The European Commission suspects the e-commerce giant of using the data it collects from third-party vendors on its marketplace to gain a commercial advantage. EURACTIV’s media partner La Tribune reports.
Trouble is brewing for Amazon. Having been the only one of the GAFA companies (Google, Apple, Facebook and Amazon) to have not yet been harangued by the European Union, Amazon is now in the sights of Margrethe Vestager, the European Commissioner for competition.
At a press conference in Brussels, the “iron lady” explained that the Commission had launched an investigation to determine whether Amazon was abusing its dominance.
Does Amazon gain a commercial advantage by using data of third-party sellers?
Vestager suspects the Seattle giant of using the data it collects through retailers on its e-commerce platform to promote its own products and, therefore, gain a commercial advantage. The European executive wonders whether Amazon then exploits the data collected “to perform its own calculations” and “to see what kind of deals people want and what makes them buy a particular product”.
“We are gathering information on the matter and, for this purpose, we have sent questionnaires to market participants in order to understand the problem in its entirety,” Vestager added.
Amazon has not commented on this announcement. The investigation, which is at an early stage, could take several years to come to a conclusion either way. Consequently, it could turn into a shot in the dark – as was the case with McDonald’s, whose tax optimisation practices were eventually declared legal on Wednesday (19 September), following two years of investigation.
It could also result in a hefty fine – as was the case with Google, which was ordered to pay a record fine of €4.34 billion in July for abusing its dominance via the mobile Android operating system.
Predictive analysis and customised marketing- central to e-commerce
The European Union is not the only regulator taking an interest in Amazon. US President Donald Trump has persistently denounced its “anti-competitive practices” and promised “problems” for the company led by Jeff Bezos, a prominent opponent and owner of the well-known Washington Post newspaper, which is loathed by Trump.
In any case, the data and the use of this data are to become central to Amazon’s economic model, whose benefits are currently held by the cloud but whose core business remains e-commerce.
Amazon also sells products of third-party vendors. These vendors need to be on the website in order to reach a wide audience and they pay a fee for this. This “marketplace” business accounted for as much as half of the company’s revenue in 2017.
This is a sign that the firm is placing increasing emphasis on the business of personal data. It has high hopes for its “Echo” intelligent speakers, the world market leader, to further refine its knowledge of its customers and to retain them in its ecosystem of products and services, which also include the streaming platforms Amazon Prime Video and Amazon Music.
Accordingly, the firm has seen its advertising turnover soar over the past year. In the second quarter of 2018 alone, the revenue generated by advertising skyrocketed by 132% to $2.2 billion, with an overall turnover of $52.9 billion (+39%).
As Amazon amasses more data about what people like and buy, it can make more money from advertising and further refine its predictive analysis and customised marketing models, which will be at the heart of future e-commerce.