American e-commerce giant Amazon has come under an investigation by the European Union to ascertain if the company broke competition rules by using merchant data from retailers to its benefit.
According to EU Competition Commissioner Margrethe Vestager, the EU wants to find out whether Amazon is using merchant data to its advantage.
Noting that E-commerce boosted retail competition and expanded choice and better prices for consumers, Vestager said it is also “important to ensure that large online platforms don’t eliminate these benefits through anti-competitive behavior.”
Therefore the EU decided to take a close look at Amazon’s business practices and its dual role as marketplace and retailer “to assess its compliance with EU competition rules.”
Use of sensitive information found
“Based on the Commission’s preliminary fact-finding, Amazon appears to use competitively sensitive information – about marketplace sellers, their products and transactions on the marketplace,” the regulator’s statement said.
In case the EU becomes convinced of a breach of competition rules by Amazon it could attract a hefty fine up to 10 percent of the online retailer’s global annual revenues.
A similar antitrust investigation by the European Commission against Google led to a fine of $9.5 billion.
The probe has no deadline. However, Vestager, noted for a series of EU investigations into U.S. tech giants including Apple will be completing her mandate in late October.
Amazon offers full cooperation
Meanwhile, Amazon offered full cooperation to the investigation.
“We will cooperate fully with the European Commission and continue working hard to support businesses of all sizes and help them grow,” a statement said.
On Tuesday, an Amazon executive, while testifying before the U.S House Judiciary subcommittee stated that the company never uses third-party sellers’ data in the planning process for new products.
Amazon has been facing rising scrutiny and regulatory vigil in different parts of the world. On Wednesday, it reached a deal with Germany’s antitrust watchdog to overhaul its terms of service for third-party merchants.
Market Place advantage and Buy Box
The EU probe will bring Amazon’s standard contracts with marketplace sellers under intense scrutiny. It will also study how data gets used in allocating prominent slots on pages. An Amazon logo is pictured inside the Amazon corporate headquarters on June 16, 2017, in Seattle, Washington. Photo: David Ryder/Getty Images
According to market studies, almost 30 percent of Amazon’s annual sales are coming from the sales of independent retailers on Amazon.
For Amazon, the main advantage of the Marketplace is that it offers a wider range of products without the burden of stocking all by itself.
The reciprocal gain for third-party retailers is the umbrella of Amazon’s brand power, reach and wider exposure.
According to a report by The Guardian, the EU investigation on Amazon will closely examine Amazon’s “buy box” that allows customers to cart items from a specific retailer.
Amazon stock traded flat after the news of EU investigation came out.
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