Europe lays out antitrust case against Amazon’s use of big data

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The European Commission has laid out a first set of antitrust charges against Amazon focused on its dual role as a platform for other sellers but also a retailer itself on its own platform — and its cumulative use of third party merchant data to underpin Amazon’s own retail decisions.

Competition chief Margrethe Vestager said its preliminary conclusion is the ecommerce giant has abused its market position in France and Germany, its biggest markets in the EU, via its use of big data to “illegally distort” competition into online retail markets.

“We do not take issue with the success of Amazon. Or its size. Our concern is very specific business conduct which appears to distort genuine competition,” she said at a press conference announcing the formal charges.

The action stems from a 2015 sectoral ecommerce enquiry carried out by the bloc’s competition division. The Commission subsequently announced a formal investigation of Amazon’s use of data from sellers on its platform in July last year, though it had begun looking into concerns about whether third party sellers were being placed at a data-disadvantage by the ecommerce giant as far back as 2018.

As part of the investigation, EU regulators obtained a massive data set from Amazon — covering over 80M transactions and more than 100M product listings on its European marketplaces — to analyse how its business uses merchant data.

“Amazon is data driven. It’s a highly automated company — where business decisions are based on algorithmic tools,” said Vestager. “Our investigation shows that very granular, real-time business data relating to third party sellers’ listings and transactions on the Amazon platform systematically feed into the algorithm of Amazon’s retail business. It is based on these algorithms that Amazon decides what new products to launch, the price of each individual offer, the management of inventories, and the choice of the best supplier for a product.”

The competition chief said its preliminary concern is thus that third party sellers are unable to compete on the merits as a result of the big data advantage Amazon gleans from its access to third party sellers’ data.

“Amazon has, for example, access to data on the number of ordered and shipped units of sellers’ products, revenues on the marketplace, the number of visits to sellers’ offers, information relating to shipping — including the past performance of the seller, the consumers’ claims on the sellers’ products including the activated guarantees. And Amazon gets this data from every seller, every listed product, every purchase on its platform,” she said. “Our concern is not about Amazon retail — about the insights that Amazon retail has into the sensitive business data of one particular seller. Rather they are about the insights that Amazon retail has about the accumulated business data of more than 800,000 active sellers in the European Union covering more than 1BN products.

“In other words this is a case about big data.”

Vestager said the investigation has shown Amazon is able to aggregate and combine individual seller data in real time and to draw what she described as “precise and targeted” conclusions from it.

That capability gives is a huge advantage over individual sellers on its platform who do not have access to the same level of big data to help their business decisions, is the contention.

“Many retailers will have to invest heavily to identify products of interest and bring them to the consumers — taking risks when they invest in new products or when choosing a specific price level. Our concern is that Amazon can avoid some of those risks by using the data that it has access to,” added Vestager.

Reached for comment on the charges, an Amazon spokesperson sent this statement:

We disagree with the preliminary assertions of the European Commission and will continue to make every effort to ensure it has an accurate understanding of the facts. Amazon represents less than 1% of the global retail market, and there are larger retailers in every country in which we operate. No company cares more about small businesses or has done more to support them over the past two decades than Amazon. There are more than 150,000 European businesses selling through our stores that generate tens of billions of Euros in revenues annually and have created hundreds of thousands of jobs.

Amazon will now have a chance to respond to the charges, after which the Commission will assess the evidence and take a decision on whether it believes there has been an infringement of EU competition law. If it believes there has it has the power to order an end to infringing conduct and impose a fine of up to 10% of a company’s annual worldwide turnover.

In the two markets EU regulators found Amazon to be dominant, with more than 70% of consumers in France and more than 80% in Germany who made online purchases bought something from Amazon in the last 12 months.

Vestager specified the Commission is defining the market as “platforms providing marketplace services” rather than more general retail.

Also today, the commissioner announced a second competition investigation into Amazon — this one focused on the Buy Box and Prime loyalty program. Vestager said regulators decided to split the Amazon cases so an ongoing investigation into the Buy Box and Prime doesn’t slow down progress on the big data probe.

Detailing the concerns around Buy Box and Prime she said: “Looking into Amazon’s data use revealed that Amazon may have set certain rules on its platform that artificially favors both its own retail offers as well as the offers of sellers that use Amazon’s logistics and delivery services. For this reason we have decided to open a second investigation into these business practices.”

While European regulators move forward with antitrust action related to Amazon’s marketplace practices, the ecommerce giant is also in the antitrust crosshairs of US lawmakers.

Last month it was one of a number of tech giants called out in an antitrust report by the U.S. House Judiciary Committee. The report argues Amazon wields monopoly power over SMEs via its dominance of online retail — which in turn enables it to “self-preference and disadvantage competitors in ways that undermine free and fair competition”.

Amazon’s response to the US committee’s scrutiny was a fierce rebuttal — saying it accounts for only a tiny fraction of global retail and isn’t even the largest US retailer by revenues. It also claimed its interests align with the third party sellers on its platform, denying there’s any conflict of interests.

This story is developing — refresh for updates…

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