Simply by conducting business as usual, Amazon has accomplished a political rarity: uniting the interests of President Trump with those of two frequent foils, Democratic challenger Elizabeth Warren and the European Union.
Since winning the White House in 2016, Trump has accused the Seattle-based e-commerce giant of paying insufficient taxes and exploiting the U.S. Postal Service while promising his administration would investigate antitrust complaints.
Warren, a senator from Massachusetts and a frequent target of Trump’s tweets, has said she would break Amazon up, partly because it competes with its own customers.
Now, the European Commission, the regional trading bloc’s administrative body, is starting its own investigation into Amazon’s practice of selling some of the same merchandise as the retailers who use its e-commerce platform.
The dual role of marketplace and retailer gives Amazon the capability of turning business customers’ own data against them, the regulators said. The firm’s agreement with retail clients lets Amazon analyze and use the data obtained by monitoring platform activity, and preliminary fact-finding by the commission indicates the company is leveraging competitively-sensitive knowledge.
“European consumers are increasingly shopping online,” said Commissioner Margrethe Vestager, the top European antitrust regulator. “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 behavior.”
The investigation, which Bank of America analyst Justin Post said may last as long as two years, comes at a pivotal moment for the company. Growing scrutiny from U.S. regulators has been heightened by the 2020 presidential campaign in which a broad field of Democratic candidates has pledged support for liberal goals from raising the minimum wage to expanding consumer protections.
“My administration will make big, structural changes to the tech sector to promote more competition — including breaking up Amazon, Facebook and Google,” Warren said during the retailer’s Prime Day sales event this week
Giant corporations like Amazon have too much power—in fact, nearly half of all e-commerce goes through Amazon. My administration will make big, structural changes to the tech sector to promote more competition—including breaking up Amazon, Facebook, and Google. #BreakUpBigTech pic.twitter.com/SIqJohvyvf
— Elizabeth Warren (@ewarren) July 15, 2019
Earlier this year, the Department of Justice and the Federal Trade Commission agreed to divide oversight of Amazon, Google, Apple, and Facebook between them, and last week, the Federal Trade Commission reportedly backed a $5 billion settlement with Facebook over privacy complaints.
In 2018, the European Commission fined Google $5.1 billion for anticompetitive practices, an amount that appears large until compared with the $103 billion in available funds the Mountain View, California-based company had at the time. It also ordered the company to halt problematic behavior that included forcing phonemakers who used the company’s open-source Android operating system to install the Google Search and Google Chrome apps on devices in order to connect to the Google Play app store.
Amazon, founded by billionaire Jezz Bezos who also owns the Washington Post, faces similar risks. Europe might take steps from fining the company to forcing changes in its operations, including a breakup, according to Fitch Ratings, a firm that analyzes corporate debt.
Trump himself told CNBC in an interview just weeks earlier that “there is something going on in terms of monopoly,” citing the number of European regulatory actions against large American tech companies including Amazon and Apple. “We should be doing what they’re doing,” the president said.
As for Amazon specifically, the e-commerce company has rejected claims that it exploits customers or competes unfairly. An Amazon executive underscored that position earlier this week, when he joined representatives of tech standouts Facebook, Apple, and Google to field questions from the House antitrust committee about their compliance with U.S. competition laws.
Amazon faces stiff rivalry in retail, an industry “as old as human experience,” said Nate Sutton, the firm’s associate general counsel for competition. Its success depends on third-party sellers whose sales are growing faster than Amazon’s own.
“Amazon supports these sellers because we have a strong incentive to do so,” he said. “The broad selection and price competition these sellers bring to our stores are attractive to our customers. Our selling partners provide the vast majority of new products in our stores.”
That’s not the whole story, however, said Stacy Mitchell, co-director of the Institute for Local Self-Reliance, a 45-year-old public interest research group. Many small businesses that have their own e-commerce operations have been forced to sell products on Amazon because it’s the go-to site for online shoppers: The company garnered more than half of $510 billion in online retail spending last year, up from just one-third in 2014.
That was the experience of Gazelle Sports, a Michigan sports-apparel store that turned to Amazon after a steady stream of online shoppers generated through positive Google and Yelp reviews began dwindling.
“Virtually every manufacturer and retailer of consumer goods in America faces this same predicament,” Mitchell told the House panel. “In order to reach more than half of the online market, they have to sell through a platform operated by one of their most aggressive and formidable competitors. This is a bitter pill. It means handing over to Amazon their customer relationships, their product expertise, and a sizeable cut of their revenue.”
Democrats, who say Amazon and others have benefited from lax regulation intended to fuel the growth of the internet and related businesses in the mid-1990s, were likewise skeptical.
“There’s a growing consensus among venture capitalists and startups that there’s a kill zone around Google, Amazon, Facebook and Apple that prevents new startups from entering the market,” said Rep. David Cicilline, the Rhode Island Democrat who is chairman of the subcommittee. “The combination of high network effects, high switching costs and the self-reinforcing advantage of data can result in a ‘winner take all’ market that shields the dominant firms.”
While Amazon has a market value of $974 billion, making it one of the world’s largest companies, its size doesn’t make it a villain, said Rep. Jim Sensenbrenner, the top Republican on the antitrust panel. He urged lawmakers to take a “fair and balanced” approach, much as his GOP colleagues advocated during a House Financial Services Committee hearing on Facebook’s cryptocurrency project.
“We should not rush to amend the antitrust laws or break up companies by congressional fiat based upon false notions that being big is necessarily bad or that everything a big company does should be presumed to be anticompetitive,” Sensenbrenner said. Companies often become big, he said, “simply by providing a better service or product than the other companies in the marketplace.”
