EU hits Amazon with antitrust charges over merchant data | Hacker News Reader

EU hits Amazon with antitrust charges over merchant data

ft.com

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Margrethe Vestager, the European commissioner who oversees competition, will announce formal antitrust charges against Amazon on Tuesday over how it uses data about the merchants on its platform, according to two people with knowledge of the announcement.

The case focuses on the online retailer’s dual role, both as a marketplace for third-party vendors and also as a competitor which sells its own goods, these people said.

The charge sheet, which is part of a probe that started nearly two years ago, fleshes out concerns that Amazon may be abusing its role by using the data it gathers on merchants to compete against them.

Amazon declined to comment. In the past the company has played down antitrust concerns, noting that many retailers have their own private label offerings, and that online sales represent only a small sliver of the overall retail sector.

Independent merchants are free to use some or all of Amazon’s services and can expand their reach and start selling online with limited initial investment, the company has noted.

The European Commission did not immediately reply to a request for comment.

Amazon’s business practices have been under scrutiny elsewhere in the EU and in the US. In 2018 the German antitrust watchdog launched a probe into its dual role as both marketplace for seller and seller of its own brands, looking into whether it used its market power to set illegal contract terms.

In the US Amazon is part of a group of companies under scrutiny by the House Judiciary Committee. The Justice Department and the Federal Trade Commission have also launched antitrust probes against Amazon.

The formal charges against Amazon will reinforce Ms Vestager’s reputation as a tough enforcer with an emphasis on tackling market rigging, consumer abuse and tax dodging. The Dane, who is serving her second term as competition commissioner, has led big battles against some of the biggest names in tech.

Under her mandate, the EU has fined Google more than €8bn in three separate antitrust cases while Apple has been ordered to pay €13bn in back taxes to the Irish government. Both companies have appealed.

Why does this sound like a Skynet brief on the next target? Kudos to this amazing human. Makes the rest of us look horrible I know, we can at least show some support. Best of luck Ms Vestager!

> Why does this sound like a Skynet brief on the next target?

Please elaborate.

There are so many amazon products coming out of the pipeline.

At first there were amazon batteries and hdmi cables.

But now there are weird products like amazon gaming desks.

It's not hard to imagine they said "we sell a lot of these" and made their own.

Yeah and it's because of people like me. When there are 2 items, both pretty much the same, if not from the same factory. If one is sold directly by amazon then I'd pick that one over the third party. Why? It's so much easier to get a replacement/refund/return with amazon than third party sellers.

If third parties are all selling the same thing then amazon can probably make more profit than the third party as well, so that's why amazon will also do it.

Now I do wish Amazon would pay more tax etc etc, but people like me make it easy for them to operate and do things like this.

You're already two steps too far to get out of the system. If all the choices you can imagine are "buy item #1 on amazon" or "buy similar item #2 on amazon" amazon already won

Amazon wins based on a superior product.

I tend to behave like niffydroid for the same reson. From experience Amazon offers a superior experience and a superior service so that, everything being more or less equal, purchasing from Amazon is the safer option.

This applied both when choosing among vendors on Amazon, and when choosing a marketplace website.

Amazon my be blamed for many things, but not for delivering one of the best delivery and customer service.

That's a bit different.

You are making a decision based on services associated with the product, rather than "this one looks identical and is $2 cheaper". Which is a valid differentiator.

But in the end it's not even about that. It's about Amazon not having to go through the cost of marketing(product development, placement, market analysis, etc) to then kick someone that did all of this.

> It's not hard to imagine they said "we sell a lot of these" and made their own.

Or more accurately, "this other company sells a lot of these on our marketplace platform, let's make our own, promote it over theirs in search, and undercut them"

This is what people seem to be missing. Amazon has the unique insights into sales, CTRs, search results and so on.

They are not a simple competitor to your product/brand, they are the super-charged competitor who knows everything about your business AND can simply favor itself in search results, recommendations and so on.

The balance is missing.

By this logic though shouldn’t “store brands” at the grocery store or “CVS brand” medicine at the drug store also be “illegal.” Both those surely look at which brands are selling before deciding to make a generic to put on the same shelf at a lower price. That’s not a monopoly, that’s standard practice in the retail business.

Thus the presence of competing products or the fact that generics appear against popular options is really not a good argument for nefarious activity.

The issue from some of those crying foul is really that there isn’t any brand loyalty towards what are commodity items. Why should someone buy your more expensive HDMI cable when a perfectly good one sells for less? It’s a valid question those crying foul need to answer. The answer here of course is that many/most of those doing the selling are middle-men and not actual product manufacturers thus it’s very easy to undercut the person that doesn’t really need to be part of the supply chain.

