Growing Trend of Antitrust Practices in E-Commerce Sector: A Take on Amazon’s Predatory Strategies

Sulagna Dutta [1]

Abstract

Amazon is the Titan of the modern e-commerce industry. On one hand, it provides a platform for third-party sellers to sell their products while on the other hand, it plays the role of a retailer and an economic competitor to the third-party sellers. However, the Fortune listed e-commerce giant has attracted the wrath of several antitrust investigations in India and abroad. This has been the result of engaging in various anti-competitive practices like that of using non-public seller data to drive out competition from third-party retailers. This blog is aimed at studying the underlying strategy of the 21st Century e-commerce Titan which is outlined to avoid the risks of the intensely competitive market. This blog also comes up with certain plausible solutions to protect the healthy competition in the market from the anti-competitive attempts of market giants.

Keywords- Amazon, seller data, competition, retail market, e-commerce, Antitrust.

Introduction

As Freak Legislation, the Antitrust Law stands alone.

These lines by Isabel Paterson hold immense relevance in the present day when business giants are looking for every possible strategy of increasing revenue. the online retailer markets illustrate a similar picture as far as antitrust practices are concerned. Almost every individual seems to be acquainted with the trend of online shopping in the current era of advanced digitalization and paucity of time. Amazon stands as a recognized name in the e-commerce industry.

The services of the 21st Century e-commerce Titan does not restrict itself to being an online retailer but extends its service to the extent of the logistics service provider, provision of a specialized payment gateway and, book publisher. The company’s fast-growing fame has transformed many apprehensions held, as far as online retail services were concerned. Apart from capturing the market of the e-commerce industry in the last few years, Amazon has been in the pivot of a number of antitrust investigations, especially when it comes to their third-party seller agreements.

The terms on which the Fortune Listed Company has been laying the foundation of its third-party agreements have attracted the wrath of several probes and investigations around the world. The use of non-public seller-data to the benefit of its retail business expansions had become the forte of the e-commerce giant, and the same received repeated objections from recognized regulatory authorities like the European Commission. The objection was not limited to the use of non-public data but extended to cover the discriminatory and Self-preferential treatment of Amazon against the sellers who use the logistics and delivery services of the company, with an unfair motive of stretching its own profit margins through various retail offers.

A Probe into the Antitrust Investigations against Amazon Retail for the Misuse of Non-public data:

The exponential rise in the number of antitrust practices can be recognized as a common phenomenon associated with most of the global players in the market these days. When we indulge in the more detailed aspects of the same with reference to Amazon Retail, several investigations need to be discussed. The European Union had accused the online retail giant of distorting the online market competition back in 2018. Amazon has played a dual role when it comes to online marketing of products. On one hand, it provides a platform for third-party sellers to sell their products while on the other hand; it plays the role of a retailer and an economic competitor to the third-party sellers.

The tune of the investigation revolved around the detrimental use of non-public data related to the third-party sellers, for whom Amazon has been acting as a marketplace provider for securing a dominant position through strategic business planning. These data include, within its purview, retailer statistics like that of the bestselling products, most visited offers, data associated with services of shipping, and the past performance graph of the sellers. Such information is of strategic importance to the third-party businesses which are being unduly used by Amazon for upgrading its services.

The Commission’s objections outlined that Amazon made strategic use of the Non-public third-party data of the sellers to avoid the risks of the intensely competitive market, by designing their offers in a way that ensures maximum profits for Amazon as well act as a detriment to its competitors.

The biggest markets of Amazon’s retail business are stretched across the French and German territories, and going by the Commission’s findings, Amazon could attract infringement of Article 102 of the Treaty on the Functioning of the European Union (TFEU) backed by the Antitrust Regulation. These practices prove to give access to the otherwise private and nuanced data of businesses that ultimately enhance the brand name of Amazon and allows them to further assert their dominance over third-party retailers on the platform.

