Why is the EU taking legal action against Amazon?
The European Commission has charged Amazon with abusing its position in online retail on the continent to gain an unfair advantage over competitors.
The EU has launched formal antitrust charges against the retailer over its treatment of the 150,000 merchants selling goods through its website.
The move is the culmination of a year-long probe, which reached the view that Amazon breached EU competition rules by using non-public data it gathers on sales on its website to boost its own-label products and services.
The European Commission came to its preliminary findings by analysing a sample covering more than 80 million transactions and around 100 million product listings on Amazon’s websites in the region. The same data is allegedly fed into algorithms to help Amazon optimize its own private label brands.
A statement read: “The Commission’s preliminary view, outlined in its Statement of Objections, is that the use of non-public marketplace seller data allows Amazon to avoid the normal risks of retail competition and to leverage its dominance in the market for the provision of marketplace services in France and Germany - the biggest markets for Amazon in the EU.”
Margrethe Vestager, who oversees the EU’s competition policy explained: “We must ensure that dual-role platforms with market power, such as Amazon, do not distort competition. Data on the activity of third-party sellers should not be used to the benefit of Amazon when it acts as a competitor to these sellers.
“With e-commerce booming, and Amazon being the leading e-commerce platform, fair and undistorted access to consumers online is important for all sellers.
“In many of the most popular product categories, Amazon lists less than 10 percent of the products available on its platform, but makes 50 percent or more of all revenues in the category.
“We have therefore come to the preliminary conclusion that the use of these data allows Amazon to focus on the sale of the best-selling product. This marginalises third-party sellers and caps their ability to grow.”
Previous, Ms Vestager has taken a tough stance on US tech firms and what she sees as their grip on the digital landscape. Google has been fined more than €8bn in three separate cases, all relating to alleged abuses of power in the EU.
The EU has separately opened a second formal antitrust investigation into whether Amazon gave preferential treatment on its site to its own products and for sellers who paid extra for Amazon’s logistics and delivery services.
Since the announcement, Amazon has responded. Its statement reads: “We disagree with the preliminary assertions of the European Commission and will continue to make every effort to ensure it has an accurate understanding of the facts. Amazon represents less than 1 percent of the global retail market, and there are larger retailers in every country in which we operate.
“No company cares more about small businesses or has done more to support them over the past two decades than Amazon. There are more than 150,000 European businesses selling through our stores that generate tens of billions of Euros in revenues annually and have created hundreds of thousands of jobs.”
Thompson and Holt managing partner Craig Gedey says the results of the antitrust charges could be significant for the platform.
Gedey said: “While Amazon is certainly right in that it offers huge opportunities to small businesses across the world, and generates vast amounts of money and jobs, they still need to operate within the law. The European Union would not take this action without some confidence that they are in the right legally, though they will be challenged.
“This isn’t the first time that this issue has been raised either, of course. Earlier this year federal lawmakers in America questioned Jeff Bezos over its treatment of third-party sellers, following a report in the Wall Street Journal that claimed Amazon uses data from independent sellers to develop and launch competing products themselves.
“Since then, there have been reports that attorney generals in New York and California could investigate the issue. So it’s unlikely to go away, and as such, the ultimate result of this European Union action could be significant moving forward.”
Should Amazon be found guilty of the practise it could be fined as much as 10 percent of its annual global revenue according to the Wall Street Journal, which would translate to around $28billion on its 2019 earnings. No deadline has been set for the findings.
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