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12 November 2020updated 02 Aug 2023 2:05pm

Will the EU’s antitrust battle with Amazon expose the limits of the regulator’s power?

The high-profile digital regulator Margrethe Vestager is under pressure to prove her approach to US tech firms is successfully increasing competition.

By Oscar Williams

At midday on 10 November, Margrethe Vestager, the EU’s high-profile enforcer of competition law, unveiled the preliminary findings of a landmark investigation into Amazon. The online retailer, the investigation claims, has been using data on products sold through its platform to launch rival offerings and guide its strategy around them.

The US tech giant, which has managed to avoid Vestager’s interrogation for longer than many of its Silicon Valley competitors, now also faces a second probe. In Brussels on Tuesday, Vestager announced she is investigating claims the company is using its “Buy Box” – the button users click to add an item to their digital basket, which selects offerings from a number of online sellers – to favour sellers who depend on its services, or to promote products Amazon sells itself. Amazon has said it disagrees with the commission’s preliminary findings.

This is not the first time the competition chief has gone head-to-head with big tech. In 2017, the Danish regulator fined Google a record €2.4bn for downranking product comparison sites that rivalled its own. The principal concern in such cases is that digital gatekeepers are abusing their dominance to promote their own products and services at the expense of others.

These practices do not immediately lead to higher prices for consumers, often a test of monopolistic behaviour. But they stifle competition in the market, potentially depriving consumers of innovations and workers of new opportunities, and they risk pushing up prices in the long term.

In the past, Vestager has sought to deter such behaviour by issuing jaw-dropping fines. Google alone has been hit by three penalties totalling £6.7bn in the last decade. But critics have questioned the effectiveness of such penalties, warning that tech companies can easily factor the cost of fines into their business models.

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Vestager has acknowledged the shortcomings of her previous enforcement actions. If she can prove that Amazon has acted illegally, she has the power to fine the company up to $28bn. But in a press conference on Tuesday, she signalled that her focus will be to ensure that Amazon’s practices are corrected swiftly.

“I recognise that in other cases Amazon has been very forthcoming to solve the issues at stake,” Vestager said. “Some of the national competition authorities have had the same experience of finding issues where they had preliminary conclusions, where also Amazon has engaged in finding solutions. That’s much more what is at stake here rather than not being able to bring the cases to an end.”

What could the potential remedies look like? And how confident should we be that they will work? To answer those questions, it’s important to understand what exactly the commission is accusing Amazon of doing.

According to the commission’s statement, “very large quantities of non-public seller data are available to employees of Amazon’s retail business and flow directly into the automated systems of that business.” This “allows Amazon to focus its offers in the best-selling products across product categories and to adjust its offers in view of non-public data of competing sellers”. Amazon can then use this data to “avoid the normal risks of retail competition and to leverage its dominance in the market”.

Vestager’s challenge will be to find a proportionate response to these alleged abuses. Ariel Ezrachi, a professor of competition law at Oxford University, explains that Vestager’s team will have to propose a behavioural, rather than structural, remedy in the first instance. In this case, Amazon’s retail business is likely to be told that it must no longer harvest this data to inform its strategies. But Ezrachi warns that, in practice, it isn’t easy to monitor whether a company is using such data.

The commission’s track record casts further doubt on whether it will deliver an effective remedy. In September, some 12 years after Google was first accused of downranking competitors’ product comparison services, research revealed that less than 1 per cent of Google Shopping’s traffic is directed to rival sites. “Despite the noise around Google’s cases, there has been a question of whether the remedies really restored competition,” says Ezrachi. “The risk is that the platforms are able to undermine their effectiveness.”

There have been calls for more radical measures. Last year, the then-Democratic presidential candidate Elizabeth Warren called for platforms, such as Amazon, to be separated from platform participants, such as the in-house publishing division Amazon Books, over fears that conflicts of interest inevitably lead to anti-competitive practices. Meanwhile, the Department of Justice’s antitrust charges against Google signal that the political tide is turning against the tech giants in the US.

But Ezrachi notes that the commission’s competition division is bound by existing legal frameworks. Even if Vestager’s team wanted to break up Amazon, they would not be able to do so unless they could prove there was no simpler way of addressing the matter. And even if they could, the political ramifications of a European regulator breaking up an American company could deter them from taking action.

The commission has acknowledged its existing legal arsenal is insufficient to handle the tech giants. It is in the process of developing new tools that aim to boost competition in the markets in which companies such as Google and Amazon operate. But until consumers and competitors start to see tangible benefits of the commission’s work, calls for the break-up of big tech will only grow louder.

[See also: How did our tools for addressing corporate power become so blunt?]

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