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Amazon scrutinized for third-party seller data use

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Elizabeth WarrenSen. Elizabeth Warren cheers on protestors engaging in a sit-in.Jonathan Ernst/Reuters

  • Regulators in Europe have zeroed in on a specific part of Amazon‘s business that they say could be anti-competitive.
  • The scrutiny involves the company’s dual role as both a direct retailer — buying goods wholesale and selling them to consumers — and as a platform for other retailers to sell their goods. The issue is the data and how Amazon uses it.
  • In the United States, Sen. Elizabeth Warren has had a similar take on Amazon’s role.
  • Amazon’s third-party marketplace is core to its retail growth, and if regulation should curtail it, the company’s future growth could be impacted.

European regulators have set Amazon in their sights.

Germany’s competition watchdog — the Federal Cartel Office, or the Bundeskartellamt — announced on Thursday that it had opened an investigation into Amazon.

“Its double role as the largest retailer and largest marketplace has the potential to hinder other sellers on its platform,” Andreas Mundt, the president of the FCO, said in a statement. “Because of the many complaints we have received we will examine whether Amazon is abusing its market position to the detriment of sellers active on its marketplace. We will scrutinize its terms of business and practices towards sellers.”

In a statement to Business Insider on Thursday, Amazon said that it would not comment on ongoing investigations, but pledged to “cooperate fully with the Bundeskartellamt and continue working hard to support small and medium-sized businesses and help them grow.”

Germany’s watchdog isn’t the first to take notice of this aspect of Amazon’s business and its potential anti-trust implications. The European Commission, led by Margrethe Vestager, announced in September that it had launched a preliminary investigation to see whether Amazon’s dual role has meant that its use of data has been in violation of European competition law. 

“The question here is about the data,” Vestager said in response to a journalist’s question at a press conference in Brussels, Belgium, at the time. 

The commission sent questionnaires to hundreds of third-party retailers this summer, it said. 

Read more: Amazon is getting slammed for a confusing email telling customers they don’t need to change their password after a data leak

Across the Atlantic, US Sen. Elizabeth Warren has echoed the European regulators’ sentiment

Speaking with The New York Times’ Andrew Ross Sorkin in September, Warren centered her criticism on the dual role Amazon plays. 

The problem, Warren says, is that Amazon gets the data from sales on its platform and doesn’t necessarily share it. With that information, Amazon could then potentially create its own market conditions and develop a private-label brand.

“Amazon gets this special information advantage that it [can] then exploit to wipe out [a business],” Warren told Sorkin. “That is a serious problem.”

Warren said that, ultimately, Amazon should not be in both businesses.

“You got to pick one business or the other, baby,” Warren said. “You want to be a competitor, be a competitor. That’s great. You want to be the platform provider, that is a different function. If you’re getting a huge competitive advantage from being a platform provider because of all this information you keep scraping off, then we no longer have competition going on.”

Amazon’s marketplace has become core to its retail growth. Marketplace has grown to account for more than half of the website’s sales. Its growth is outpacing Amazon’s direct sales of merchandise. It has also more closely integrated offerings by third parties into its own services, which Amazon collects fees on, so customers often can’t tell the difference when shopping the site.

That’s a powerful tool for Amazon, as it drastically increases the number of items available for purchase on the website. Should regulation not let Amazon sell products that compete with those sold by third parties on its own website, Amazon’s future retail growth could be impacted. 

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