The EU just hit Amazon with a major antitrust complaint that could cost the tech giant $28 billion

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The EU just hit Amazon with a major antitrust complaint that could cost the tech giant $28 billion
European Digital Economy Commissioner Margrethe Vestager.Reuters
  • The European Commission on Tuesday filed an antitrust complaint against Amazon over the way it uses data from third-party sellers.
  • If successful, the complaint could result in a fine equivalent to 10% of Amazon's annual global revenue.
  • This would mean a $28.1 billion fine for Amazon.
  • The commission accused Amazon of using data from third-party sellers to inform its own retail strategies, improperly benefiting from its status as both a marketplace operator and a competitor within that marketplace.
  • In a statement, Amazon said: "We disagree with the preliminary assertions of the European Commission and will continue to make every effort to ensure it has an accurate understanding of the facts."

The European Commission on Tuesday announced that it's filing formal preliminary antitrust charges against Amazon over the way the tech giant uses data from third-party sellers.

The case could cost Amazon more than $28 billion in fines.

"The European Commission has informed Amazon of its preliminary view that it has breached EU antitrust rules by distorting competition in online retail markets," the commission said in a published statement. The preliminary complaint was based on Amazon's conduct in France and Germany.

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Amazon must now respond to the charges.

The commission's complaint centers on the accusation that Amazon uses data from third-party sellers to inform its own retail strategies, improperly benefiting from its status as both a marketplace operator and a competitor launching products within that marketplace.

"We must ensure that dual-role platforms with market power, such as Amazon, do not distort competition. Data on the activity of third-party sellers should not be used to the benefit of Amazon when it acts as a competitor to these sellers," Competition Commissioner Margrethe Vestager said in a statement.

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If successful, the European Union's case could mean Amazon has to pay a maximum fine equal to 10% of its annual global revenue.

Amazon's net sales at the end of 2019 totaled $280.5 billion, meaning a 10% fine would be about $28.1 billion.

The EU started looking into Amazon in 2018, and it launched its formal antitrust investigation in July 2019, examining the e-commerce giant's so-called dual role as a competitor within its own marketplace.

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Amazon said in a statement: "We disagree with the preliminary assertions of the European Commission and will continue to make every effort to ensure it has an accurate understanding of the facts."

'This is a case about big data'

During a press conference on Tuesday, Vestager said the issue wasn't just that Amazon gleaned business data — it was the scale at which it's able to process it.

"Our concern is not about the insights that Amazon retail has into the sensitive business data of one particular seller," she said.

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"Rather, they are about the insights that Amazon retail has about the accumulated business data of more than 800,000 active sellers in the European Union covering more than a billion products. In other words, this is a case about big data."

She added that as part of its investigation, the commission analyzed more than 80 million transactions and more than 100 million product listings on Amazon's European marketplaces.

"Amazon is data-driven, it's a highly automated company where business decisions are based on algorithmic tools," she said, adding: "Our investigation shows that very granular real-time business data relating to third-party sellers' listings and transactions on the Amazon platform, they systematically feed into the algorithm of Amazon's retail business.

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"It is based on these algorithms that Amazon decides what new products to launch, the price of each individual offer, the management of inventory, and the choice of the best supplier for a product," she said.

Vestager has a reputation for slapping Big Tech companies with record-breaking fines. In 2018 she handed Google a fine of $5 billion, which the company is still appealing.

Christy Hoffman, the general secretary of the international worker's union UNI Global Union, welcomed the announcement in a statement sent to Business Insider.

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"The European Commission's Executive Vice President and Commissioner for Competition Margrethe Vestager, should be commended for bringing antitrust charges against Amazon over what has become obvious to everyone: Amazon is abusing its dominant market position, squeezing small and medium-sized businesses, engaging in social dumping and dragging down labour conditions — all while failing to pay its fair share in taxes," she said.

"The time to end Amazon's stranglehold on our markets and communities is now. We are pleased that the European Commission is leading the way," Hoffman added.

The EU launched a 2nd investigation

The European Commission simultaneously announced on Tuesday it's launching a second investigation into "possible preferential treatment of Amazon's own retail offers and those of marketplace sellers that use Amazon's logistics and delivery services."

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Specifically this investigation will center on two areas: Amazon's "Buy Box" and how well sellers are able to access Amazon Prime users.

The Buy Box is the white box that displays on the right-hand side when you click into a product's details on Amazon, and it often contains offers for other items.

"The commission will investigate whether the criteria that Amazon sets to select the winner of the 'Buy Box' and to enable sellers to offer products to Prime users, under Amazon's Prime loyalty program, lead to preferential treatment of Amazon's retail business or of the sellers that use Amazon's logistics and delivery services," the commission said in its statement.

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