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Big Trouble for the Big Tech: EU investigates Amazon

[Saumya Raizada and Shreetama Ghosh are Editors at IRCCL.]

 

In 2015, Forbes reported that, by the year 2020, about 1.7 megabytes of new information will be created every second for every human being on the planet. In 2019, the Forbes report does seem very canonical as not only is data constantly collected by companies - in the form of surveys at shops, for the creation of loyalty cards or even with each click that a user does - but it is also constantly processed and scrutinized by market players to understand consumer preference and behaviour. In turn, the market player having the most relevant data and using it to the disadvantage of others may be able to ruin the competitive landscape for the others.

 

The Competition Commission of India (CCI), in a recent case involving Matrimony.com (informant) and Google (respondent), defined big data in the context of search engines. It observed that when users place a search requisition for a particular keyword or phrase through a search engine, the search platform seeks certain information from such users such as IP address, device information, location, information regarding operating system etc. apart from the information with respect to date and time of search and the keyword or phrase searched for. This information generated from the searches conducted on such platforms constitutes ‘big data’ by aid of which search platforms are able to attract advertisers and target relevant ads and conduct their search business.The misuse of customer data to gain a competitive advantage has become a tactic for most multinational companies and technological giants, and the European Commission (EC) has come down hard on such practices. The EC has already imposed record fines on Google Inc. over the past few years for undertaking similarly placed anti-competitive practices, and is now targeting other such technology giants like Amazon and Qualcomm for abusing their dominance in their specific relevant markets.

 

The heart of a recent clampdown on Amazon, comprises the main service provided by Amazon, i.e. an online retail platform used by third party merchants to access customers and broaden their reach. The controversy arises because not only does Amazon host third party merchants on the platform, but it also plays the role of a competitive retailer on the same platform, over which it has complete control. In the process of hosting the merchants, Amazon continuously collects data about the activities undertaken on its platform, which includes competitively sensitive data about the merchants, their products, and their customer demands and transactions. Against this background, it has been found by the EC, on preliminary investigation, that Amazon uses this sensitive data to gain competitive advantage over the merchants.

 

The formal investigation against Amazon will be undertaking a review of standard agreements entered into between Amazon and the third-party merchants and probing into how the use of the accumulated seller data of the platform is distorting competition. Further, the EC will look into how retailers qualify for the “Buy Box” option (which allows the customers to add a product directly into their cart), and whether Amazon is preferring its own products for placement in the Buy Box.

 

It is important in light of the investigation to understand that data can be a factor contributing to market power. If – and this is a crucial precondition – the access to data is important to compete on the markets, the possession of or the access to data can constitute a barrier for market entry if new entrants are unable to either collect similar data or to buy access to sources of such data as the incumbents. As the gap in market share increases, so might the gap in data collection, which could further increase the gap in the quality of services proposed to customers. Finally, higher revenues earned by larger undertakings could fuel higher investments (such as new algorithms, new functionalities, entry on adjacent markets, etc.), thereby attracting even more customers and more data.

 

Vestager has time and again made her stand clear with respect to collection and use of data. It was only recently that she clarified that data use and data collection is not always harmful for existing competition in a given market; companies may be able to be more cost-effective and in turn serve their customers better through recommendations etc. However, when limited number of companies start controlling their data, it may have an effect of driving existing competition out of a given market. What is notable is that the commission has investigated similar use of big data in the two cases of Google’s acquisition of Doubleclick and Facebook’s purchase of Whatsapp already. The EC also heavily fined Facebook in the latter case when it found that Facebook had, in fact, submitted misleading information pertaining to data sharing for getting the said approval. Non-exclusivity as a defence to abuse of dominance has recently been argued before the CCI in its probe of Google, and Amazon may also similarly contend that its data collection is not exclusive in nature and its rivals can very much obtain the same, meaning which users do not share their data with Amazon exclusively, thereby making it a fair game. But again, it would be intriguing to see whether Amazon really has rivals effective enough for them to stand a chance against Amazon and its big pool of big data. This investigation is in furtherance to the EU taking a preliminary look at Amazon’s third-party data collection practices also launched by Vestager last year. With the Google probe already underway in India, it looks like these investigations spell big trouble for the big tech.

 

 

 

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