Amazon vs EU
Introduction
The European Union (EU) recently opened a formal antitrust investigation against Amazon so as to assess whether the company’s utilization of sensitive data from autonomous retailers who sell in its market place are in violation of the competition rules of the EU. The role of Amazon as both a seller and a dais for other traders has turned out to be one of the most controversial areas of the business with the Federal Trade Commission also investigating its practices (Bagley, 2019). The EU wants to establish if the double role of Amazon as both a marketplace hosting 3rd-party merchants and as a dominant retailer in its own right on a similar platform, normally selling similar products provides it an unfair competitive advantage. The investigation is exploring 2 main areas: the standard agreements that exist between Amazon and sellers in the market place, and the role that client data plays in the selection of winners in the Amazon’s so-called “Buy Box,” a prized button that drives 4/5ths of the sales it makes (Matsuura, 2019). This probe underlines the increasing significance of data in measuring the power that tech platforms have. The probe could ultimately lead to fines, charges and order for Amazon to change its practices in business; however, there is also the possibility of the investigation being dropped (Feiner, 2019).
Perspectives/hypotheses
E-commerce has played a significant role in boosting retail competition, and in the process, it has led to more choice and improved prices. This is the reason why the EU recognizes the need to make sure that huge online platforms do not eradicate these advantages through anti-competitive conduct (Edgmand, Moomaw, & Olson, 2014). As such, the commission was prompted to take a very close look at the business practices of Amazon and its double role as marketplace and retailer so as to evaluate its adherence with the competition rules of the EU. German antitrust regulators are another party interested in the case. The regulators had also opened a probe into Amazon’s practices and it recently pronounced an agreement with Amazon to settle the investigation into the marketplace of the company. As such, Amazon agreed to make changes to the terms of business it provides sellers in Germany and at the global level. In all of this, Amazon states that it will fully cooperate with the investigation as it believes its practices are fair. Furthermore, according to the organization, retailers are even raking more revenue from its platform compared to them. The EU commission has brought in the US authorities into the investigation, and therefore, the authorities will also take an active role in probing Amazon. The US authorities are hell bent on ensuring that tech giants such as Amazon, Facebook, Google and Apple do not abuse the data of their clients and businesses that depend on their platforms (Lubbe, 2017). As such, they want to ensure that such companies safeguard the data of the clients and businesses and do not abuse them to gain an unfair advantage over competitors.
Merchants are also an important entity in the case. This is particularly because they are the ones who are mostly affected by Amazon’s alleged unfair business practices. Amazon’s website is the major storefront for numerous 3rd party merchants, with a significant number paying a fee to store products in the warehouses of the company and utilizing its delivery network to ship products (Publishing, 2013). The merchants believe that when Amazon notices that a certain good is selling well, it develops its own version-and offers it at a reduced price. This way, the company indirectly steals their clients. The merchants further state that Amazon makes unfair contracts with them and accuse the company of pushing market sellers into its wholesale supply chain, where it can regulate prices and vice versa. Customers have also been affected by this probe. In their opinion, they feel that the trust they gave to Amazon to safeguard their sensitive has been violated. Amazon has taken advantage of them and used their data to make profits.
SWOT Analysis
The case has several strengths. For instance, Amazon has pledged to fully support the investigation. This means that it will be cooperative in the probe process, and provide all the needed information to make the investigation a success. The EU also has the support of the US authorities. Therefore, they will Help the commission to get all the needed data and hence speed up the process and come up with a definitive solution to the problems presented in the case. The EU has experience in conducting such investigations. For example, in the past, the commission has investigated tech giants like Facebook and Google and is thus well versed with the processes involved in investigation; as such, the commission will know where to look/probe. The commission has adequate time to examine Amazon. The EU has indicated that there is no lawful deadline for bringing antitrust investigation to a conclusion. The period of the antitrust probe relies on several aspects including the intricacy of the case, the degree to which the undertakings involved cooperate with the Commission and the exercise of the defense rights. This case against Amazon also has some weaknesses. One of the weaknesses pertains to lack of cooperation. Some parties to the case may fail to fully cooperate with the authorities for fear of intimidation (especially Amazon employees). The case may take a long period to complete thus affecting the operations of Amazon. The key overarching threat is inadequate data gathering may negatively affect the outcome of the case.
Legal issues
The legal issue as it pertains to this case is the breach of the EU competition rules on anticompetitive agreements between organizations; Article 101 of the Treaty on the Functioning of the European Union (TFEU) and/or the violation of a powerful position (under article 102 TFEU) as well as the violation of the anti-trust regulation (Blanco, 2012). Article 101 of the TFEU bars anticompetitive agreements and decisions of associations that avert, ban or alter competition within the sole market of EU. Through unfair contracts, it appears that Amazon may have wanted the merchants to agree not to compete with it on its platforms, and this might have violated article 101 of the TFEU thus prompting the probe. Article 102 of the TFEU bars the abuse of a dominant position (Almășan & Whelan, 2017). As a tech giant, Amazon may have abused its powers to gain an unfair competitive advantage. Since it has access to numerous customers at the global level and this is thanks to its merchants, the organization may have taken advantage of this to indirectly steal clients from its retailers. As previously noted, the company has been accused of creating its own version of products it notices sell well and offers it to the market at a lower price. This way, customers are influenced to purchase its low-priced goods, and in the process, retailers lose their clients. Amazon may have breached the Anti-trust regulation by using customers’ sensitive data to gain a competitive advantage.
Actions
One of the proposed actions against Amazon if it is found guilty of the accusations is for it to be fined. As such, the company could be forced to pay billions in fines for engaging in unfair business practices. Another key action is for Amazon to change its current business practices. This particularly applies to its treatment of 3rd parties. In that regard, the organization could face new rules over how it terminates or blocks external sellers from its site, and it will have to incur more of the expenses that pertain to returns and reimbursements (Miller, 2019). The rules could also force Amazon to accept more legal responsibility in its contracts with sellers. The mission of the EU commission is to foster synchronization between the EU and its member states in the area of development cooperation and make sure that the external representation of the EU in this field. Therefore, part of the EU’s mandate is to look out for the welfare of its member states and this entails ensuring that the member states including organizations affiliated to them adhere to the set laws (Jones, Sufrin, & Dunne, 2019). In this regard, in investigating Amazon, the EU is fulfilling part of its duty. If the EU commission goes on to implement the suggested actions, various positive consequences will result. For instance, companies will ensure that they adhere to the anti-trust regulation rules. Also, organizations will strive to engage in fair business practices. Companies will strive to safeguard and maintain the confidentiality of client data. Organizations will ensure that they honor contract agreements they make with merchants as well. If the proposed actions are not followed, tech giants like Amazon, Facebook, and Google etc will take advantage of their dominance to exploit smaller companies. Unfair business practices are also likely to be quite rampant.
References
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Feiner, L. (2019, July 16). Europe will reportedly launch a major probe into Amazon’s
business practices in days. Retrieved from https://www.cnbc.com/2019/07/16/amazon-reportedly-faces-antitrust-probe-in-eu.html
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