Amazon has caught the attention of European Union authorities, which initiated a formal antitrust investigation of the American platform this week. The European Commission – an EU institution tasked with proposing legislation, implementing decisions, upholding the EU treaties and managing the day-to-day business of the 28 member state bloc – is probing the Jeff Bezos-founded giant to determine whether its use of sensitive data from independent sellers on its massive third-party marketplace runs afoul of the EU’s competition rules.
As Reuters stated on Wednesday, the European Commission “wants to know whether Amazon’s dual role as both a marketplace, [which] hosts third-party merchants, and as a powerful retailer in its own right on the same platform, often selling the same products, gives it an unfair competitive advantage” to the detriment of consumers.
In order to decide whether Amazon in breach of Article 101 of the Treaty on the Functioning of the European Union, “which prohibits agreements that prevent, restrict or distort competition within the EU single market, or Article 102, which prohibits the abuse of a dominant position,” the European Commission’s investigation will focus on the formal agreements that Amazon requires it third-party marketplace sellers to sign, in connection with which Amazon gains access to a mass of seller-specific data, which it may, in turn, be using to boost sales of its own private-label products.
One of the key concerns, per Reuters’ Georgina Prodhan is that “Amazon could use that information to hone its own competitive pricing strategy, gain information about consumers to make its own marketing more effective, and give its own goods an advantage in search results.”
The European Commission’s newly-initiated probe – which will also look into the role of data in the selection of the companies included in Amazon’s so-called “Buy Box,” the prized button on each Amazon product page that enables customers to add a product, including non-Amazon-created products, to their cart or make an instant purchase – comes on the heels of a larger discussion about what the New York Times described last year as Amazon’s practice of “optimizing word-search algorithms, analyzing competitors’ sales data, [and] using its customer-review networks to steer shoppers away from its competitors and toward its in-house brands.
Those in-house brands – whose annual sales were less than $1 billion as of last year, but expected to potentially grow to $25 billion per year by 2022 – are truly expansive in nature. They include apparel lines like its fast-fashion label Find, and Ella Moon, the latter of which was sued by lookalike, sound-alike brand Ella Moss last year for trademark infringement, as well as the successful AmazonBasics with its batteries, bed sheets, bath towels, and baby wipes.
More recently, the tech titan launched Belei, its first private label foray into beauty goods. The 12-product range collection made headlines upon its launch in March at least in part because it was reported to have been formulated based on the arsenal of search and purchase data that Amazon has collection based on the sales of third-party beauty and skincare brands on its platform.
As Vox’s Cheryl Wischhover asserted at the time, Belei “feels like a brand birthed by an algorithm … Everything Amazon is doing is data-driven, [and] there’s no reason to think Amazon hasn’t applied that same strategy to its own product lines.” The Seattle-based giant “has reams of data on what people are searching for,” she noted. “This gives it a huge potential advantage over outside brands that sell in its marketplace.”
It is precisely this type of competitive advantage, among others, that has antitrust experts scratching their heads.
“I think there is a potential monopolization case against Amazon,” Chris Sagers, an antitrust professor at the Cleveland-Marshall College of Law in Ohio, told the Times. “If they are getting massive penetration in the market and preventing customers from buying products from their competitors.” It appears that the EU just might think so, as well.