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Dec. 10, 2020, 3:11 p.m. EST

Amazon and antitrust: As EU inquiry begins, U.S. ponders similar action in 2021

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By Jon Swartz

Amazon.com Inc. doesn’t have nearly the antitrust headaches of Facebook Inc. and Alphabet Inc.’s Google at the moment — but that could change in 2021.

A federal case against Amazon /zigman2/quotes/210331248/composite AMZN +0.82% and Trump nemesis Jeff Bezos isn’t as far along, with so much emphasis on Google and Facebook. But after the European Union announced antitrust charges against Amazon in November for abusing its dominance in online shopping and opened a second investigation into the company’s business practices, speculation turned to what may follow in the U.S.

See also: Big Tech’s antitrust woes grow, but will it actually matter?

The Federal Trade Commission is probing antitrust concerns involving Amazon, and California and Washington state have separately launched antitrust probes. The focus of those inquiries is unclear, though they are likely to drill down on the effect Amazon’s dominance has on competitors.

“Amazon is screwing over small businesses, which account for half of the jobs in America,” said Jason Boyce, author of “The Amazon Jungle.” “There needs to be laws in action to protect the small businesses that are so crucial to the fabric of being American.”

Boyce pointed to Amazon recently opening an online pharmacy in 45 states as a further threat to small- and medium-size business.

European antitrust authorities opened a second investigation into whether Amazon artificially favors its own retail offers or those of marketplace sellers who use the company’s logistics and delivery services. One area of focus is the criteria that Amazon uses to select products featured in its prominent “Buy Box.”

Margrethe Vestager, the European Commission’s top antitrust official, accused the Seattle-based company of illegally abusing its dominant position as an online marketplace in Germany and France, the company’s biggest markets in the EU. Amazon, she claims, feeds nonpublic seller data, such as the number of products ordered and the sellers’ revenues, into its own retail algorithms to help it decide which new products to launch and the price of each new offer.

Amazon, in essence, has marginalized third-party sellers and capped “their ability to grow,” Vestager added.

For more: Big Tech is turning on one another amid antitrust probes and litigation

In a statement, Amazon said it disagreed with the commission’s allegations, and it will “continue to make every effort to ensure it has an accurate understanding of the facts.”

“No company cares more about small businesses or has done more to support them over the past two decades than Amazon,” the company said. “There are more than 150,000 European businesses selling through our stores that generate tens of billions of euros in revenues annually and have created hundreds of thousands of jobs.”

Amazon could face potential fines of up to 10% of its annual global sales, though European-led probes are likely to drag on for years.

The scope of an EU investigation — as well as how EU charges translate to the U.S., if at all — remains a subject of debate among financial analysts.

Daniel Newman, principal analyst at Futurum Research, disagrees with the premise that Amazon is aggressively using the data of its marketplace sellers to drive preference to its private-label products.

Private-label products account for just 1% of Amazon’s revenue, Newman pointed out. By contrast, Target Corp. /zigman2/quotes/207799045/composite TGT -0.24% , Costco Wholesale Corp. /zigman2/quotes/201191698/composite COST +0.63% , and Walmart Inc. /zigman2/quotes/207374728/composite WMT +0.29% have 33%, 20% and 15% of their revenue tied to private-label products, respectively.

Additionally, he’s dubious over the probe’s assertion of stack ranking of marketplace vendors and how searches may be impacted by the fee structure and services that the marketplace vendor gives to Amazon. Amazon, he asserts, may simply be trying to “meet the greatest customer experience level.”

“I find it unlikely these particular areas of investigation will lead to fines imposed in the U.S.,” Newman told MarketWatch. “Amazon has invested more than $18 billion this year to support small business and its marketplace is enabling many businesses that couldn’t possibly compete in the modern digital age to have a relevant growing business.”

/zigman2/quotes/210331248/composite
US : U.S.: Nasdaq
$ 3,362.02
+27.33 +0.82%
Volume: 2.21M
April 21, 2021 4:00p
P/E Ratio
80.52
Dividend Yield
N/A
Market Cap
$1681.07 billion
Rev. per Employee
$297,430
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/zigman2/quotes/207799045/composite
US : U.S.: NYSE
$ 206.77
-0.50 -0.24%
Volume: 2.84M
April 21, 2021 4:04p
P/E Ratio
23.92
Dividend Yield
1.32%
Market Cap
$103.35 billion
Rev. per Employee
$228,756
loading...
/zigman2/quotes/201191698/composite
US : U.S.: Nasdaq
$ 374.09
+2.36 +0.63%
Volume: 1.53M
April 21, 2021 4:00p
P/E Ratio
38.26
Dividend Yield
0.84%
Market Cap
$164.50 billion
Rev. per Employee
$610,846
loading...
/zigman2/quotes/207374728/composite
US : U.S.: NYSE
$ 141.20
+0.41 +0.29%
Volume: 5.78M
April 21, 2021 4:00p
P/E Ratio
29.81
Dividend Yield
1.56%
Market Cap
$396.62 billion
Rev. per Employee
$243,109
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