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Amazon Faces Probe in Europe Over Third-Party Selling

Amazon Faces Probe in Europe Over Third-Party Selling

Postby smix » Wed Jul 17, 2019 4:53 pm

Amazon Faces Probe in Europe Over Third-Party Selling
The Wall Street Journal

URL: https://www.wsj.com/articles/amazon-to- ... 1563353036
Category: Politics
Published: July 17, 2019

Description: EU to investigate use of merchants’ data as scrutiny of tech firms mounts on both sides of the Atlantic
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 Silicon Valley giants like Facebook Inc. and 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 Alphabet Inc.’s Google for more than a decade, issuing €8.25 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 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 in Amazon’s contracts with independent merchants. In particular, investigators will look at whether Amazon’s contracts allow 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.
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Amazon under EU antitrust fire over use of merchant data

Postby smix » Wed Jul 17, 2019 5:08 pm

Amazon under EU antitrust fire over use of merchant data
Reuters

URL: https://www.reuters.com/article/us-eu-a ... SKCN1UC0W9
Category: Politics
Published: July 17, 2019

Description: BRUSSELS (Reuters) - Amazon became the target of an antitrust investigation by the European Union on Wednesday over its use of merchants’ data, underlining regulators’ increasing focus on how tech companies exploit customer information. U.S. tech giants Amazon, Google and Facebook have been in the regulatory spotlight as antitrust enforcers examine how they use data to boost their market power. Some U.S. politicians and even one of Facebook’s co-founders have called for them to be broken up. The European Commission has been seeking feedback from retailers and manufacturers since September into Amazon’s dual role as a marketplace for merchants and acting as a competitor following complaints from traders about Amazon’s practices. The Commission said its investigation would look into Amazon’s data agreements with marketplace sellers and how the online retailer uses that data to choose which seller is selected to provide a product once a consumer clicks “buy.” European Competition Commissioner Margrethe Vestager, who can fine companies up to 10% of their global turnover, said the issue was crucial as more and more Europeans shop online. “E-commerce has boosted retail competition and brought more choice and better prices. We need to ensure that large online platforms don’t eliminate these benefits through anti-competitive behaviour,” she said. Amazon said it would cooperate fully with the EU investigation. The company reached a deal with Germany’s antitrust authority on Wednesday to overhaul its terms of service for third-party merchants. Under Amazon's terms of service for Europe here set out on its website, merchants grant Amazon "royalty-free" rights to use in a range of ways their materials, such as technology, trademarks, content and product information. In Washington, the U.S. Federal Trade Commission is contemplating probes of Amazon and Facebook while the Justice Department is looking at Apple and Google. In Congress on Tuesday, Representative David Cicilline, chair of the Judiciary Committee’s antitrust subcommittee, pressed Nate Sutton, an associate general counsel at Amazon, about whether the online retailer used data about independent sellers on its platform to develop products to sell, thus competing against its own sellers. Sutton argued that the data was used solely to know what to offer customers. “The algorithms are optimised to what customers want to buy regardless of the seller,” he said. This EU probe has some parallels with the Commission’s investigation of Google for giving illegal advantage in search results to its own comparison shopping service, Ian Giles, a partner at Norton Rose Fulbright, said. “There have been concerns around the world that competition authorities have failed to appreciate the market power that comes from ownership of data,” he said. In Amazon’s case, he said the Commission needed to show “the standard agreements with retailers were anti-competitive in somehow allowing Amazon to use the data to manipulate market outcomes, or that Amazon had in some way abused its dominance.” Politico reported last week the EU would start a probe. The Commission had been struggling to define the market in which Amazon operates in order to identify where the competitive harm could have been, sources said. They said the issue was whether to look at Amazon in the overall retail market or in its own niche. This would not be Amazon’s first run-in with the Commission. Two years ago, it was told to pay back taxes of about 250 million euros ($280 million) to Luxembourg because of illegal tax benefits. That same year it settled with the regulator over its distribution deals with e-book publishers in Europe. The Commission may take a tougher approach this time to set a precedent for other platforms providing a marketplace whilst competing with their own products, Ioannis Lianos, professor of global competition law and public policy at University College London, said. To send a strong message, the Commission may rule that an infringement of competition law has taken place rather than settle with Amazon, he said. “I think the Commission will want to give a strong message because it’s one of the first cases to bring this issue,” Lianos said. “My feeling is that the Commission’s interest is not to settle but to take an infringement decision to lay down the law clearly and set a precedent.”
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A 'fundamental legal' question at the heart of the EU's probe into Amazon

