European Commission to send a statement of objections to Amazon. No, this is not protectionism.

Yesterday The Wall Street Journal broke the news that the EU is about to formally charge Amazon regarding its treatment of third-party sellers on its marketplace. The European Commission – which has been investigating Amazon since September 2018 – is expected to issue a Statement of Objection during the summer, whereby it will lay down the relevant facts and its theory of harm against Amazon.

The focus of the investigation seems to be Amazon’s dual role as the platform (the operator of the marketplace) and a participant in the platform (as a seller of its own private label goods). In particular, the concern appears to be that Amazon scoops sensitive commercial data from third-party sellers in its capacity as operator of the marketplace which it then uses to inform its retail arm business, in order to e.g., launch its own private label good at a lower price.

EU protectionism?

Some were quick to dismiss the Commission’s move as “thinly veiled protectionism”. But is that really so? I do not think that is the case, as I did not think it was the case when the Commission decided to formally charge Google in 2015. The Commission is a tough enforcer no doubt, and has not hesitated to take enforcement action against EU companies, including to block mergers that would have created EU champions (see e.g., Siemens/Alstom). And in many cases it is large US companies that bring complaints before the EU.

Importantly, Amazon’s practices with regard to third-party sellers on its marketplace are also scrutinized in the US. Amazon is being probed by the Federal Trade Commission. The US House Judiciary Committee, Subcommittee on Antitrust, has taken particular interest in Amazon’s ability to scoop data from third-party merchants. In a grilling Congressional hearing in July 2019, Amazon’s General Counsel Nate Sutton submitted that Amazon does not use “individual seller data to directly compete with them”. In April 2020, The Wall Street Journal revealed that Amazon employees have used data about independent sellers on Amazon’s platform to then develop competing products, which would seem to contradict Mr. Sutton’s sworn testimony. In response, the Honorable David Cicilline, Chairman of the US House Judiciary Committee, Subcommittee on Antitrust, stated that “at best, Amazon’s witness appears to have misrepresented key aspects of Amazon’s business practices while omitting important details in response to pointed questioning. At worst, the witness Amazon sent to speak on its behalf may have lied to Congress.” In May the Committee called on Mr. Bezos to testify before the Congress, but Amazon made no promise that he will appear.

Substance

What interests me the most is to see how the Commission has framed Amazon’s practice with regard to third-party sellers in formal competition law terms. I hope that the Commission’s press release will shed light on the theory of harm put forward (will it be based on Article 102 TFEU, and if yes, on which ground?). As Dimitrios Katsifis and I observed in a recent paper, similar questions could arise with regard to the Apple App Store; according to a former senior Apple executive, the data (and the insights gleaned from them) Apple collects about app developers in its capacity as the operator of the App Store are shared among top Apple executives and are fed into strategic product development decisions.

As I noted in an earlier post, in a recent paper Hagiu, Teh and Wright observe that, while Amazon should be allowed to compete on its own marketplace, it should not be left free to do whatever it wants. One of the remedies contemplated by the authors with the aim of preserving the sellers’ incentive to innovate while keeping the benefits of the dual model would be to mandate Amazon to have in place strict “Chinese walls” between its marketplace and private label divisions.

More on this to come as the case unfolds…

Damien Geradin

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s