While the US was delving deeper into the possible violation of anti-competition laws, the European Commission was building its antitrust case against Amazon over the course of two years. In April 2020, the Wall Street Journal (Journal) launched an investigation into Amazon’s employee conduct. And now, in November 2020, the online retailer accountable for 39% of American online shopping was finally formally charged by the European Union (EU) with violating antitrust laws “by distorting competition in online retail markets.”
The Commission objected to two specific forms of conduct Amazon allegedly engaged in: 1) the use of non-public data from sellers on Amazon’s platform to increase sales of in-house comparable, competing products; and 2) the preference towards products from Amazon and sellers using “Amazon’s logistics and delivery services” on its platform versus those from other brands. With regard to the first objection, the Journal found, through several interviews with former and current Amazon employees, that rules implemented to prevent the use of private seller data were not “uniformly enforced.” Employees were able to use third-party seller data to work with manufacturers and create a similar competing product with higher margins for Amazon. Additionally, executives were under strict pressure to ensure Amazon brands “make up more than 10% of retail sales by 2022.” Amazon’s reputation of private-label copying was well-known amongst various brands, such that they refused to sell their products via the platform. With regard to the second objection, the Commission intends to investigate whether Amazon is biased in how it approaches the featured offer of “Buy Box” and seller products available on the Prime platform. “Buy Box” is a program that allows multiple sellers of similar products to compete to be the single offer, which can provide them “80% of sales for some products.” The Commission alleges Amazon prioritizes their private-label products or “sellers that use Amazon’s logistic and delivery services” on programs such as “Buy Box” or Prime, where the number of users is increasing.
Are these allegations true?
Legally, the Commission argues that if these allegations are true, they may breach Article 102 of the Treaty on the Functioning of the European Union (TFEU), preventing a dominant player from monopolizing the market. The EU is concerned by the ease in which Amazon is able to “avoid the normal risks of retail competition,” particularly with a business model centered on two platforms.
But, is mitigating risk via innovative strategy to achieve higher profit margins illegal?
Some legal experts argue that Amazon’s business practices in question are commonplace within the retail industry and have arguably propagated competition rather than stifled it. Moreover, given Amazon’s share of the online retail market, attorney Alfonso Lamadrid, of Garrigues, argues that the EU will need to highlight the role of Amazon’s platform for online sellers and the role of its alleged conduct in suffocating the market by driving away sellers to make its case. Lamadrid also argues that Amazon’s dominance of the market does not subject it to a “duty of neutrality” under EU law.
Though, is there a difference between neutrality and just, transparent business practices?
In the Journal’s earlier investigation, it noted that research firm eMarketer found “many brands feel they can’t afford not to sell on [Amazon].” Amazon’s dominance and prominence within the online retail marketplace arguably biases sellers in where and how to market their products, despite the risk of private data being used for Amazon’s competitive goods.
So, how much is too much?
In the aviation industry, arguably the car industry, and now, in the ‘big tech’ industry many argue a few companies make up an industry oligopoly. Is this simply the nature of these industries due to high cost, limited resources, and concentrated know-how? Or are handfuls of dominant companies distorting the market and maintaining their disproportionate share by preventing competition through illegal maneuvers? These charges against Amazon tackle a broader, abstract question that plagues the American economy, and arguably the American political system. But for the sake of this piece, it is safe to say these charges are contentious and further investigation may be necessary to ensure transparency and legality in the online retail industry, and perhaps broader ‘big tech’ space.