Amazon.com Inc. is the latest U.S. tech giant facing scrutiny from European Union regulators.

The European Commission, the EU’s executive branch, today announced the launch of a formal antitrust investigation into the online retail giant. The probe focuses on how Amazon collects and uses data about the third-party merchants that sell on its platform.

Third-party merchants are a key part of Amazon’s growth story, having accounted for 58% of the physical merchandise sales it processed in 2018. At the same time, the company also competes against these sellers with a line of private labels and exclusively distributed products from external suppliers. This dynamic is further complicated by the fact that Amazon’s terms of service for third-party merchants give it access to extensive data about their operations.

Through the new antitrust investigation, EU regulators will seek to uncover if the company uses this information to gain an unfair advantage. The stakes are high. Breaches of EU competition law can carry a fine of up to 10% of a company’s global annual revenues, which in Amazon’s case would amount to more than $23 billion at the top end. 

“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,” EU competition commissioner Margrethe Vestager said in a statement. 

The investigation will focus on two areas in particular. First, the EU will assess if Amazon’s use of merchant data has any affect on competition. Second, regulators plan to probe how the company chooses the sellers it features in the so-called Buy Box.

The Buy Box is the sidebar on the left corner of an Amazon product page that displays the “Add to Cart” button. When a product is available from multiple merchants, which is often the case, Amazon will pick out one seller to feature in the sidebar. This has caught EU regulators’ attention because the vast majority of purchases on Amazon are done through the Add to Cart button.

Amazon issued a brief statement responding to the investigation: “We will cooperate fully with the European Commission and continue working hard to support businesses of all sizes and help them grow.”

The antitrust probe is launching just as another has wrapped up. This morning, Germany’s national competition authority ended a seven-month investigation into Amazon after it had pledged to make a number of changes to its seller agreement. The modified terms will give merchants the ability to appeal certain decisions brought by Amazon and pursue legal disputes with the company in their home countries.

Photo: Tony Webster/Flickr