Big Tech returns to antitrust weapons. For Amazon, the first shot came for the EU in the form of two complaints about Amazon's anti-competitive behavior. The first complaint, in July 2020, concerned the Buy Box, an important part of the Amazon ecosystem. Notably, that complaint did not specifically refer to Amazon's private label brands, a primary concern of US authorities. Instead, the EU focuses on broader issues covering all of Amazon Retail's competition with third-party sellers on its Marketplace platform. Margrethe Vestager, the EU's competition commissioner, appears willing to cast a broad net around all Amazon activities that falsely favor first-party sales.

The most recent complaint, filed in November 2020, reiterates its concerns about the Buy Box, but also complains about Amazon's conditions for sellers to acquire the coveted & # 39; prime & # 39; badge, and about Amazon's pressure on sellers to use Amazon's own logistics network, Fulfillment by Amazon (FBA).

EU competition policy focuses on ensuring fair competition within markets, and is more generally much more attuned to the relationships between different market participants, rather than focusing on strict and limited interpretations of consumer benefit . Unlike the US, lower prices and consumer benefits are not enough to isolate Amazon from EU complaints. Traditionally, when complaints are validated, the EU does not favor structural solutions such as breaking up a business. Instead, it usually looks for binding agreements on future behavior, as it did with Amazon in a previous case targeting the ebook market. It can also – just like with Google – impose very heavy fines.

Even without a break, the EU poses some apparent – but perhaps not so serious – threats to Amazon. First, the EU is creating a path for US regulators and Congress to follow, illuminated by the light the EU process sheds on Amazon's behavior. And there's plenty of evidence that Amazon is tilting the playing field – not always, not for all items, but often enough.

Second, the EU also objects to something that is at the heart of the Amazon process in retail – the connection between its Marketplace and its logistics network. Amazon has the best e-commerce logistics network (the US and Europe). Third-party sellers recognize that if they use that network, they will deliver faster, cheaper and more consistently. And those factors play a big part in deciding who wins the Buy Box – Amazon's default selection for purchases, which greatly affects who actually gets the sale. That makes the use of Fulfillment by Amazon (FBA) much more attractive. The EU could step in and demand that Amazon adjust its algorithm to eliminate that connection: in that case, using FBA would no longer help a seller win the Buy Box. But even if this split were mandatory, it would have minimal impact on Amazon (which, after all, isn't really making money off FBA anyway).

Third, the EU has also signaled that the existing link between using FBA and acquiring the important "Prime" badge for an item is problematic. But breaking that link would also have almost no impact on Amazon or its sellers. Amazon could easily find other stats for the Prime badge, and this one would still be critical for sellers. And Amazon has clear solutions. It has already realized that being left to their own devices is a powerful incentive to use FBA, which Amazon favors, both because FBA volume helps fill its massive logistics channel, and because Amazon seeks strict control over its whole supply chain, which FBA provides. For example, to encourage the use of FBA, it could simply emphasize (possibly in the Buy Box itself) that it explicitly guarantees delivery times for sellers using FBA, but not others.

Beyond workarounds, Amazon is already transitioning to a world where its platform is dominated not by its own retail operations, but by the external marketplace. EU pressure may accelerate that shift, but that's a feature that's not a bug, from Amazon's perspective: Amazon is losing money on its own retail operations and making a lot of money in Marketplace, so highlighting the latter is a big plus .

In addition, a recent European Court of Auditors report found that the EU took an average of four years to complete investigations, and often longer – Google is still appealing is fine from an action that more than started ten years ago. Amazon knows how to play the game, and it has a decent defense against some of the accusations. It will be a long time before the EU has two of the three pins in its hands.

Finally, if some adjustments are eventually needed, Amazon can make them without changing its fundamental business model (beyond its natural evolution). So even though the EU's complaints cast a pretty broad net, and the EU has the formidable hammer of massive fines, that net, and those fines are nowhere near broad enough or big enough to bother Amazon at all.

Written by

Dr. Robin Gaster .