Why Europe is keeping a close eye on Amazon

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Depending on your perspective, the European Union is either the global leader in trying to bring American Big Tech to heel or is protectionist in efforts to shield traditional European media, retailers and workers from the hyper-competitive environment of US online giants.

The EU has emerged as a key battleground over high tech due to its tough rules on data protection, hate speech, taxation, and competition. Apple, Google, and Facebook have all come under scrutiny for various reasons including the taxes they pay in Europe, privacy concerns, and potential unfair business practices.

In March, the bloc hit Google with a third antitrust penalty, ordering it to pay ?1.5 billion for abusing its dominant position in online search advertising. It has fined Google a total of ?8.2 billion since 2017.

Now it is Amazon’s turn in the crosshairs. Last week Margrethe Vestager, the European Commission’s top antitrust official, said she would examine whether the online retailer’s use of data violates competition rules. “I have decided to take a very close look at Amazon’s business practices and its dual role as marketplace and retailer to assess its compliance with EU competition rules,” she said.

Vestager said e-commerce provides greater choice for consumers, but cautioned that regulators need to ensure that large online platforms don’t indulge in anti-competitive behaviour.

But some suspect hitting Amazon over how it uses data could be a pretext for finding a way to slow the juggernaut. Critics say Amazon could have a devastating impact on traditional small retailers and even large stores in Europe.

As well, many workers and unions in Europe chafe at its high-pressure employment environment. Strikes have broken out at Amazon warehouses in Spain, Germany, the UK, and other countries as workers call for better working conditions, pay, and health benefits.

The labour protests highlight a growing challenge to Amazon in Europe. It faces increased scrutiny at a time when it is looking to add thousands of new warehouse workers and is growing at breakneck speed.

As European labour unions are mulling over their options, the EU’s antitrust regulator is looking to possibly rein in the company over suspected violations in the arcane world of data collection and use. Though murky to the layman, how digital data is used has huge repercussions in the real world.

In the case of Amazon, data collected through its own search box gives it an advantage that could be exploited.

The European Commission, the administrative arm of the bloc’s government, will investigate standard agreements between Amazon and independent merchants who sell on the platform. More than 130,000 small and medium-sized independent EU retailers sell goods on Amazon, but some claim the tech giant could itself have moved into bestselling products that small retailers discovered.

“Amazon is a big beast that is trading on its own behalf as well as offering small and medium-sized retailers a shop in their store,” James Dunford-Wood from e-commerce data specialist Ometria, told The Guardian newspaper.

The EU investigation that could go on for years exposes Amazon to potential fines of up to 10 per cent of its annual global sales, a levy of $23 billion based on 2018 revenues. But whatever fines are imposed – the EU has now fined or imposed tax bills totalling nearly ?25 billion on US tech giants – the real story will likely still be played out in the actual world of business.

Natalie Berg, co-author of a book about Amazon that labels it the world’s most relentless retailer, says the online giant still faces solid European competition in the hard-knock world of retailing. “Europe is still a priority but it’s becoming tougher for Amazon,” Berg says.

“They’ve always been up against fiercer online competition, particularly in apparel, but now they’re also contending with the resurgence of brick-and-mortar retail. Fashion retailers are distancing themselves from Amazon’s utilitarian image by becoming more experiential while also leveraging their best assets – their stores.”

Europe has long proved, it is no slouch in business and generating wealth. Bernard Arnault, chairman and CEO of the world’s largest maker of luxury goods, LVMH Moet Hennessy Louis Vuitton, recently surpassed Microsoft’s Bill Gates as the world’s second-richest man. But the No. 1 spot belongs to Amazon founder Jeff Bezos with a net worth of $124 billion, though some estimates put his fortune much higher.

Despite claims Europe might be moving toward protectionism, it seems a good idea to keep a close eye on Amazon. Bezos probably didn’t climb to the very top by always playing fair.

Jon Van Housen and Mariella Radaelli are editors at www.luminosityitalia.com