Jul 17, 2019

European Union opens antitrust probe of Amazon

Amazon CEO Jeff Bezos. Photo: SAUL LOEB/AFP/Getty Images

The EU said Wednesday it would investigate how Amazon creates products, like AmazonBasics batteries or Solimo brand razors, that compete with offerings from outside merchants on its site.

Why it matters: It's a major new wave of scrutiny for the retail giant at a time when it is also under fire in the U.S.

Driving the news: Amazon's critics have expressed concern that the company can use the data it gathers on merchants using its platform to develop its own house-brand products. Then, critics say, Amazon, can give those products prime placement on the site.

  • EU Commissioner Margrethe Vestager said in a statement Wednesday that she had "decided to take a very close look at Amazon's business practices and its dual role as marketplace and retailer, to assess its compliance with EU competition rules."
  • The regulator will look at how Amazon's trove of data on its third-party merchants affects competition.
  • The investigation will include an inquiry into how merchants end up in the "Buy Box," the highlighted area on an Amazon product page that can drive customers to the seller that controls it.

Flashback: Vestager first said she was looking at the issue last year.

By the numbers: Amazon has become a prominent player in its own marketplace, according to data from TJI Research.

  • The research firm counts 140 Amazon private labels around the world and an additional 519 brands which have struck deals to be sold exclusively on the site.
  • Amazon's private label products range from the ubiquitous AmazonBasics batteries to bluejeans and coffee.

Regulators and policymakers have started to target this segment of Amazon's business in recent months out of concern it will put the squeeze on third-party sellers that compete with its own brands.

  • For example, critics say Amazon boosts its own offerings in search — and on its Alexa voice assistant products — putting it at an advantage compared to the merchants that use its platform.
  • In response, Democratic presidential candidate Sen. Elizabeth Warren (Mass.) has proposed banning Amazon and other large companies from running a platform and simultaneously participating on it.
  • The company has defended itself by publicly touting its work to help third-party merchants and quietly ending the use of restrictive legal agreements with the sellers seen as anticompetitive.

What they're saying: An Amazon spokesperson pledged that it would "cooperate fully with the European Commission."

The big picture: Regulatory authorities increasingly view Amazon and other tech giants with suspicion, alarmed by their collection of consumer data, market power and ability to influence society.

  • On Tuesday alone, three different Congressional committees held hearings with executives from major tech companies on issues ranging from competition to content moderation to Facebook's plan to launch a digital currency.

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Amazon shares slide as it misses earnings expectations

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