Amazon Faces Probe in Europe Over Third-Party Selling -- 4th Update

Date : 07/17/2019 @ 11:43PM
Source : Dow Jones News
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Amazon Faces Probe in Europe Over Third-Party Selling -- 4th Update

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By Sam Schechner Inc. faces a European Union antitrust investigation into its treatment of merchants that sell goods on its site, the latest push by the bloc against a U.S. tech giant and the biggest regulatory threat thus far to the online retailer's growing market power.

The European Commission, the EU's top antitrust enforcer, said Wednesday that its investigation will examine whether Amazon is abusing its dual role as a seller of its own products and a marketplace operator.

By ensnaring Amazon and focusing on how it uses other merchants' data, the case opens a new -- and potentially more complex -- chapter for competition enforcers.

The EU has led the antitrust charge for years, most notably against Alphabet Inc.'s Google, issuing $9.25 billion in fines against the search giant. Now antitrust scrutiny of technology titans is ratcheting up in the U.S., as well, with the Federal Trade Commission and Justice Department dividing up oversight of Amazon, Google, Facebook Inc. and Apple Inc.

U.S. politicians also have gotten more vocal. Sen. Elizabeth Warren (D., Mass.), a presidential candidate, has proposed breaking up Amazon and unwinding its acquisition of grocer Whole Foods. President Trump, a Republican, has said Amazon should pay more in taxes and has criticized the company's effect on competitors.

In particular, the EU probe will study whether Amazon is using nonpublic data from independent merchants to compete unfairly 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 has an unfair advantage to be designated the default for products it sells.

The investigation could eventually lead to formal charges, fines and orders for the company 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.

Margrethe Vestager, the EU's antitrust chief, has emerged as a major technology regulator. She guided the cases against Google, which found it abused the dominance of its search engine and Android operating system for mobile phones to favor its own businesses. She also issued a fine to Facebook for misleading regulators during a review of its acquisition of the WhatsApp chat service and ordered Amazon, Apple and other global tech players to pay back taxes under what she alleged to be sweetheart deals with tax authorities. Google is appealing the decisions against it, and Amazon and Apple are appealing the tax cases.

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 Amazon case could lay the groundwork for other competition regulators increasingly taking a hard look at a company that has a presence in many sectors, from logistics and e-commerce to cloud computing and more recently advertising.

Authorities in Italy and other countries are investigating Amazon on various topics including its treatment of merchants on its site, so-called third-party sellers. Germany's antitrust regulator, which has been looking into the e-commerce giant's sales practices, said Wednesday that Amazon agreed to change its terms of service on its platform for third-party sellers. The changes include requiring Amazon to give those sellers 30-day notice before suspending accounts and reducing confidentiality stipulations for sellers, the German authority said.

The agreement marks the conclusion of an eight-month probe by the German Federal Cartel Office. A spokeswoman for the European Commission 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, which opened informally in September, will zero in on Amazon's contracts with independent merchants. In addition, investigators will look at whether Amazon has such a large market share that it qualifies as holding a dominant position in any EU markets. That would subject it to special obligations under EU law; for instance, it wouldn't be permitted to impose onerous terms on smaller companies that use its services.

On Tuesday, at a hearing before the U.S. House of Representatives about digital platforms' market power, Amazon tried to play down its dominance in the retail sector. An Amazon representative said the company doesn't use any single seller's data to compete with its own products. An Amazon spokesman declined on Wednesday to comment, however, when asked whether the company uses aggregated data from multiple sellers.

Amazon collects about 38% of all U.S. retail dollars spent online, according to research firm eMarketer.

The EU's case against Amazon could prove to be complicated, some antitrust experts said, because of its focus on the contractual use of a business customer's data. "It's an innovative case," said Nicholas Economides, an economics professor who looks at competition issues at New York University Stern School of Business. He thinks the EU has a real challenge if it attempts to show that Amazon's use of the data is anticompetitive. "Information alone is not going to make the case," Mr. Economides said.

Recent court decisions in the EU suggest that the commission would have to come up with strong evidence 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 for third-party sellers has grown in importance for the company, accounting for more than half of its global sales, Chief Executive Jeff Bezos wrote in a letter to shareholders in April. According to Mr. Bezos, the company's traditional retail business tallied $117 billion in sales last year, compared with $160 billion for its marketplace.

"Third-party sellers are kicking our first party butt," he wrote.

Sara Germano, Laurence Norman and Dana Mattioli contributed to this article.

Write to Sam Schechner at


(END) Dow Jones Newswires

July 17, 2019 19:28 ET (23:28 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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