Amazon Is under EU Anti-Competitive Scrutiny


Jul. 29 2019, Published 7:38 a.m. ET

Amazon EU scrutiny begins

EU scrutiny over Amazon’s (AMZN) possible anti-competitive behavior is taking shape. The e-commerce giant is under investigation by the European Union Competition Commission. The investigations center claims that the company uses sales data from small merchants to gain an unfair advantage. The probe comes at a time when the e-commerce company has confirmed changes to its third-party seller service.

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Amazon joins the likes of Apple (AAPL), Facebook (FB), Google (GOOGL), and Qualcomm (QCOM), which are also under scrutiny. While Apple, Facebook, Google, and Qualcomm have had to contend with hefty fines, Amazon has so far avoided such penalties. However, Amazon EU scrutiny threatens the firm’s competitive advantage. The e-commerce giant has continued to enjoy accelerated revenue growth on operating as a marketplace as well as a retailer. According to the Wall Street Journal, the traditional retail business brought in $117 billion in revenues last year. In contrast, the e-commerce marketplace brought in $160 billion.

Amazon EU scrutiny will center on whether the e-commerce giant misuses its dual role as a marketplace and retailer. According to the EU Competition Commissioner, Margrethe Vestager, the investigation will assess Amazon compliance with EU rules. In addition, authorities are also looking at Amazon data collection practices.

The investigations stem from concerns that the company may be using nonpublic data from independent merchants to gain an unfair advantage. However, the EU chief faces an uphill task to prove that Amazon’s use of the data results in anti-competitive effects on merchants. The Amazon EU scrutinies will also asses how the e-commerce firm selects a seller to be the default option for a product.

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Amazon EU scrutiny repercussion

A move By Amazon to give sellers a 30 days’ notice before removing them from the platform could also come under scrutiny. German authorities have already dropped charges against the company in response to the new policy. The new policy accords sellers an option to sue Amazon for shutting down their online stores.

The probe in Europe could result in formal charges against the company. In addition, it could result in fines and orders to change business practices. Likewise, Amazon could walk scot-free if found to be playing by the rules.

Similarly, the EU probe could open a can of investigations by other competition regulators in the region. For instance, regulators in Italy are reportedly looking into how the company treats merchants on its site.

EU antitrust probes

The Amazon EU scrutiny could as well be the last antitrust probe under the tenure of Vestager. After more than five years at the helm, the Commission has gone to great lengths to clamp down on anti-competitive practices.

In March 2019, Vestager and his team successfully petitioned for a 1.5 billion euro fine against Google. The search giant found itself in trouble over claims it abused its dominant position under its AdSense business. The malpractice arose on the company forcing customers to sign contracts that barred them from advertising with a rival search. Google signed such deals to fend off competition from Microsoft’s (MSFT) Bing among others.

Likewise, Qualcomm was the subject of a $1.2 billion fine by the EU in early 2018. The fine stemmed from claims the company paid Apple billions of dollars so that it could only use its 4G chips on the iPhone and the iPad. Similarly, the EU commission hit Facebook with a $122 million fine in 2017. The fine was over claims Facebook provided misleading information in the WhatsApp acquisition.

The Amazon EU scrutiny adds to mounting regulatory pressure targeting tech giants in the U.S. Calls to break up the e-commerce giant are gaining momentum as a way of controlling the amount of power the company wields. Facebook is another company under immense scrutiny in the U.S. The social networking giant is the subject of a record $5 billion fine over its mishandling of people’s data.


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