Alex Haffner, Partner, Fladgate LLP (email@example.com)
Thomas Edwards, Trainee Solicitor, Fladgate LLP (firstname.lastname@example.org)
The European Commission has launched an initial probe into Amazon over how it uses third party sellers’ data. In the past weeks this has been closely followed by an antitrust probe from the German Federal Cartel Office.
One of the reasons Amazon is unique as a retailer is that it operates as both a merchant, and as a platform for other sellers to use its marketplace. The EU commission has said it wants to investigate whether Amazon has misused the data it has collected from those third party sellers in order to boost its own merchant arm. Unusually, the probe was not launched due to a complaint by a competitor, but of the Commission’s own volition.
Amazon collects a lot of data from customers and retailers who utilise its online marketplace. In theory, this data is supposed to be positive for consumers (who can receive more personalised retail suggestions) and retailers (who can receive useful data on shopping trends and pricing). However, there is a suggestion that Amazon has been using this data to benefit its own retail arm, at the expense of third party retailers.
The Commission’s investigation is still in its early stages and it will be considering whether or not to open a full investigation based on the evidence at its disposal. The Commission has already collected a lot of data on how Amazon’s system works and on how they interact with the businesses they host. It has also sent out a large number of questionnaires to users of Amazon’s marketplace in order to gather information on Amazon’s practices from those retailers who may suffer due to anti-competitive practices.
Although this investigation against Amazon is the first time the Commission has reviewed use of retailer data in this capacity, it is not the first high profile investigation into a large US corporation in recent years. The current head of the Commission, Margrethe Vestager, has developed a reputation for bringing cases against the likes of Google and Apple. Earlier this year the Commission fined Google €4.3b for a breach of the EU’s antitrust rules. In brief, it was found that Google had imposed legal restrictions on mobile network operators in order to ensure that Google remained the dominant internet search provider. Google was found to have done this by requiring manufacturers to pre-install Google search and browser apps, and restricting manufacturers from using versions of the Android operating system which were not approved by Google.
In more general terms, the Commission launched an inquiry into e-commerce in 2015 as part of the wider Digital Single Market strategy. The final report of this inquiry found that there were a number of practices existing in e-commerce which unduly prevented consumers from benefiting from greater product choice and lower prices in e-commerce. Given the Commission’s interest in e-commerce, it is perhaps unsurprising that Amazon has become the focus point of the latest investigation. EU based businesses used the Amazon marketplace to export more than €5b worth of goods in 2017, and Amazon has stated that last year more than half of all sales on its marketplace were made through third party retailers.
It was announced in November that the German Federal Cartel Office has also launched an investigation into whether Amazon has abused its market power to set illegal or restrictive contract terms with third party retailers. The Watchdog has received various complaints from retailers who allege that Amazon uses its dominant position to impose terms on the sellers which restrict lawsuits against Amazon, increase Amazon’s right to the product information of the retailers, and increase Amazon’s control over the seller’s accounts. The German authorities have said that this investigation will supplement the wider EU investigation, and the Competition and Markets Authority in the UK have already said they will note the outcome of the German investigation.
As stated, Amazon is in a powerful position as both a merchant and the platform owner. Amazon may use the third party data completely legitimately, but if Amazon has been using the data to promote its own retail arm then the Commission may well impose a heavy fine on Amazon. The investigation is still in the data gathering stage and the Commission is keen to hear from interested parties. It would be advisable for any retailers who use the Amazon marketplace to get involved in the Commission’s investigation as soon as possible.