By Melissa Cox
Your commercial awareness dose…
The unprecedented growth of Amazon – particularly the speed of its global expansion – has resulted in a rising number of controversies and legal claims questioning how fairly Amazon is operating their business.
Early this November, the EU accused Amazon of breaking antitrust laws by utilising non-public business data of third-party sellers on the platform to avoid competition and adjust their own retail strategies. A second investigation has also been opened by the European Commission, looking into Amazon’s business practices; They are possibly favouring their own retail offers, as well as favouring merchants on the platform who pay to use Amazon’s own logistics and delivery services.
The general goal of antitrust laws is to protect fair competition and stop monopolies from dominating the market. Some might question just how much Amazon dominates global e-commerce and retail; Amazon makes up less than 1% of the global retail market, and 90% of their revenue is sourced from just four countries (USA, UK, Japan and Germany). In the USA alone, however, Amazon makes up about 35-40% of US e-commerce, their competitors being large retailers with physical stores such as Walmart.
But for this specific antitrust investigation case it is important to look to European countries such as Germany: Where Amazon has significant dominance, and where various complaints are coming from. There have already been previous complaints voiced by the German Cartel office (Competition Regulator) over Amazon’s business practices. As a result of this, Amazon made multiple changes to their business practices globally such as giving merchants 30-day notice before being taken off their platforms.
The EU suspects that Amazon uses non-public and essential data of third-party sellers for their own benefit within the Amazon marketplace. Such data includes, for instance, the number of ordered and shipped products, or number of site visits to offers, which lends Amazon an unfair advantage. Executive Vice President of the European Commission Margrethe Vestager emphasised that, ‘Data on the activity of third-party sellers should not be used to the benefit of Amazon when it acts as a competitor to these sellers.’ If Amazon were to be found guilty of this, it would be infringing upon Article 102 of the Treaty on the Functioning of the European Union (TFEU).
The second investigation focuses on Amazon potentially favouring and promoting their own retail offers and offers of merchants who use Amazon’s logistics and delivery services. The EU is looking into Amazon’s “Buy Box” system, and how they allocate a winner. The “Buy Box” is a box to the right of a product description page with a ‘Buy now’ button. Those who are represented in the “Buy box” will be the merchant whose product will be added to the customers cart, rather than having to be found through hyperlinks. Over 80% of online purchases are completed through the “Buy box” function. Amazon has admitted to their algorithm favouring certain merchants, however, claims this is due to Amazons services working more efficiently compared to other logistics services other third-party sellers may use.
There are doubts that any drastic changes will come of these investigations, as it is common for such antitrust investigations to merely result in a hefty fine, with little other action taken. An example of this would be the antitrust investigation into Microsoft between the 1990s and 2000s. At the end of the investigation Microsoft was to split into two companies – this was never realised. In the case of Amazon, it could be argued that Amazon hardly has a monopoly of the worldwide retail market, that they are simply conducting business. The relative dominance of Amazon reveals, however, a clear and established disadvantage to small third-party sellers who are struggling to compete.
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