Amazon is facing the wrath of the European Commission's scrupulous competition regulator. Margaret Vestager has opened an antitrust case against the online retailer's data practices around third party sellers. If found guilty, Amazon could face huge fines and be forced to change how its business operates.
The Commission opened a preliminary investigation opened in October 2018 and has found evidence that Amazon might be using competitively sensitive information about marketplace sellers, their products and transactions on the marketplace to potentially give itself a competitive edge. This is particularly in relation to how Amazon uses data to decide which retailers are featured in the ‘Buy Box’ which provides quick links for the customers to click on directly.
“There is definitely smoke,” says Damien Geradin, a partner in the Brussels office of Euclid Law and professor of competition law at Tilburg University. However, he points out it may take some time to discover whether the ecommerce giant has violated EU Competition Law or not, with similar cases lasting a number of years. (Vestager is due to leave the office later this year).
Amazon’s relationship with third party sellers has been a growing point of contention. Although Jeff Bezos' firm began life purely as a platform, it has increasingly launched more of its own products. If you turn to the website to buy towels, there's now an Amazon version. It's the same for luggage, computer accessories, and office equipment. The breadth of Amazon-owned products is increasing
The result? Its dual position as both a platform and a seller vastly complicates its practices, and in which ways its acceptable to leverage data insights.
The European Consumer Organisation (BEUC) says that it welcomes an investigation: “If powerful platforms such as Amazon are found to use data they amass to get an edge over their competitors, both consumers and the market bear the cost,” the organisation said in a statement. “Consumers and traders often rely on the intermediation of big platforms to shop, sell, offer and use services. The risk of today’s platform economy is that intermediaries sell products to consumers and at the same time might deny competitors that they host to reach consumers on an equal footing.”
During her five year tenure, Vestager, the EU's antitrust commissioner has levied fines on Google, Qualcomm, and Facebook, and Apple which was forced to pay back $15.4 billion (£12bn) in taxes. Is it surprising that Amazon has evaded investigation by Vestager until now? “Let’s not forget that there won’t be that many volunteers to complain against the company,” says Geradin. “If your livelihood depends on selling stuff on Amazon, then you might think twice against levelling a complaint against them.”
Read more: Margrethe Vestager fined Google and Apple billions, now she may lead Europe
In response to the launch of the investigation, Amazon has said it will fully co-operate with the European Commission and "continue working hard to support businesses of all sizes and help them grow.”
There are around six million third party sellers on the Amazon Marketplace, and sales were almost double that of Amazon retail at the end of 2018. The sellers rely heavily on Amazon’s infrastructure – its warehouses and delivery systems, as well as the vast customer base – and pay fees to ensure their place in the ecosystem, as well as complying with a number of rules and regulations. This gives Amazon power over retailers. As Dave Bryant, an Amazon seller and blogger told The Verge, “Amazon is the judge, jury and executioner”.
Small scale competitors have repeatedly accused Amazon of selling competing products at significantly lower prices. This could involve collecting information about the prices that third party sellers offer products for and then undercutting them by offering them at prices these sellers couldn’t afford. Sellers have also pointed to evidence that there are lower standards for Amazon’s products, which are still featured as top products. For example, an AmazonBasics charging cable that many users complained about melting.
Another antitrust investigation brought against the giant by German regulators also concluded yesterday, after Amazon agreed a number of measures in return for the dropping of the investigation. The concessions include granting sellers 30 days notice and reasons for being removed from the platform, as well as sellers being able to take Amazon to court in their home countries, as opposed to Luxembourg.
This is likely in response to a number of complaints from third party sellers that they were removed from the site suddenly and without explanation. In March last year, thousands of these sellers were sent an impromptu email letting them know their products would no longer be sold on the site and in some cases, that their account would be shut down completely.
“Amazon should be worried, because it’s being investigated and the Commission is serious,” says Geradin. “A lot of companies have been condemned by the company – they have a high conviction rate.” However, at the same time, the fines inflicted on these companies are somewhat minor given the vast revenue they produce each year.
Another reason a case against Amazon hasn’t been launched until now is more practical. “The Commission has to look at these things sequentially,” says Geradin. “They can’t bring ten cases at the same time.”
Amazon is facing more scrutiny across the Atlantic too, where the Justice Department and Federal Trade Commission last week divided up antitrust oversight for Amazon, as well as Apple, Facebook and Google. The investigation will examine bigger questions surrounding the overwhelming dominance of these companies in their respective markets with a view to potentially calling for their dismantling. Amazon’s will centre on its vast 50 per cent share of online retail sales in the country.
Prime has also been highlighted as a potential avenue through which Amazon might be able to unfairly compete against third party sellers, by bundling certain products it may be giving itself an advantage on price according to the FTC. To prevent Amazon abusing its position of power, presidential candidate Elizabeth Warren has suggested stopping the giant from competing with smaller competitors on the platform at all.
This article was originally published by WIRED UK
