UPDATE: The European Union settled its 2019 investigation with a legally binding agreement with Amazon in December 2020. That agreement covered the online retail giant’s use of non-public seller data and access to its Buy Back and Prime programs.
July 17, 2019–As some of the largest tech companies in the world grow in value and market share, they face increasing scrutiny in both the United States and the European Union that they are using their platforms to favor their products over their competitors, collect and use data to their advantage and buyout competitors.
The European Union launched a formal investigation into Amazon’s use of data on independent retailers selling on its platform to see if it violates competition rules. The investigation will focus on “Amazon’s business practices and its dual role as marketplace and retailer,” according to EU Competition Commissioner Margrethe Vestager.
The investigation comes as U.S. lawmakers examined the industry to determine whether new regulations are needed.
The enhanced oversight comes as some observers say the new internet economy is undergoing a period of excessive consolidation that threatens innovation, rather than encouraging it.
House Committee Examines Competition
Executives from Amazon, Facebook, Google and Apple testified before a House antitrust committee, where they faced questions about their market dominance. Rep. David N. Cicilline, D-RI, the subcommittee chair, suggests it might be time for greater oversight. “I think we see a tremendous concentration of economic power that is fundamentally shaping markets in a way that are often unfair, unbalanced, and not competitive,” he said.
In contrast, several of the Republican members of the committee cautioned against congressional overreach.
Facebook’s Acquisitions
Facebook has 2.7 billion users around the world and owns several of the next largest social-media applications.
Acquisition is a key part of the company’s growth strategy. Overall, the company has acquired more than 70 companies, including the $19 billion WhatsApp, the $1 billion Instagram and Lightbox. The acquisitions have given it unmistakable market dominance, and some lawmakers are taking notice.
“So you can understand skepticism,” Rep. Joe Neguse, D-Colorado, said at the hearing. “Because when a company owns four of the largest six entities measured by active users in the world in that industry, we have a word for that and that’s monopoly or at least monopoly power.”
In response to questions by Rep. Pramila Jayapal, D-Washington, about Facebook’s acquisition strategy, a company representative suggested its part of the normal business operations.
“The focus of our acquisition strategy is on companies that will enable us to innovate more effectively and bring value to people who will use our services,” said Matt Perault, Facebook’s Head of Global Policy Development. “It is certainly the case that some acquisitions don’t work. When they don’t work, we may discontinue a product because of a legitimate business judgment.”
EU Investigates Amazon
Amazon faced increasing scrutiny over its data collection and competition against third-party sellers.
“Essentially you have this massive trove of data,” said Rep. Jayapal. “When people sell products on your site, Do you track which products are most successful and then do sometimes create a product to compete with that product?”
Asked about its competition policies, an Amazon executive insisted the company does not misuse its data to compete with retailers who use its platform to sell their products.
“That data on popularity of products, like much retail data, is actually public data,” said Nate Sutton, Amazon’s Associate General Counsel. “We do not use any of that specific seller data in creating our own brand products.”
Sources: For more information on the EU’s investigation, see the commission’s July 16 statement. The House Judiciary Committee’s subcommittee hearing.
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