Postby smix » Thu Jul 18, 2019 2:21 pm

A 'fundamental legal' question at the heart of the EU's probe into Amazon
Yahoo Finance

URL: https://finance.yahoo.com/news/amazon-a ... 52132.html
Category: Politics
Published: July 17, 2019

Description: The European Union has launched an antitrust investigation into whether data Amazon (AMZN) collects on third-party merchants as part of standard agreements unfairly boost sales of Amazon’s own products. The EU is also looking into how the data selects merchandise for the coveted “Buy Box” section of Amazon’s website, which drives the vast majority of sales on the site. Whether Amazon’s dual role as a merchandise platform and seller violates antitrust rules will be evaluated under a different and arguably more stringent antitrust framework than exists in the U.S. “A fundamental legal question is whether or not, or to what extent, Amazon, as a platform, needs to treat Amazon Retail just as it treats every other merchant,” says Nikolas Guggenberger, an Assistant Professor at Münster Law School. The European Court of Justice has set no real precedent for this type of case, according to Guggenberger, who advises the International Competition Network for the EC’s Directorate-General for Competition. Very few decisions by the European Commission deal with whether vertically integrated enterprises — those that own companies at different points in a supply chain — are obliged to treat their subsidiaries in a neutral manner, according to Guggenberger. It's not entirely clear whether an obligation to treat subsidiaries in a neutral manner only arises if an entity owns an “essential facility,” or whether there’s an obligation for neutrality simply based on a company’s “dominant position in the market.” Essential facilities are those that a monopolist controls and are necessary for effective competition.
A lower antitrust threshold in Europe
Under U.S. law, a finding that Amazon’s platform is an essential facility would likely be required in order to mandate that it treat its subsidiaries and its third-party merchants equally. In turn, an antitrust claim would fail, as alternative platforms like eBay (EBAY) exist where merchants can reach customers. In Europe, for regular types of antitrust remedies, establishing that a company holds a dominant market position is sufficient, and an essential facility finding is not required to trigger antitrust obligations, Guggenberger said. The EU’s threshold for showing market dominance is also comparatively lower than the U.S. Enterprises that have reached approximately 40% or more market share are presumed to have established a dominant position. U.S. courts, on the other hand, generally require a much higher percentage — around 70%, Guggenberger said. Even in the EU, “you very rarely get to a situation where you have a dominant position,” he said. If EU authorities conclude that dominant market share is enough to trigger a vertical company’s responsibility to deal with their subsidiaries in the same way they interact with their competitors, then defining Amazon’s market share may still prove elusive. “This is close to impossible to get,” Guggenberger said of Amazon, and other major e-commerce players. “You can't really find anything, because the first hard part — and this is basically undecided so far — is you need to define the market, and that basically pre-defines what kind of market shares you get.” One way to define the market, he said, would be to ask which platforms are available to a merchant. “And then on top of that you would need to define the market in a regional manner. And then in Europe, the question is always do you look at a national level, meaning a member state level, do you look at a union level because of the cross-border aspect is large enough, or do you have sub-markets?” Adding more complexity is the question of whether to include Amazon Retail as a merchant that sells on the platform, or exclude it as part of a vertically integrated enterprise that should not be counted.
Is collecting data hurting competition?
The Wall Street Journal raises another wrinkle for the Commission: proving that its collected data on third-party merchants is having anticompetitive effects. “I think the qualitative answer is that it is very likely that Amazon has a dominant position,” Guggenberger said, adding that one of the benefits of the investigation is that the EU may carve out definitions for interpreting e-commerce markets. If the Commission concludes that remedies should be enforced, rather than dropping the investigation, it can order Amazon to cease certain practices, mandate changes to its merchant agreements, as well as impose fines. However, unlike U.S. antitrust authorities, the Commission lacks the power to break up Amazon’s corporate ownership structure. Now that the Commission has moved to a legally formal stage it has authority to demand that Amazon turn over documents and other information. On Wednesday, German authorities announced Amazon’s agreement to alter its terms of business for platform sellers, after regulators expressed concerns over its merchant relationships. The changes relax merchant liability rules that previously required sellers to waive various claims against Amazon. The new rules also increase Amazon’s obligations to notify sellers before termination and cancelation of their accounts, and broaden choice of jurisdiction for dispute resolution that made it difficult for smaller merchants to pursue claims. Other changes include amendments to seller agreements concerning returns, product information, secrecy, transparency and merchant ratings. The EU’s investigation, for its part, is the first case of its kind, so it could take several years to be resolved. In a statement to Yahoo Finance, Amazon wrote, “We will cooperate fully with the European Commission and continue working hard to support businesses of all sizes and help them grow.”
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