Amazon CEO Jeff Bezos on October 2, 2019.
Elif Ozturk | Anadolu Agency | Getty Images
After EU regulators filed antitrust charges against Amazon on Tuesday, Amazon is facing new pressure to answer questions about the use of third-party seller data.
The European Commission, Europe’s largest antitrust watchdog, accused Amazon of violating competition laws by using non-public data collected from third-party merchants to compete against them unfairly. It also conducted a second survey of Amazon’s business practices related to the Prime label and the “Buy Box,” which provided customers with a click of a button to add products to their shopping carts.
Amazon rejected the European Commission̵
The European Commission is still investigating, but if Amazon is found to have violated antitrust rules, the investigation may provide new materials to strengthen similar antitrust cases against Amazon in the United States.
Congress and the Federal Trade Commission are also investigating Amazon’s treatment of third-party sellers. It is unclear what the FTC’s investigation is, but Bloomberg reported in September last year that the agency has been interviewing third-party sellers as part of the investigation. The House Justice Department’s Antitrust Subcommittee released the results of a 16-month investigation of Amazon and other technology giants last month, and found that Amazon has a monopoly on third-party sellers in the market.
Both investigations are at different stages. After publishing detailed reports on the competitive practices of Amazon, Apple, Google and Facebook, it is expected that lawmakers will enact legislation based on their policy recommendations.
At the same time, the EU has not filed a legal action against Amazon, so it may take several years to announce any penalties. It may also reach a settlement with Amazon or abandon the case altogether.
Regulators in Europe and the United States oppose Amazon’s dual role as market operator and seller, believing that this may encourage anti-competitive behavior.
They pointed out that Amazon’s role as a market service provider gives it privileged access to non-public third-party seller data, such as order quantity history, shipping data, and seller’s past performance, which merchants cannot obtain.
Both EU officials and Democrats in the House Justice Department’s Antitrust Subcommittee believe that data provided by third-party sellers is used to inform Amazon’s first-party business decisions, such as what products to launch and where to set prices.
The European Union said in a statement on Tuesday that this insight “enables Amazon to focus its offer on the best-selling products in all product categories and adjust the offer based on non-public data from competing sellers.”
Similarly, the antitrust subcommittee included testimony from third-party sellers in the investigation, who claimed that Amazon’s business was damaged when it launched competing products. For example, a retired third-party businessman was forced to withdraw from Amazon’s seller business because Amazon allegedly copied its products, “sorted by color”, lowered the price, and “purchased the purchase box of the product”, thus killing him promotion of. “,” The Antitrust Subcommittee quoted the seller as saying.
Amazon has long insisted that it will not look at the data of individual sellers to build private-label products because this would violate internal policies. However, the company has admitted that aggregate data may be used in the process of building its own products.
Amazon also refuted the claims of the regulator, saying that it used its control of the “buy box” to give preferential treatment to its own products and products provided by sellers who use its logistics and delivery services (called FBA) . The “buy box” refers to the part on the side of the product page in which sellers compete for the offer.
Amazon insists that the “Buy Box” (Buy Box) will show offers that it thinks customers will like, taking into account factors such as price and delivery speed. At a Congressional hearing in July, CEO Jeff Bezos admitted that the “buy box” algorithm “indirectly” supports offers that can be shipped with Prime when determining which sellers have features.
The investigations by the House Antitrust Subcommittee and the European Union have raised questions about the ability of third-party sellers to reach major users.
U.S. Congressmen said in their October report that they had talked with third-party sellers, and they believed that they had “no choice” but to pay for Amazon’s logistics, which made their products become Prime members in order to “maintain good Ranked in search results, attracted more than 112 million Amazon Prime members and won the Buy Box.”
Winning the “buy box” is critical to the success of third-party sellers. The antitrust subcommittee estimates that approximately 80% of Amazon sales are conducted through the Buy Box, “the percentage of mobile purchases is even higher.”
The European Commission stated that premium members are also an important source of income for third-party sellers because their sales on the Amazon market tend to be higher than those of non-primary users. Elite members will not only spend more money on each purchase, but they will also shop more frequently on the site.
With the European Union and the United States questioning Amazon’s market power over sellers, it is now the responsibility of Amazon to provide evidence that it treats merchants fairly.
The company disputed the findings of the House Antitrust Subcommittee, calling it “conditional.” Amazon can answer the committee’s conclusions in writing or through oral hearings.
Shaoul Sussman, a legal researcher at the Local Self-Reliance Institute, a non-profit organization, said: “In Amazon court, this is a move to refute these allegations.”
The European Union and the United States have found similar problems with Amazon’s treatment of sellers, but the potential fines and remedies they may accept may differ.
The Democracy Staff of the Antitrust Subcommittee of the House Department of Justice has recommended a wide range of remedies, including forcing companies to prove that the merger will not harm competition and split different business units. For Amazon, this may cause it to separate third-party markets from its core retail business.
As for the Federal Trade Commission’s investigation, Amazon may be fined or the company may reach a settlement with the agency and agree to certain business restrictions.
Similarly, the EU may also propose a series of penalties, including a maximum fine of 10% on Amazon’s annual global revenue, or a maximum fine of $28 billion based on 2019 data.
The EU can also propose behavioral remedies to try to maintain competition by requiring companies to avoid certain business practices. Sussman said, but in terms of effectiveness, behavioral remedies may be “hit luck,” because some companies may find that “violating the remedy is more profitable, and if the violation is found again, it will be fined.”
Sussman said that the most aggressive tool in the EU’s arsenal is the proposal to establish business isolation lines. For Amazon, this may mean that the European Union has ordered to stop selling its own brands in Europe.
“This type of decision will not affect any other markets where these products are sold in the United States or Amazon, but they can say that if you trade in Europe, you must not become the brand owner, manufacturer and operator of the brand. Platform” , Sussman said.
Sussman and other antitrust experts said they are still skeptical about whether the United States will successfully prosecute Amazon. Even if antitrust officials do so, the remedies are limited. In contrast, in recent years, European regulators have intensified their crackdowns on large technology companies such as Facebook, Google, and Apple, thus winning aggressiveness.
When assessing whether a company is engaged in anti-competitive behavior, the United States and Europe use different methods.
The US antitrust law centers on consumer welfare standards, which rely heavily on price increases to show harm. This standard has been difficult to apply to technology companies because many of the products and services provided are free or low-cost (for Amazon).
Sussman said that in the United States, companies like Amazon can argue that any damage it causes to competitors can be offset by any benefit to consumers (ie, lower prices and more choices).
It is difficult to prove this view in front of European antitrust enforcement agents. When determining whether a company’s business practices are anti-competitive, including damage to consumer choice, potential competitors and innovation, the EU takes a broader view.
Eleanor Fox, a professor of law at New York University, said that as a result, it is easier to file an antitrust case in the EU than in the United States. Fox said this is part of the reason why the United States is trying to catch up with the European Union regulator, which has cracked down on American technology giants including Google, Facebook and Apple.
Fox said: “This difference is why we are working hard, and that’s why the United States has made any requests so late.”