En passant Florence G'sell July 26, 2019 No Comments

Note: this article was translated from French by an automated tool The European Commission announced on July 17 that it would investigate Amazon's business practices to find out whether its use of data from third-party sellers on its platform complies with competition rules. Jhave answered on this point the questions of the Lawyers Club, on whose blog you can also read my answers.

Why has the European Commission opened an investigation into Amazon?

On July 17, Margrethe Vestager, the European Commissioner for Competition, announced the opening of an investigation “Thorough” concerning Amazon, which follows a preliminary investigation opened in September 2018, the results of which prompted the Commission to want to continue its investigations. The investigation is mainly justified by the dual role played by Amazon: not only does the platform allow third parties to sell their products on its marketplace for a commission but Amazon also sells its own products. The Commission wants to ensure that the control, by Amazon, of the marketplace, does not allow it to benefit from excessive advantages for the benefit of its own sales activities. Indeed, Amazon is in a position to collect a lot of information relating to products, customer preferences or transaction prices, which could be exploited in an anti-competitive manner. For now, an Amazon official heard recently by the United States Congress assured that data relating to third-party sellers was not used by Amazon.

Another point raised by the Commission relates to the conditions reserved for third-party sellers, in particular with regard to ' buy box », The yellow button thanks to which the buyer can add an item in one click to his basket. This button allows third-party sellers to simplify and increase their sales. However, the criteria allowing them to benefit from this functionality are not perfectly transparent, even if Amazon claims to select sellers according to the prices they charge and the stocks they have. This lack of clarity leads the Commission to want to further study the elements taken into consideration.

The Commission will therefore examine the conditions offered to third-party sellers. On this point, it is interesting to note that, on the very day of the announcement of the Commission's investigation, the German Federal Anti-Cartel Office (Federal Cartel Office) has obtained from Amazon that third-party sellers can no longer be abruptly and without explanation dereferenced but are informed of the reason for exclusion and benefit from a 30-day notice period. The German authority, however, has refrained, given this agreement, from officially taking sides on whether Amazon is in a position of domination.

For its part, the Commission will examine the situation of Amazon with regard to the prohibition of cartels and abuses of a dominant position within the meaning of the Articles 101 and 102 of the TFEU. If a sanction were imposed, it could reach 10% of Amazon's global annual turnover, or nearly 20 billion euros if we take into account the 2018 turnover (207,7 billion euros ).

Is Amazon's business model in question? 

Seeing large distributors offering their own products for sale while distributing products from other brands is nothing new. The phenomenon of “private labels” (private labels) is classic today. Distributors installed, such as Walmart or Carrefour, benefit from information that manufacturers do not have, for example on customer behavior. The fact remains that the switch from a physical store to a platform changes the situation: an online distributor has access to much more information than a traditional distributor, at a lower cost (see on this point Randal C. Picker, Breaking up Amazon? Platforms, Private Labels and Entry, July 17 2019). Amazon is not only able to know the keywords entered in the search engine or the browsing history of buyers, but also to compare this data with the transactions actually carried out, of which Amazon knows all the particularities, starting with the price. It is therefore easy for Amazon to have a very precise idea of ​​the products consumers are looking for and the prices they are willing to pay. It is then possible for him to position himself as a seller of products favored by customers, at price and quality conditions totally adapted to demand. To put it another way, Amazon can profit, without incurring any cost, from the risk-taking of third-party sellers who, in turn, offer their products to customers without knowing whether they will be successful.

All this explains why the Commission's investigation is focused on the data available to Amazon, the competitive advantage that results from it, and the possible illicit use that could be made of it. More broadly, it is the dual quality of Amazon, both a marketplace and a seller, that is in question. This business model has been singled out for several years. In 2017, an article by a Yale student titled “Amazon's Antitrust Paradox”Has provoked a lot of discussion: the author argues not only that Amazon probably charges lower predatory prices than those of third-party sellers, but also that its control of the infrastructure on which transactions take place gives it an advantage over the law. classical antitrust does not allow to seize and regulate. Other authors prefer to put into perspective the advantage that Amazon would have by emphasizing the constant increase in the share of third-party sellers in all transactions carried out on the platform (3% in 1999, 25% in 2004, 31% in 2009, 49% in 2014 and 58% in 2018), which would show that Amazon is rather losing ground compared to these third-party sellers (RC Picker, supra).

Does the issue exclusively concern Amazon? 

The problem posed by Amazon's dual role exists for all platforms that offer both their own services and a connection with third-party providers. The Google search engine is, for example, regularly accused of favoring Google's services to the detriment of its competitors. Google has also been sanctioned several times by the European Commission. If it was considered that this double hat is not acceptable, then these companies would have to be forced to divide themselves into separate companies carrying out their activities separately. This question is at the heart of the debate on the dismantling of large platforms (Google, Facebook, Amazon). In the United States, the Democratic candidate Elizabeth Warren proposes that any platform with at least $ 25 billion in annual revenue be prohibited from being both the owner and participant of the platform. Concretely, this would mean that Amazon Basics, Amazon's private label (private label) products division, would either have to separate from Amazon or give up selling its products on the Amazon marketplace.

It is in any case in this context that, on July 23, 2019, the antitrust division of the US Department of Justice announced the launch of an investigation into the practices of the platforms that dominate the search engine market, that of social networks. and online distribution. The idea is to see if their practices would warrant prosecution by the DOJ or the Federal Trade Commission, which in February created a new task force responsible for monitoring the tech sector.

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