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The European Union (EU) intends to announce whether it believes Amazon’s data practices warrant further investigation, Margrethe Vestager, head of competition policy in Europe, told CNBC.
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Vestager opened a preliminary probe into how Amazon treats other merchants on its site in September, with the goal of determining how the e-tailer gathers these merchants’ sales information, and whether that gives Amazon an edge in competing with those sellers. This preliminary investigation is now at an “advanced” stage, according to Vestager.
Here’s what it means: Amazon could face disciplinary or regulatory action in Europe in the future if the EU decides it has abused its power.
A thorough investigation by the EU in the next few months could lead to consequences for Amazon that are, at best, expensive in the short term or, at worst, restrictive in the long term. Last July, European authorities demonstrated that they take antitrust issues seriously when they hit Google with a whopping $5.1 billion fine and regulations to loosen the company’s grip over its Android software. While Amazon has the resources to handle a fine if it is given one, a potentially worse punishment would be restrictive regulations on Amazon’s use of its power. For example, if Amazon uses sales data from other sellers to determine which categories to target with private labels, regulations restricting this practice would diminish the e-tailer’s competitive advantage.
The bigger picture: Amazon’s unique position of power and the way it wields that power are creating antitrust skepticism in the EU and elsewhere.
The e-commerce giant has made waves recently for practices that could be detrimental to other sellers on its marketplace. Amazon experimented with adding “Similar item from Our Brands” links directly below listings for non-Amazon products in October, and last month it tested a feature in its mobile app that showed pop-up ads for lower-priced products on other sellers’ product pages. But as damaging as these experiments might have been for third-party sellers on the marketplace, many of them can’t afford to leave, as 44% of Amazon sellers say they get 51% or more of their sales on Amazon.
Amazon’s actions are also receiving scrutiny from legislators in the US. If the EU launches a full-scale investigation of Amazon, and US lawmakers also begin working to reduce the e-tailer’s power, Amazon could find itself substantially weakened globally within the next few years.
US politicians have already gotten the ball rolling: Senator Richard Blumenthal asked the Department of Justice and the Federal Trade Commission to investigate the requirements for possible antitrust violations in December. And 2020 presidential hopeful Senator Elizabeth Warren said that Congress should pass a law preventing large companies from owning a marketplace and selling on it simultaneously.
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