The EU Competition Commission has formally opened an investigation into Amazon’s business practice, looking into whether the e-commerce giant’s use of merchant data violates competition rules. Findings of anti-competitive behaviour could cost the company billions, and could dramatically alter the shopping experience of Amazon’s many users.

The Commission has revealed in its 2018 preliminary fact-finding that Amazon has been collecting third-party seller data, which sellers view as proprietary. Possessing this third-party information grants Amazon control of the entire interface all the while competing within it. “We never accept in a football match that one team was also judging the game,” EU Competition Commissioner Margrethe Vestager explains.

Amazon provides an online store but also sells its own products on it, thus holding a dual role. Further, the “Buy Box”, a pop-up which suggests similar products for customers to add to their carts with a single click, consequently accounts for 80% of transactions on the platform. The Commission intends to look into the standard agreements between Amazon and third-party sellers, and the role of data in selecting products that are displayed in the “Buy Box”. If proven, Amazon will have breached Articles 101 and/or 102 of the TFEU - anti-competitive agreements between companies and abuse of a dominant position respectively. The company may face a charge of up to 10% of its global revenue - a hefty sum of £15bn.

The standard agreement stipulates that Amazon has a “royalty-free, non-exclusive, worldwide, perpetual, irrevocable right and license to use, reproduce, perform, display (public communication), distribute, adapt, modify, re-format, create and exploit derivative works of … any and all of [the vendor’s] Materials”. Despite company policy prohibiting the access of such sensitive information to be abused by employees, an investigation conducted by the Wall Street Journal found that it has ceased to prevent seller-specific information from being used to inform the company’s own product strategy.

This is not the first time the Commission, led by Vestager, has taken a strong approach to Big Tech. In 2017, Google faced a fine of £2.1bn following an allegation that it was distorting the market by promoting its own shopping comparison service above search results. Qaulcomm, Facebook, and Apple have also faced charges following antitrust investigations. Similarly, California and Washington have pursued their own probes, with the House Judiciary Committee requesting CEO Jeff Bezos to testify about the company’s business practices with third-party sellers, threatening a subpoena if he refuses to comply.

With non-essential physical stores closed due to COVID-19, e-commerce has significantly increased retail competition as consumers turn to online shopping - Amazon had seen a record high in share price last week. It is largely unsurprising that there has been heightened government scrutiny into big technology firms, monitoring their compliance with competition rules. This investigation will determine what is legally permissible when it comes to online marketplaces. Without action, Amazon is likely to consolidate its dominant position, which in the long-term would lead to choice restriction and increased prices. Amazon has been able to dodge being fined by competition regulators thus far, but this could very well change with a charge sheet that could be published as early as next week.

by Nicole Woo

Sniffing Around Amazon’s Use of Sensitive Data: EU Watchdog Launches Antitrust Action