Amazon Faces Probe in Europe Over Third-Party Selling
Amazon Faces Probe in Europe Over Third-Party Selling
EU to investigate use of merchants’ data as scrutiny of
tech firms mounts on both sides of the Atlantic
By Sam Schechner Updated July 17, 2019 9:58 am ET
Amazon.com Inc. will face a formal European Union
antitrust investigation into its dealings with third-party merchants, expanding
a multipronged regulatory push that has ensnared other Silicon Valley giants
like Facebook Inc. and Google.
The European Commission, the EU’s top antitrust enforcer,
said Wednesday that its investigation will look into whether Amazon is abusing
its dual role as both the provider of a marketplace where independent sellers
can offer products and a retailer of products in its own right.
In particular, the probe will investigate whether Amazon
is using nonpublic data from independent merchants to compete against them.
Investigators will also examine what data Amazon uses to pick a seller as the
default option for a given product when a user clicks the “buy” button—and
whether Amazon gets an unfair leg up to be that default.
The probe could eventually lead to formal charges, fines
and orders to change business practices, but it could also be dropped.
“We will cooperate fully with the European Commission and
continue working hard to support businesses of all sizes and help them grow,”
an Amazon spokesman said.
The case opens a new—and potentially more complex—chapter
for competition enforcers on both sides of the Atlantic. The EU has led the
antitrust charge against Alphabet Inc.’s Google for more than a decade, issuing
€8.25 billion ($9.25 billion) in fines. Now antitrust scrutiny of technology
titans is rising in the U.S., as well, with the U.S. Federal Trade Commission
and U.S. Justice Department dividing up oversight of four of the largest U.S.
tech firms, including Amazon, Google, Facebook and Apple Inc.
Politicians also have gotten more vocal. Sen. Elizabeth
Warren (D., Mass.), a presidential candidate, has proposed breaking the company
up and unwinding its Whole Foods acquisition. President Trump has said Amazon
should pay more in taxes and has criticized the company’s effects on
competitors.
Margrethe Vestager, the EU’s antitrust chief, has emerged
as one of the world’s major technology regulators. In addition to the Google
cases, she also has issued a fine to Facebook for misleading regulators during
a review of its acquisition of the WhatsApp chat service and ordered tech giants
including Amazon and Apple to pay back taxes under what she alleged to be
sweetheart deals with tax authorities. The companies are appealing the tax
cases.
Meanwhile, Ms. Vestager was this month nominated to a
senior position in the Commission for the next five years, meaning she may keep
some sway over competition policy.
More broadly, the EU has also taken a lead in reining in
the alleged excesses of technology giants in other domains, with a sweeping
privacy law that went into effect last year, and new copyright legislation
aimed at making tech giants pay more to news media and music companies.
The EU’s Amazon case could now help lay groundwork for
growing interest among other competition regulators in investigating parts of a
company that has a presence in many sectors, from logistics and e-commerce to
cloud computing and now advertising.
In addition to the U.S., authorities in Italy and other
countries are investigating Amazon on various topics including the treatment of
third-party sellers. Germany’s antitrust regulator, earlier Wednesday, said
Amazon has agreed to change its terms of service on its marketplace platform
for third-party sellers, following its own investigation into the e-commerce
giant’s sales practices. The changes mark the conclusion of a separate
eight-month probe by the German Federal Cartel Office.
As part of the settlement, Amazon will amend certain
terms for its marketplace platform around the world. The changes involve some
technical issues like requiring Amazon to offer third-party sellers a 30-days
notice before suspending accounts and reducing Amazon’s requirements about the
confidentiality terms with sellers, the German authority said.
A European Commission spokeswoman described the German
case, and the others in Europe, as not conflicting with the EU’s case, which
focuses on data. “These investigations are complementary but not overlapping,”
she said.
The EU investigation, first opened informally last
September, will focus in large part on certain terms in Amazon’s contracts with
independent merchants. In particular, investigators will look at whether
Amazon’s contracts allow it to aggregate merchants’ proprietary data, given its
role as the platform for processing transactions and shipping goods on behalf
of third party-sellers—and whether using that data to inform its own retail
business violates EU competition laws.
In addition, investigators will look at whether Amazon
has a dominant position in any EU markets, which could set a higher bar for its
conduct with smaller companies that use its services.
On Tuesday, at a hearing before the U.S. House of
Representatives about digital platforms’ market power, an Amazon representative
said the company doesn’t use individual sellers’ data to compete with them. An
Amazon spokesman declined to comment Wednesday when asked whether the company
uses data aggregated from multiple sellers to compete with them.
The EU’s case against Amazon could prove to be
complicated, some antitrust experts say, because its focus on the contractual
use of a business customer’s data appears novel.
“It’s an innovative case because it’s trying to use data
collected by Amazon,” said Nicholas Economides, an economics professor who
looks at competition issues at New York University Stern School of Business. He
said the EU will have its work cut out for it, however, to show that its use of
the data is anticompetitive: “Information alone is not going to make the case.”
Given recent court decisions in the EU, the Commission
may also face pressure to show robust data demonstrating that Amazon’s use of
the data has had anticompetitive effects on merchants, said Nicolas Petit, a
competition-law professor at the University of Liege.
Amazon’s marketplace business, in which it offers
services to retailers to sell goods on Amazon’s platform, is an increasingly
important part of its business. The marketplace accounts for more than half of
the retailer’s global sales, according to chief executive Jeff Bezos’s letter
to shareholders in April. According to Mr. Bezos, the traditional retail
business reached $117 billion in sales last year, dwarfed by $160 billion for
sales on its marketplace.
“Third-party sellers are kicking our first party butt,”
he wrote.
—Sara Germano, Laurence Norman and Dana Mattioli
contributed to this article.
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