Amazon Gets More Antitrust Scrutiny
Antitrust enforcers are weighing the competitive impacts of Amazon’s collection of seller data, but it’s unclear whether it will result in concrete action, academics and antitrust attorneys told us. Amazon got antitrust scrutiny last week after a Wall Street Journal article said the company uses seller data to build products that compete with third-party sellers on the platform. Sen. Josh Hawley, R-Mo., called for a DOJ investigation, and Public Knowledge wrote Congress asking lawmakers to consider dramatic policy changes. The company didn’t comment.
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Amazon should be concerned about enforcers in the U.S. and EU scrutinizing the platform’s dual role as a platform and competitor, said Labaton Sucharow partner Jay Himes. Europe has less-forgiving antitrust enforcement, but the company isn’t risk-free in the U.S., he said.
PK’s letter suggests U.S. antitrust law should be updated, which is a policy judgment, said Wayne State University Law School professor Stephen Calkins. With an election in six months, COVID-19 concerns and a divided Congress, there’s “zero chance of such legislation in 2020. But of course there is 2021,” he said.
Amazon critics argue the company sacrificed short-term profit for long-term gain to gain a monopoly. Sacrificing short-term profits for long-term gain can be an issue if it’s done by a monopolist or company with a “dangerous probability of achieving monopoly,” Calkins said. PK and the WSJ story don’t suggest Amazon is sacrificing short-term profits, he said. Both the FTC and DOJ are examining Amazon thoroughly, and it “will be interesting to see what comes of that,” he said.
The claim that Amazon is operating as a monopoly with its long-term focus is a “superficial statement,” said Georgetown University Law Center professor Steven Salop. Whenever a firm invests, it’s sacrificing short-term profit for what it hopes are longer-term gains, he argued. Antitrust focuses on the conduct involving short-term profit reductions and its impact on consumers, he said.
Amazon’s use of seller data is “uncharted territory,” said Hausfeld partner Scott Martin. But companies like grocery chains take similar approaches in offering store brand products, he added. Data collection allows grocers to know when to market generic brands and when to put them on sale, he said. Amazon is different due to its enormous market share and access to troves of data, he said. Numbers from Statista project Amazon will have about 50 percent of the e-commerce retail market by 2021. That means sellers are forced to do business on Amazon, Martin said.
Amazon’s data sets the company apart from traditional brick and mortar retailers, Martin said. Amazon sellers are basically being surveilled, allowing the company to “read minds,” he argued. It’s a complicated issue the FTC is sure to be analyzing, he said. The agency declined comment.
The WSJ story prompted a letter from Hawley to Attorney General William Barr, urging criminal antitrust investigation of Amazon: "Abusing one’s position as a marketplace platform to create copycat products always is bad, but it is especially concerning now,” given the demand for e-commerce during COVID-19, he wrote. “Amazon’s reported data practices are an existential threat that may prevent these businesses from ever recovering." He noted the EU’s investigation into Amazon’s third-party data use and the platform’s ability to collect mass amounts of data. DOJ didn’t comment.
Public Knowledge sent a letter last week urging Congress to prohibit digital platforms from “misusing retailer data.” Citing the WSJ report, PK raised concerns about Amazon product teams using “proprietary information from independent vendors to develop competing products.” The letter was sent to the chairmen and ranking members of the Commerce and Judiciary Committees in the Senate and House. The committees didn’t comment.
Amazon’s algorithms favor clone search results, wrote Econ One Research Managing Director Hal Singer, citing the Journal report. The innovation impact could be “staggering” if merchants avoid doing business with Amazon and the risk of private label cloning. He urged Congress to ban Amazon’s private-label business, prohibit the algorithms that favor Amazon products, remove merchant arbitration clauses and bar the company from using transaction data for secondary purposes.