The European Commission has opened an official investigation into alleged anticompetitive behaviour by Amazon, a company which started life as a bookseller but has expanded to major shares of everything from the cloud computing to third-party reseller markets.
Founded in 1994 as Cadabra and publicly launched in 1997, Jeff Bezos' Amazon started off selling books in the US over the World Wide Web - one of the first major efforts to do so. By 1998 it had expanded internationally and added music and video to its offerings; a year later it was selling everything from computer games and radios to DIY tools and toys. In 2002, the company spun out its in-house analytics division as Amazon Web Services (AWS); by 2006, AWS was offering cloud compute and storage in its international data centres, while also allowing third-party sellers - who are able to sell through the mainstream Amazon websites using the Amazon Marketplace platform - to use the company's warehousing and fulfilment systems.
Since then, its expansion has only accelerated: By 2017 the company had branched out into high-street supermarkets, acquiring Whole Foods Market and opening a small number of 'cashless' outlets using facial recognition and machine vision to track purchases and charge customers' Amazon accounts accordingly. The company has also launched a range of own-brand consumer electronics, including its Echo-brand smart home products linked to the Alexa voice assistant ecosystem, Kindle electronic book readers, Fire tablets running a customised Android operating system, and an ill-fated smartphone, as well as everything from backpacks to toilet rolls under its Amazon Basics and other own-brand labels.
The retail side of the business, meanwhile, generates a portion of its revenue from third-party sellers who use the Amazon Marketplace platform to list their items and either sell them directly or use Fulfilled by Amazon to store the items in Amazon's own warehouses and use Amazon's logistics chain for fulfilment. It's here that the European Commission is focusing its investigation, following accusations that the company may be stifling competition both among third-party sellers and between those sellers and itself.
'European consumers are increasingly shopping 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,' explains Commissioner Margrethe Vestager, leading the investigation. 'I have therefore decided to take a very close look at Amazon's business practices and its dual role as marketplace and retailer, to assess its compliance with EU competition rules.'
The investigation will focus on two key aspects of Amazon's operations. The first is the agreements between the company and those choosing to sell through Amazon Marketplace, which includes clauses allowing Amazon to analyse and exploit analytical data from third-party sells - with a key focus on whether access to this data provides Amazon with an anticompetitive edge. The second aspect is how sellers are selected for the 'Buy Box,' a section of the Amazon website which highlights key products and allows users to add them to their basket or buy them directly with a single click - 'a vast majority of transactions,' the Commission claims, taking place through the Buy Box, making a company's presence or absence a key aspect of their success or failure.
The investigation, which could take years to complete, is being carried out under the Treaty on the Functioning of the European Union (TFEU) Articles 101 and 102 - prohibiting anticompetitive agreements and abuse of a dominant market position respectively - and Article 11(6) of the Antitrust Regulation.
January 24 2020 | 12:00