The European Commission is investigating Amazon over concerns that the company’s use of data gathered from independent retailers that sell on its marketplace breaches EU competition rules.
The Commission believes since Amazon acts as a marketplace as well as a retailer, it may be using sensitive data it has gathered about retailers’ activities, their transactions, and their products to unfairly give itself a competitive advantage.
Commissioner Margrethe Vestager, in charge of competition policy, said in a statement: “We need to ensure that large online platforms don’t eliminate [the benefits of e-commerce] through anti-competitive behaviour. 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.”
In an emailed statement, an Amazon spokesperson said, “We will cooperate fully with the European Commission and continue working hard to support businesses of all sizes and help them grow.”
As part of its in-depth investigation, the Commission will look at the standard agreements between Amazon and marketplace sellers that allow Amazon’s retail business to analyze and use third-party seller data. In particular, the Commission will focus on whether and how Amazon’s use of accumulated marketplace seller data gives its retail operations an unfair competitive advantage.
The Commission will also examine how marketplace sellers are selected for the “Buy Box,” often seen as a key determinant in influencing customer purchases and a major coup for sellers on the Website as it allows customers to add items from a specific retailer directly into their shopping carts.
“Amazon is likely to settle and change its business practices as necessary and with no fine. It does not want a finding that it is dominant in any market.”
Matthew Hall, Antitrust Lawyer and Partner, McGuireWoods
The Commission wants more information about what data underpins the process and what criteria are used to determine seller selections.
“Winning the ‘Buy Box’ seems key for marketplace sellers, as a vast majority of transactions are done through it,” it says.
If the Commission’s concerns are proven, Amazon could face a fine of up to 10 percent of global revenues for breaching EU competition rules on anti-competitive agreements between companies under Article 101 of the Treaty on the Functioning of the European Union (TFEU) and/or Article 102 on the abuse of a dominant position, says Simon Latham, antitrust lead at Augusta Ventures, a litigation funder. It might also be forced to make changes to its online platform, he adds.
Amazon has previously denied that it uses data from its marketplace to gain an unfair advantage. Lesley Smith, Amazon U.K. & Ireland’s director for public policy, stated in oral evidence to a U.K. House of Lords Committee in January that “our retail business does not see any data relating to our Marketplace business. We do not have that visibility. Marketplace sellers can see how their things are selling, but our marketing people cannot see the sales figures or any of the data that relates to a Marketplace seller. That is just not available to them. They can see the same as anyone else.”
The Commission began its preliminary fact-finding investigations into Amazon’s behavior in 2018, when it sent online retailers requests for information, though concerns about online marketplaces were also raised way back in May 2017 when the Commission’s “E-commerce Sector Inquiry” report was published.
Amazon is currently subject to other investigations underway at the EU member state level. For example, the company is being investigated in both Italy and Austria for abuse of dominant position regarding the terms and conditions it uses when dealing with Amazon Marketplace vendors.
Matthew Hall, antitrust lawyer and partner at law firm McGuireWoods, believes while the Commission’s investigation could take at least a year, “Amazon is likely to settle and change its business practices as necessary and with no fine. It does not want a finding that it is dominant in any market.”
Hall adds regulators are increasingly keen to stop Big Tech firms “self-preferencing,” whereby they use their power in one market to dominate another they also operate or have control of. For example, over the past three years the European Commission has fined Google heavily for abusing its dominant position by promoting its own comparison shopping service in its search results while demoting those of competitors and for imposing restrictive clauses in contracts with third-party Websites to prevent competitors from placing their search adverts on the same Websites.
Separately, Germany’s competition regulator, the Bundeskartellamt, on Wednesday announced a settlement with Amazon to secure changes to its business practices regarding its marketplace which will take effect globally. Such changes include imposing less stringent requirements on sellers, as well as making it easier for them to take legal action against the company in a dispute.