By Sam Schechner
Amazon.com Inc. will face a formal European Union antitrust
investigation into its dealings with third-party merchants,
expanding a multipronged regulatory push that has ensnared other
big Silicon Valley giants like Facebook Inc. and Alphabet Inc.'s
Google.
The European Commission, the EU's top antitrust enforcer, said
Wednesday that its investigation will look into whether Amazon is
abusing its dual role as both the provider of a marketplace where
independent sellers can offer products and a retailer of products
in its own right.
In particular, the probe will investigate whether Amazon is
using nonpublic data from independent merchants to compete against
them. Investigators will also examine what data Amazon uses to pick
a seller as the default option for a given product when a user
clicks the "buy" button -- and whether Amazon gets an unfair leg up
to be that default.
The probe could eventually lead to formal charges, fines and
orders to change business practices, but it could also be
dropped.
"We will cooperate fully with the European Commission and
continue working hard to support businesses of all sizes and help
them grow," an Amazon spokesman said.
The case opens a new -- and potentially more complex -- chapter
for competition enforcers on both sides of the Atlantic. The EU has
led the antitrust charge against Google for more than a decade,
issuing EUR8.25 billion ($9.25 billion) in fines. Now antitrust
scrutiny of technology titans is rising in the U.S., as well, with
the U.S. Federal Trade Commission and U.S. Justice Department
dividing up oversight of four of the largest U.S. tech firms,
including Amazon, Google, Facebook and Apple Inc.
Politicians also have gotten more vocal. Sen. Elizabeth Warren
(D., Mass.), a presidential candidate, has proposed breaking the
company up and unwinding its Whole Foods acquisition. President
Trump has said Amazon should pay more in taxes and has criticized
the company's effects on competitors.
Margrethe Vestager, the EU's antitrust chief, has emerged as one
of the world's major technology regulators. In addition to the
Google cases, she also has issued a fine to Facebook for misleading
regulators during a review of its acquisition of the WhatsApp chat
service and ordered tech giants including Amazon and Apple to pay
back taxes under what she alleged to be sweetheart deals with tax
authorities. The companies are appealing the tax cases.
Meanwhile, Ms. Vestager was this month nominated to a senior
position in the Commission for the next five years, meaning she may
keep some sway over competition policy.
More broadly, the EU has also taken a lead in reining in the
alleged excesses of technology giants in other domains, with a
sweeping privacy law that went into effect last year, and new
copyright legislation aimed at making tech giants pay more to news
media and music companies.
The EU's Amazon case could now help lay groundwork for growing
interest among other competition regulators in investigating parts
of a company that has a presence in many sectors, from logistics
and e-commerce to cloud computing and now advertising.
In addition to the U.S., authorities in Austria, Italy and other
countries are investigating Amazon on various topics including the
treatment of third-party sellers. Germany's antitrust regulator,
earlier Wednesday, said Amazon has agreed to change its terms of
service on its marketplace platform for third-party sellers,
following its own investigation into the e-commerce giant's sales
practices. The changes mark the conclusion of a separate
eight-month probe by the German Federal Cartel Office.
As part of the settlement, Amazon will amend certain terms for
its marketplace platform around the world. The changes involve some
technical issues like requiring Amazon to offer third-party sellers
a 30-days notice before suspending accounts and reducing Amazon's
requirements about the confidentiality terms with sellers, the
German authority said.
A European Commission spokeswoman described the German case, and
the others in Europe, as not conflicting with the EU's case, which
focuses on data. "These investigations are complementary but not
overlapping," she said.
The EU investigation, first opened informally last September,
will focus in large part on certain terms Amazon's contracts with
independent merchants. In particular, investigators will look at
whether Amazon's contracts are allowing it to aggregate merchants'
proprietary data, given its role as the platform for processing
transactions and shipping goods on behalf of third party-sellers --
and whether using that data to inform its own retail business
violates EU competition laws.
In addition, investigators will look at whether Amazon has a
dominant position in any EU markets, which could set a higher bar
for its conduct with smaller companies that use its services.
On Tuesday, at a hearing before the U.S. House of
Representatives about digital platforms' market power, an Amazon
representative said the company doesn't use individual sellers'
data to compete with them. An Amazon spokesman declined to comment
Wednesday when asked whether the company uses data aggregated from
multiple sellers to compete with them.
The EU's case against Amazon could prove to be complicated, some
antitrust experts say, because its focus on the contractual use of
a business customer's data appears novel.
"It's an innovative case because it's trying to use data
collected by Amazon," said Nicholas Economides, an economics
professor who looks at competition issues at New York University
Stern School of Business. He said the EU will have its work cut out
for it, however, to show that its use of the data is
anticompetitive: "Information alone is not going to make the
case."
Given recent court decisions in the EU, the Commission may also
face pressure to show robust data demonstrating that Amazon's use
of the data has had anticompetitive effects on merchants, said
Nicolas Petit, a competition-law professor at the University of
Liege.
Amazon's marketplace business, in which it offers services to
retailers to sell goods on Amazon's platform, is an increasingly
important part of its business. The marketplace accounts for more
than half of the retailer's global sales, according to chief
executive Jeff Bezos's letter to shareholders in April. According
to Mr. Bezos, the traditional retail business reached $117 billion
in sales last year, dwarfed by $160 billion for sales on its
marketplace.
"Third-party sellers are kicking our first party butt," he
wrote.
Sara Germano, Laurence Norman and Dana Mattioli contributed to
this article.
Write to Sam Schechner at sam.schechner@wsj.com
(END) Dow Jones Newswires
July 17, 2019 10:13 ET (14:13 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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