Amazon under EU antitrust fire over use of merchant data

BRUSSELS (Reuters) - Amazon’s use of merchants’ data triggered an EU antitrust investigation on Wednesday, as regulatory concerns mount around the world on how tech giants exploit customer information to reinforce their market power.

U.S. tech firms Amazon, Google and Facebook have been in the regulatory spotlight as antitrust enforcers examine how they use data to shut out rivals. Some U.S. politicians and even one of Facebook’s co-founders have called for them to be broken up.

The European Commission has been seeking feedback from retailers and manufacturers since September into Amazon’s dual role as a marketplace for merchants and as a competitor, following complaints from traders about Amazon’s practices.

The Commission said its investigation would look into Amazon’s data agreements with marketplace sellers and how the online retailer uses that data to choose which seller is selected to provide a product once a consumer clicks “buy.”

European Competition Commissioner Margrethe Vestager, who can fine companies up to 10% of their global turnover and force them to change their business practices, said the issue was crucial as increasing numbers of Europeans shop online.

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“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,” she said.

Amazon said it would cooperate fully with the EU investigation. The company reached a deal with Germany’s antitrust authority on Wednesday to overhaul its terms of service for third-party merchants.

Its shares were 0.6% down versus a 0.1 percent rise in the Dow Jones U.S. Technology Index.

Under Amazon's terms of service for Europe here set out on its website, merchants grant Amazon "royalty-free" rights to use their materials, such as technology, trademarks, content and product information.

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The Commission may take a tougher approach this time to set a precedent for other platforms providing a marketplace whilst competing with their own products, said Ioannis Lianos, professor of global competition law and public policy at University College London.

“I think the Commission will want to give a strong message because it’s one of the first cases to bring this issue,” Lianos said. “My feeling is that the Commission’s interest is not to settle but to take an infringement decision to lay down the law clearly and set a precedent.”

In Washington, the U.S. Federal Trade Commission is contemplating probes of Amazon and Facebook while the Justice Department is looking at Apple and Google.

In Congress on Tuesday, Representative David Cicilline, chair of the Judiciary Committee’s antitrust subcommittee, pressed Nate Sutton, an associate general counsel at Amazon, about whether the online retailer used data about independent sellers on its platform to develop products to sell, thus competing against its own sellers.

Sutton argued that the data was used solely to know what to offer customers. “The algorithms are optimized to what customers want to buy regardless of the seller,” he said.

This would not be Amazon’s first run-in with the Commission. Two years ago, it was told to pay back taxes of about 250 million euros ($280 million) to Luxembourg because of illegal tax benefits. That same year it settled with the regulator over its distribution deals with e-book publishers in Europe.

Additional reporting by Phil Blenkinsop in Brussels and Sonya Dowsett in Madrid, Diane Bartz in Washington and Munsif Vengattil in Bangalore; Editing by Edmund Blair and Rosalba O’Brien