The European Commission (EC) has charged online retail giant Amazon over claims it uses data from third-party sellers to gain an unfair advantage and boost sales of its own goods.
In a Statement of Objections sent to Amazon, the EC claimed that Amazon has illegally distorted competition in online retail markets.
Amazon’s e-commerce platform is home to thousands of small third-party sellers, with sales split roughly 50/50 between Amazon and independent sellers. Since Amazon is both the owner of its e-commerce platform and the largest retailer on it, the company is in direct competition with its own users.
With access to a range of third-party data, including orders, revenues, shipping and feedback, the Commission expressed concern that Amazon avoids risks taken by third party sellers when making businesses decisions while reaping the benefits.
European Commission Executive Vice-President Margrethe Vestager commented in an EC statement: “We analysed a data sample covering over 80 million transactions and around 100 million product listings on Amazon’s European marketplaces. Our investigation shows that very granular, real-time business data relating to third-party sellers’ listings and transactions on the Amazon platform, systematically feed into the algorithms of Amazon’s retail business.
“It is based on these algorithms that Amazon decides which new products to launch, the price of each individual offer, the management of inventories, and the choice of the best supplier for a product.”
The statement added: “We have now come to the preliminary conclusion that Amazon illegally abused its dominant position as a marketplace service provider in Germany and France – the biggest markets for Amazon in the EU.”
If found guilty, Amazon could be hit with a fine as high as 10% of its global turnover –around £15 billion.
The new charges are related to an ongoing EC scrutiny of Amazon’s business practices that started around 2015. In 2019, the European Commissioner for Competition formally began its first investigation into how Amazon used the data from third-party vendors on its platform to gain a competitive advantage.
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In addition to the new charges, the EC also announced it has opened a second investigation into Amazon’s e-commerce business practices. This will focus on whether Amazon has set rules that favour its own products and drive retailers towards using its own logistics services.
“The Commission will investigate whether the criteria that Amazon sets to select the winner of the ‘Buy Box’ and to enable sellers to offer products to Prime users, under Amazon’s Prime loyalty programme, lead to preferential treatment of Amazon’s retail business or of the sellers that use Amazon’s logistics and delivery services,” an EC statement said.
The Buy Box is the part of an Amazon product page that has the functions for adding an item to the shopper’s cart, along with options to choose other sellers.
If Amazon is showing preferential treatment for which sellers appear in the Buy Box, the EC warned that it may breach Article 102 of the Treaty on the Functioning of the European Union (TFEU) that prohibits the abuse of a dominant market position.
The EC has given Amazon the opportunity to respond to its new conclusions over the few next weeks. In a statement, Amazon has said that it disagrees with the EC’s allegations.