Amazon knows a lot about the products customers buy on its platform, and the European Union's antitrust chief wants to know exactly how it uses all that data.  

The E.U. competition commissioner, Margrethe Vestager, said at a press conference Wednesday that the E.U. has opened a preliminary investigation into Amazon's dual role--as both partner and rival--to businesses that sell on its site. E.U. regulators have already fined Google more than $7 billion from two separate inquiries on antitrust violations. Previously, Vestager won a case against Amazon over taxes owed to Luxembourg, and the Seattle-based retailer was forced to fork over $295 million in back taxes. 

The process is in very early stages, Vestager stressed, and the agency has not yet opened an official investigation. Even so, if the commission rules against Amazon--and the company decides to then cease selling private-label products in the E.U.--that could be good news for European vendors, as they would lose Amazon as a rival. And lest you think what happens in the E.U. will stay in the E.U., consider what happened after the E.U. passed its new data-privacy law, or the  General Data Protection Regulation (GDPR): Companies across the globe needed to change their practices to accommodate the changes. 

"The question here is about the data," said Vestager, referring to the information Amazon has on the sales of third-party products. "Do you then also use this data to do your own calculations, as to what is the new big thing, what is it that people want, what kind of offers do they like to receive, what makes them buy things?"

It's worth noting that there's a difference between grocery stores and other private-label product sellers, says Sucharita Kodali, a retail analyst at Forrester Research. Traditional retailers like Costco or Walmart actually acquire the goods themselves. Amazon, rather, acts as more of an outlet for vendors to pitch their own products (in some cases, it also buys the products itself, notes Kodali). The key distinction is the platform--the technology that lets anyone create an account and put up their items for sale on Amazon. Amazon doesn't "actually [need to] buy any of the inventory," she says. 

Cooper Smith, director of Amazon research at L2, a business intelligence firm, says it was only a matter of time before regulators put Amazon under the microscope. "We're reaching a turning point in Amazon's ability to launch new businesses and products--and [that] immediately extends [to] fear in the traditional businesses."

Amazon's private-label business started with the launch of AmazonBasics in 2009, and L2 has been keeping a thorough record since. In March this year, Amazon operated 80 private-label brands, according to L2's data. More than 80 percent--66 brands--were created and launched in the 12 months prior. The products live across a wide range of categories, from clothing to electronics to household items--and they're often sold at very competitive prices. 

The rapid influx of Amazon-owned brands in its e-commerce platform is stoking fear in brands, including some of Amazon's close partners, says Smith. "I think a lot of brands are sitting back and saying, 'This isn't a frenemy situation.'"

Unlike retailers like Walmart or Target, Amazon doesn't "share a whole lot of data with brands," he adds. "[Amazon doesn't] act like an agency or retailer that wants to help brands." 

It may be why Vestager is keen to understand how its business works, argues Kodali. "Europeans just have a different standard for not only consumer protection, but competitor protection, too."

Published on: Sep 21, 2018