The European Commission has launched a first series of antitrust proceedings against Amazon focused on its dual role as a platform for other sellers, but also as a retailer himself on its own platform – and on the cumulative use of third-party merchant data to underpin Amazon's own retail decisions.
Competition chief Margrethe Vestager The preliminary conclusion is that the e-commerce giant has abused its market position in France and Germany, the EU's largest markets, by using big data to "illegally distort" competition in online retail markets.
“We have no problems with Amazon's success. Or its size. Our concern is a very specific business behavior that seems to distort real competition, ”she said at a press conference, announcing the formal charges.
The move stems from a 2015 sectoral e-commerce survey conducted by the block's competition department. The commission subsequently announced a formal investigation into Amazon's use of sellers' data on their platform in July last year, but was already concerned about whether third-party vendors were being penalized by the e-commerce giant as early as 2018.
As part of the investigation, the EU regulators obtained from Amazon an extensive data set, covering over 80 million transactions and more than 100 million product lists on its European marketplaces, in order to analyze how the company uses retailer data.
“Amazon is data-driven. It's a highly automated company where business decisions are based on algorithmic tools, ”said Vestager. “Our research shows that very detailed, real-time business data relating to third-party offers and transactions on the Amazon platform is systematically fed into the algorithm of Amazon's retail store. Based on these algorithms, Amazon decides which new products should be brought to the market, how high the price is for each individual offer, how the stocks are managed and which provider is best suited for a product. "
The competition chief said his preliminary concern, therefore, is that third-party sellers will not be able to compete on the merits due to the big data advantage that Amazon gains from accessing third-party data.
“For example, Amazon has access to data on the number of units of seller products ordered and shipped, revenue from the market, the number of visits to sellers, information on shipping – including the seller's past performance. the claims of consumers on the products of the seller including the activated guarantees. And Amazon gets this data from every seller, every product listed, every purchase on its platform, ”she said. “Our concern is not about Amazon retail, but rather the insight that Amazon retailers have in the sensitive business data of a particular seller. Rather, it is about what the Amazon retail sector has about the business data collected from more than 800,000 active sellers in the European Union covering more than 1BN products.
"In other words, it's big data."
According to Vestager, the investigation has shown that Amazon is able to aggregate and combine individual seller data in real time and to draw the conclusions it describes as "precise and targeted".
This ability is a huge advantage over individual sellers on their platform who cannot access the same amount of big data to support their business decisions.
“Many retailers have to invest a lot in order to identify interesting products and make them accessible to consumers. They take risks when they invest in new products or choose a certain price level. We fear Amazon can avoid some of these risks by using the data it has access to, ”added Vestager.
An Amazon spokesperson made the following statement:
We disagree with the European Commission's preliminary claims and will continue to make every effort to ensure that it fully understands the facts. Amazon accounts for less than 1% of the global retail market, and there are larger retailers in every country we operate in. No company cares more about small businesses or has done more in the past two decades to support them than Amazon. There is more than 150,000 European companies sell through our branches, which generate revenues of tens of billions of euros annually and have created hundreds of thousands of jobs.
Amazon will now have the opportunity to respond to the indictment. The Commission will then evaluate the evidence and decide whether it believes there has been a breach of EU competition law. If it believes it has, it has the power to order an end to the violation and to impose a fine of up to 10% of a company's worldwide annual sales.
In both markets, EU regulators have found Amazon dominating. More than 70% of consumers in France and more than 80% in Germany who have made online purchases have bought something from Amazon in the past 12 months.
Vestager stated that the Commission defines the market as 'platforms for marketplace services' rather than more general retail.
Also today, the commissioner announced a second competitive investigation against Amazon that focused on the Buy Box and Prime loyalty programs. According to Vestager, regulators have decided to split the Amazon cases so an ongoing investigation into the Buy Box and Prime doesn't slow progress on the big data investigation.
Speaking of concerns about Buy Box and Prime, she said, “The Amazon's investigation into data usage found that Amazon may have set certain rules for its platform, which includes both its own retail listings and those from sellers who do the logistics and Use delivery services from Amazon, artificially favor them. For this reason we have decided to conduct a second investigation into these business practices. "
The purchase box is displayed on the Amazon product listing pages so that Amazon users can click to add a product directly to their shopping cart. This means that the seller's choice for the product that appears in the box is an important detail.
"The buy box is essential," said Vestager. “It prominently shows you offers for a single seller of a selected product with the option for the consumer to buy it directly. The profit of the Buy Box is therefore of crucial importance for the sellers in the market, since it appears that more than 80% of all transactions on Amazon are processed through this box. "
She also said it was "critically important" that retailers can sell their products under Amazon's Prime label.
"Amazon's Prime consumers are very important to sellers – not only because they are constantly increasing, but also because Prime consumers spend significantly more on Amazon than others."
"We fear Amazon is artificially pushing retailers to use its own related services," she added, referring to its logistics and delivery arms. "You could potentially pull them deeper into Amazon's own ecosystem."
The regulators will therefore investigate the "possible effects" of the rules set by Amazon for the Buy Box and for Prime. “We want to ensure that sellers who do not use Amazon's logistics and delivery program also have the opportunity to compete on the matter on the Amazon platform. We also want to ensure that retailers can move to competing marketplaces without being tied to the Amazon ecosystem. "
While European regulators are pushing antitrust measures related to Amazon's market practices, the e-commerce giant is also on US lawmakers' antitrust law.
Last month, it was one of several tech giants named in an antitrust report by the US House of Representatives Judiciary Committee. The report argues that Amazon, through its dominance in online retail, exercises monopoly power over SMEs – which in turn enables it to "favor competitors themselves and disadvantage them in ways that undermine free and fair competition".
Amazon's response to the U.S. committee scrutiny has been a fierce rebuttal: it accounts for a tiny fraction of global retail and isn't even the largest U.S. retailer by sales. It also claimed its interests coincide with the third party vendors on its platform and denied any conflict of interest.
This story is evolving – update it for updates …