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As Amazon Faces Grilling in Congress, EU Launches Antitrust Probe of Online Behemoth

"If you believe in competitive markets, you cannot ignore the problem Amazon presents."

Close-up of sign with logo on facade of the regional headquarters of ecommerce company Amazon in the Silicon Valley town of Sunnyvale, California, October 28, 2018.

Close-up of sign with logo on facade of the regional headquarters of ecommerce company Amazon in the Silicon Valley town of Sunnyvale, California, October 28, 2018. (Photo: Smith Collection/Gado/Getty Images)

A day after Amazon faced grilling at a U.S. House hearing, the European Commission announced Wednesday it's launching an antitrust probe into the online behemoth.

Commissioner Margrethe Vestager said in a statement that she will "take a very close look at Amazon's business practices and its dual role as marketplace and retailer, to assess its compliance with E.U. competition rules."

"Based on the Commission's preliminary fact-finding," the body said in its statement announcing the formal investigation, "Amazon appears to use competitively sensitive information—about marketplace sellers, their products, and transactions on the marketplace."

The probe's two focal points, per the statement, are:

  • the standard agreements between Amazon and marketplace sellers, which allow Amazon's retail business to analyze and use third party seller data. In particular, the Commission will focus on whether and how the use of accumulated marketplace seller data by Amazon as a retailer affects competition.
  • the role of data in the selection of the winners of the "Buy Box" and the impact of Amazon's potential use of competitively sensitive marketplace seller information on that selection. The "Buy Box" is displayed prominently on Amazon and allows customers to add items from a specific retailer directly into their shopping carts. Winning the "Buy Box" seems key for marketplace sellers as a vast majority of transactions are done through it.

Sen. Elizabeth Warren (D-Mass.), who released a plan for breaking up big tech as part of her presidential campaign, outlined similar problems with Amazon earlier this year, a point noted Wednesday by Tommaso Valletti, the European Commission's chief competition economist, when he shared news of the probe on social media.

Minnesota Attorney General Keith Ellison, a Democrat, has also suggested there's good reason for the EU to take on the investigation. "If you believe in competitive markets," told the BBC recently, "you cannot ignore the problem Amazon presents."

Laying out the problem in detail, Stacy Mitchell, co-director of the U.S.-based Institute for Local Self-Reliance (ILSR)—which has authored a report on the company's "stranglehold"—explained how Amazon is picking "winners and losers."

Speaking to the BBC's "World Business Report," Mitchell said: "Most shoppers in the U.S. and increasingly around the world when they want to buy something online, they are starting right at Amazon." 

That means that "any other company out there that produces anything or retails any product, if they want to reach the market, increasingly [has] to be on Amazon's platform," she said. "And that means that Amazon essentially control[s] the underlying infrastructure."

Amazon, she continued, is able to "decide who can be there, which companies show up well in the search results, and they can use the information that they glean from the companies that are riding on their platform in order to undermine them as competitors."

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"In some cases," said Mitchell, Amazon has "spotted products that are selling really well that are being offered by another company on their platform, and then they brought those products into their own inventory. Or, in some cases they've begun to manufacture them themselves."

She dismissed the notion that Amazon is offering a public good by offering low prices and a wide variety of products. "Increasingly," said Mitchell, "it's not the market, it's not consumers who are picking winners and losers. It's Amazon."

"Amazon," added Mitchell, "can effectively determine the fate of a product because it chooses so."

News of the European scrutiny comes right after tech giants, including Amazon, were questioned by U.S. lawmakers.

"Republicans and Democrats on Capitol Hill who no longer seem able to agree on the color of the sky," Axios reported, "found common ground Tuesday across three committee hearings in both houses of Congress: Big Tech is too powerful and needs to be knocked down a peg."

At one of those hearings, as Reuters reported, Democratic Rep. David Cicilline (R.I.) challenged Amazon's collection of data.

Lawmakers on the House Judiciary Committee's antitrust panel pressed an executive from Amazon.com Inc. on Tuesday about allegations that it competed against its own sellers and pushed them to buy advertising and fulfillment services. [...]

Representative David Cicilline, chair of the antitrust committee, pressed Nate Sutton, an associate general counsel at Amazon, about allegations that the online retailer used data about independent sellers on its platform to develop products to sell, thus competing against its own sellers.

"You said we do not consult data to compete with other sellers online. You do collect enormous data about prices, [and] what's popular," Cicilline said skeptically. "You're saying that you don't use that in any way to promote Amazon products? I remind you, sir, you're under oath."

As part of her testimony (pdf) before the same committee Tuesday, ILSR's Mitchell summed up the problem succinctly.

"Amazon doesn't just dominate the online market," she said, "it controls access to it."

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