A second investigation of the Commission was initiated against Amazon’s alleged self-preferential treatment in terms of letting out offers of its third-party sellers and self-retail services by the use of labels like “buy-box” and “Prime” (Tagged with exclusively for prime members). Both of these features allow the respective retailers to earn a vast number of sales. The concern aggravates because the graph for prime subscribers has seen an upward trend in the recent past and constitutes a much higher percentage when compared to the non-prime users on the platform. This often leads to a discriminatory approach towards both non-prime consumers and third-party sellers carrying out their retail business through Amazon.

Outlining the Retail Market in Terms of the Competition Commission of India

Amazon has time and again come up with numerous justifications for their policies and strategies in respect of the broad spectrum of classification of the online retail market.

Moreover, Amazon being a hybrid platform, it becomes a challenging task for the investigating authority to ascertain the limits of such an investigation. The definition of a relevant market has seen varied terms being iterated by various Global commissions and authorities entrusted with the task of regulating and upholding healthy competition in the market.

To ascertain the antitrust paradox of the 21st Century e-commerce giant Amazon, it is essential to mark the relevant market for the same. The Competition Commission of India, while probing an investigation against Flipkart, which is a similar online retailer as Amazon, has gone to define relevant product markets in regards to the same.

It has incited considering several factors like the ultimate use of the products, the pricing policy adopted, the presence of specialized production or exclusion of in-house production, and the preferences of the customer base. These iterations of the regulating body were delivered in consonance with the provisions contained under Section 19(7) of the Competition Act of 2002.

However, when the same is compared with instances from Foreign Regulatory Bodies, a plethora of doubts form a cloud on the coherence of the concept. There is ample lack of clarity on ascertaining the relevant market for such retailers, which also stands as one of the primary challenges in the assertive investigation for the investigating authorities around the world.

Plausible Suggestions

The effective regulation of almost untraceable and strategically designed antitrust practices across global markets is the need of the hour. Hefty fines imposed by the European Union on the conduct of such practices, that are against the principle of Equal Treatment is not a new phenomenon. However, some global titans continue to endure such malpractices through strategic planning and dominance within the hybrid networks. Some of the plausible suggestions to curb this are as follows:

1. Ensure better standards of Transparency- This attempt of securing better walls for testing transparency within the Market will ensure that they do not indulge in predatory policies with their third-party sellers. The same can be achieved through periodical checks on the internal operating procedures of big companies followed by the submission of a detailed report to the concerned Statutory Authority. The more transparent the operations, the greater would be the accountability to stand by the compliances and regulations that are set by the regulatory authorities to uphold healthy competition in the market.

2. Stringent Application of General Data Protection Regulations (GDPR)- Most of the Data Protection Regulations around the world have emphasized the importance of specific legal requisites like that of the consent of the concerned seller or consumer, storage limitation and, purpose limitation. These put an added responsibility on big companies to acquire the consent of its customers whose data they are dealing with along with providing for the manner and period of storage of such information. In all such cases, the company collecting the data is termed as a Data Fiduciary, who must maintain the confidentiality of the entrusted data. However, in the instant case, Amazon has breached the duty of a data fiduciary, and the scope of such an action can be evaded, given that the law is applied more stringently on the operations of such hybrid platforms through regular inspections and report collections by the concerned authorities.

Conclusion

The unaddressed deliberations surrounding the dual-role of online platforms with market power often do not find a place among the general notions associated with the brand hype of such companies. Companies like Amazon thus end up assuming the position of a controller of infrastructure on which its third-party rivals depend. The situation calls for FastTrack investigation of the allegations, which otherwise would not attract the general customers availing the services of such platforms. It is the ultimate aim of the regulatory authorities and market enthusiasts to grow in scope of healthy competition prevailing in the sector, rather than distorted competition and unfair practices. It is, therefore, imperative to establish more secure standards of transparency coupled with regular legal checks to avoid the entrenched dominance of a single player.

[1] Sulagna Dutta is an undergraduate from Symbiosis Law School. For any discussion related to the article, she can be contacted via mail: sulagna.dutta@student.slsh.edu.in.

Preferred Citation – Sulagna Dutta, “Growing Trend of Antitrust Practices in E-Commerce Sector: A Take on Amazon’s Predatory Strategies", Syin & Sern Law Review, Published on 1st February 2021.