Amazon’s Jeff Bezos Faces Off Against a Fearsome Adversary

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(Bloomberg Opinion) -- The European Union is going to hold Amazon.com Inc.’s feet just a little bit closer to the fire. While this could make Jeff Bezos’s life trickier, it’s unlikely to be a catastrophe for the e-commerce giant and its founder. Still, the case can’t be ignored.

The EU’s antitrust regulator plans to file a formal complaint against Amazon over the way it treats third-party sellers, Dow Jones reported on Thursday. The bloc’s probe started almost a year ago and focuses on Amazon’s marketplace operations. That’s where third-party retailers — from corner stores to multinationals — can flog their wares directly on the Seattle company’s website. It’s different from Amazon’s other approach, where it just buys a product from a supplier and sells it.

The problem is that running the marketplace means Amazon can learn which products are popular and where, even when these aren’t goods that it’s supplying directly. It would be similar if Walmart Inc. had instant sales data from all of its brick-and-mortar rivals. Amazon has been accused of using this information to create Amazon-branded goods that then compete with the equivalent products made by marketplace sellers.

Amazon’s data gives it a potential advantage even if sellers try to opt out of its ecosystem. Take fashion, for example, where operating as a retailer on the company’s marketplace is tough. You only get a prominent placement on the website if your product has received a certain number of reviews, usually about 15. Because fashion labels change their product lineups several times a year, it takes a lot of effort and expense to reach that number each time. That’s why many just don’t bother selling on Amazon at all.

Yet Amazon will still know what kind of fashion products its customers want, from their searches and purchasing habits. So when it can’t get enough supply of a particular item — say if the retailer has run out of stock, or has simply opted not to sell on Amazon — it can manufacture its own equivalent, in this case a t-shirt or jeans. Amazon might also deem that the existing product is not at a compelling enough price for its customers. Most of Amazon’s 200 or so own-brand product lines are in fashion.

Bezos’s company argues that what it does is no different from real-world retail giants such as Walmart, Tesco Plc and Carrefour SA making their own branded products. The difference may be in the power that Amazon now wields through its market data, and that third-party sellers are so dependent on its marketplace that its use of those data appears anticompetitive. Margrethe Vestager, the EU’s technology and antitrust chief, appears to believe she can demonstrate that.

Any fine is unlikely to be crippling. Bloomberg Intelligence analyst Aitor Ortiz estimates it would be less than $1 billion, about 0.3% of Amazon’s expected revenue this year. But Vestager might attempt to change the company’s behavior. She’s done it before with Alphabet Inc. Now Bezos is up.  

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.

©2020 Bloomberg L.P.

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