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  • Urshila Pandit, Sanah Javed

Amazon’s Antitrust Practices Involving Third-Party Seller Data Re-Emerge?

[Urshila and Sanah are students at School of Law, Christ University.]


Amazon has been the subject of multiple antitrust investigations since 2018 involving its business agreement terms with third-party sellers, collection of consumer data, mergers and acquisitions and potential abuse of its dominant position as a marketplace. However, none of these investigations materialized into a penalty, raising concerns on whether the current approach of antitrust law fails to adequately detect anticompetitive practices by digital platforms. Concerns about Amazon using its position as a platform to capture relevant data from third-party sellers to facilitate Amazon’s product development are not new as they previously appeared in 2018, leading to a formal investigation by European Commission (EC) into Amazon’s use of third-party seller data in 2019.


The Wall Street Journal’s report on Amazon’s practice of obtaining third-party seller’s data to develop competing products has reignited antitrust inquiries. When confronted by the House Antitrust Subcommittee about the same, Jeff Bezos stated that even though the company did have an internal policy against sharing specific third-party seller data with its retail wing, he could not deny that the policy has never been violated before.


Amazon’s dual position as a marketplace and a retailer gives it access to third-party seller data, which third-party sellers would not normally reveal to a competitor in the market. Even though similar instances of hybrid platforms exist in traditional business environments, digital platforms such as Amazon have access to highly nuanced data and information that gives it enhanced value due to its sophisticated nature.


Determining the relevant market


In determining the relevant market, the EC will face two fundamental challenges. First, it must be able to recognise Amazon’s role as a hybrid platform. Second, the commission must refrain from defining the market broadly so as to entail retail e-commerce as a whole. To do so would be to adopt an overly simplistic and broad market definition.


If the relevant product market is defined by customer group, the market would be the online marketplace platform. The EC has defined an online platform as an enterprise operating in multi-sided markets, which enables interactions between two or more distinct yet interdependent groups of users characterized by indirect network effects. This definition of relevant market was also adopted by the Competition Commission of India while examining a complaint against Flipkart, a platform akin to Amazon. Similarly, the German FCO in its 2019 investigation against Amazon defined the relevant market as online marketplace services, serving sellers on one side and consumers on the other. The FCO’s definition encapsulates the two market framework that has previously been applied in eBay Gmarket merger case. Defining the market from both sides allows the courts to analyse competition issues that exist only on one side of the market.


Amazon has often contended that its competitors include all retail e-commerce; however, the Austrian FCA rightly pointed out that this is incorrect. While it did not conclusively define the relevant product market, it did conclude that the market would exclude brick-and-mortar shops or their own websites. The fundamental difference between the two lies in the functioning of a platform as Amazon acts as a platform through which buyers and sellers conclude transactions. Further adopting a precise market definition occupies less importance as opposed to the theory of harm, in the context of multi-sided platforms as indicated by the FCA. The Bundeskartellamt in Immonet/Immowelt and P7S1/Verivox, both of which dealt with the merger of transaction platforms, has also refrained from defining a precise market.


Misuse of third-party seller data covered under an established theory of harm?


Amazon’s position as a two-sided platform confers upon it the infrastructure required to exploit its competitors by accessing the latter’s competitively sensitive information. Google was in a similar position in 2012 where it accessed its competitors’ data to add to its own vertical content. This unfair advantage conferred by Amazon’s hybrid position as a competitor and the host of the market is one that the third-party sellers cannot easily overcome.


In the digital market, data acts as an important economic input similar to capital or labour. It provides access to economic insights that drastically impact competition in a market. The allegations against Amazon suggest that it acquired individual-seller-specific data of its competitors in its position as a marketplace and subsequently used that data to benefit its own product development. Amazon essentially treats third-party sellers on its platform as a testing site, using privileged information about their sales and inventory to determine which products are performing well in the market, and goes on to develop those products at a lower cost without incurring the risk of commercial failure. One of the primary goals of competition law is to fuel innovation in the market; however, the absence of the said risk secures Amazon's profits leading to a situation wherein third party sellers lose the incentive to innovate and invest in product development.


Leveraging through an information advantage


Amazon’s activity in the present case does not fall under any strict theory of harm, hence often raising the question of whether antitrust is the optimal law to deal with the problem. A conventional reading of antitrust law may render it unable to tame hidden anticompetitive practices, however, a purposive interpretation can be used to hold Amazon accountable if it is found misusing third-party seller data. The end goal of antitrust law should not be limited to consumer welfare, but also to promote competition and innovation amongst firms. Amazon’s appropriation of third-party seller data confers on it an information advantage capable of distorting competition and it is essential that the anticompetitive harms of the following be recognized by regulators.


Previously, the EU has fined Google to the tune of 2.42 billion euros for its practice of abusing dominance as a search engine to benefit ‘Google Shopping’. Critics of the judgement stated that the findings of the commission did not fall within any established theory of harm. However, the scope of Article 102 TFEU is not exhaustive and includes dynamic practices that may amount to anti-competitive behaviour. This interpretation can be used to explain the commission’s finding of Google indulging in the practice of leveraging by abusing its market power as a search engine to advantage Google Shopping. Whenever a platform in a dominant position extends its power into another market by employing anti-competitive means it constitutes leveraging and the following two conditions need to be fulfilled in order to establish leveraging. First, the player needs to exercise dominance in the relevant market. Second, the player should be able to leverage this dominance in another market to distort competition. In the present case, Amazon fulfils both of these conditions. With regard to the first condition, Amazon has been found to be dominant as a marketplace. In separate cases examined by the Austrian and French competition authorities evaluating Amazon’s practices, they established findings of Amazon’s dominance. Consequently, Amazon leverages this dominance in the retail market. It does so by using its dominant position as a marketplace to preference its product development wing. Thus, it fulfils the second condition of leveraging. The acts of Amazon can also be said to be a particular kind of leveraging called ‘sabotage’. It is a kind of leveraging tactic which refers to the use of market power in an upstream market to hinder downstream competitors using non-price mechanisms. In the present case, Amazon’s use of third-party seller data represents a popular non-price mechanism to distort competition.


Tackling Amazon’s anti-competitive behaviour without harming consumer welfare


Amazon’s internal policy is clearly an insufficient safeguard as it lacks external review. The proceedings initiated by the Commission must seek to achieve two main objectives; equal treatment/neutrality by Amazon as a platform and prohibition of the use of third-party seller data for its own benefit.


The EC has previously sought to ensure compliance with the principle of equal treatment in the Google search case wherein it penalized Google in the form of a hefty fine for abuse of dominance by favouring its own comparison shopping services over its rivals. However, fines are an ex post facto remedy that takes effect only after there has been irreversible distortion in competition. Moreover, calculation of fines in cases where the platform is found to have abused its dominance by the misuse of data is also a challenging task.


In this context, enforcing standards of transparency may be more effective in securing compliance with the principle of equal treatment by platforms. The Regulation by promoting fairness and transparency for business users of online intermediation services is a step forward in this regard.


A plausible solution that antitrust regulators can implement in order to ensure that Amazon maintains a Chinese wall between data received by it from third-party sellers and Amazon retail can draw heavily from data protection principles of consent and purpose limitation. These principles should be imposed on Amazon marketplace by virtue of the fiduciary relationship that it has with third-party sellers. Third-party sellers disclose information to Amazon as it requires certain services in return; however, Amazon is opaque about its use of this information, breaching its role as an information fiduciary.

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