through some type of review? The ones I've seen are WAY off when you look deeper.
> 3. Fake reviews that were unrelated to the product all along
This is harder, I'd have 2 amazon staff review higher volume products.