Amazon: A marketplace for data?

Posted on 3 May 2019

Amazon: A marketplace for data?

Amazon's dual role as an online retailer and a marketplace host for other retailers has long raised concerns over potential conflicts of interest. More recently, this hybrid function has led to an investigation by the European Commission into the e-commerce giant.

The Commission announced in September 2018 that it had launched a preliminary investigation into how Amazon had been using data taken from third-party sellers on its platform, and whether this use amounts to abuse of dominance and a violation of European competition law.

The EU's Competition Commissioner, Margrethe Vestager, explained the reasons behind the Commission's preliminary investigation:

"The question here is about the data, because if you as Amazon get the data from the smaller merchants that you host — which can be of course completely legitimate because you can improve your service to these smaller merchants — well, do you then also use this data to do your own calculations? What is the new big thing, what is it that people want, what kind of offers do they like to receive, what makes them buy things."

Recently, a number of retailers have voiced concerns over the extent to which Amazon is collecting and analysing their data to gain an advantage in the market. The investigation centres around Amazon's position in the market, and whether Amazon is abusing its dominance as an online marketplace. Recently, retailers claim that Amazon has been producing own brand versions to compete with products already listed for sale on its platform. Retailers claim that Amazon is then promoting its own brand products above the retailers' products pushing retailers' products further down the results page of a product search and reducing sales of non-Amazon products.

Meanwhile, the reality is that small and medium-sized businesses often have no real alternative but to list their products on Amazon Marketplace if they want to reach potential customers. This is reflected in Amazon founder Jeff Bezos's letter to shareholders in which he revealed the growth of Amazon Marketplace:

"In 2017, for the first time in our history, more than half of the units sold on Amazon worldwide were from our third-party sellers, including small and medium-sized businesses."

Vestager has confirmed the Commission's preliminary investigation is now at an advanced stage.  Should Vestager choose to launch a full investigation into Amazon's use of data and the Commission ultimately make a finding that Amazon has infringed competition law, it has the power to issue a fine of up to 10% of Amazon's annual global turnover.

Not only is Amazon potentially under scrutiny by the Commission, the company is also facing investigations by the French, German and Austrian competition authorities into allegedly unfair terms in contracts between Amazon and retailers.

Similarly, the Italian competition authorities announced earlier this month that they had opened a preliminary probe into concerns that the terms and conditions on Amazon Marketplace give an unfair advantage to its own logistics services.

Amazon's hybrid functionality is a sensitive topic for many retailers, and one around which the debate seems set to continue from a competition law perspective.

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