You're completely ignoring the Amazon being the marketplace.

Is a traditional store also not a marketplace for product manufacturers and distributors to sell their wares? It operates the same way. Drop off a truckload of your stuff at mega-mart’s distribution hub and they take care of the rest via their marketplace for your canned beans or whatever you’re trying to sell. If your product is popular, mega-mart will probably make mega-mart beans and put them right next to yours on the shelf at a lower price. The fact that it happens on a website vs a physical store doesn’t change anything.

It depends. By marketplace, what people mean here is that Amazon is taking zero risk on the inventory. They are merely providing a place to list it. (Along with maybe some other paid services such as fulfillment and inventory management.) Retailers sometimes operate under this model.

But retails also sometimes operate under the model where the inventory on their shelves was purchased by them from the manufacturer or distributor. They are taking the risk on the inventory, and not selling means they are losing money. The manufacturers and distributors were already paid.

So, I reflect a question back to you: If it's all your owned inventory, what does it matter what name is on the box? No matter what, you the retailer are getting your sale and making the profit. This is not true of the marketplace model. There, whitelabels are directly competing for every sale, and no sales means no money to the manufacturers of those other products.

All this is also heavily discounting the fact that Amazon also owns the search. Some people equate this to product placement on shelves, but it's really more like there's two stores. The first store is all Amazon stuff, and you have to walk through that store to get to the second store, where other sellers are.

I again suggest looking at other retail models. Grocery stores, department stores and such operate a sizable part of their business by simply providing distribution and shelf space for goods. They don’t own all the inventory on their shelf. For things like beverages and certain other goods they literally just rent shelf space in the store (3rd parties come in and stock the shelf) and then put their own store brand stuff right next to it selling for less. It’s literally the same model. One really struggles to make the argument that it’s bad to do this online but not in person. That’s the issue with this line of reasoning.

Slotting fees are not the same model, and even if they were they're considered questionably ethical.

One difference is the branding. Grocery store products rely far more on branding, and slotting fees are often used for market research.

Stores cannot reproduce the branding, therefore their own-brand products don't have the same competitive appeal.

Amazon actually hides prominent branding. A few big brands have their own mini-stores, but most of the time you can't tell if you're getting a product from Amazon, from the original manufacturer, or from a retailer.

So when Amazon uses market analytics to decide which products to make and sell, it has a huge advantage - and it can and does wipe out existing sellers. Which is something grocery stores don't do.

1) It's hard to hide things in a physical store. There are some tricks but if you want Brand A cereals and the store has them, you can find them in the cereal section. Amazon has in my experience, sometimes hidden product brands entirely or beyond page 4-5, favoring their own or prime products.

2) When a supermarket takes on Brand A cereal, the Brand A owner makes little risk, they get paid whether they sell or not. The supermarket is taking all the risk. If they bring their own store brand, they still run the entire risk, now for both stocks. If cereals stop selling well (because there is a milk shortage) then the supermarket is loosing a lot of money. Amazon faces no risk, they can have the vendor for Brand A continue to sell non-prime cereal from their own stock so amazon faces 0 costs if it flops. If the vendor does well they can be onboarded for inventory management and prime shipping, amazon takes more risks and more profit. Lastly, they can use methods like "We suspect the product is counterfeit, send bills for when you bought it" to gain direct access to the manufacturer of Brand A. Now they can sell Brand Amazon directly from the manufacturer, leaving the Brand owner of Brand A in the dust by selling the same product, that did well, cheaper and hiding them in the search results below their own.

The supermarket equivalent would be that the supermarket subsidizes the Brand A seller from their value-add in-store things like customer payback cards after a while, then blackmails them into giving them the manufacturer by threatening to not sell their popular product, then selling the manufacturer's product under an in-store brand and the Brand A cereal is only available under-the-counter. Brand A seller is also entirely co-dependent on the supermarket as that supermarket is 90% of the market.

I know you have wallmart in the US but in the EU we do have some variety in supermarket chains (ALDI Süd/Nord, LIDL, Edeka, Rewe, etc.).

That's not at all how retailers actually operate on the US. They pay for the overwhelming majority of what they sell. Full stop.

You've taken a relatively rare thing like slotting fees and built up an entire mental model around it. That would be like saying that all programming languages are typeless because you heard that JavaScript isn't typed.

Retailers most definitely take on the full risk of distribution and storage. Even when there's a buyback agreement.

Retailers are also NOT interested in buybacks, as the cost of shelf life is not cheap(much more expensive, than warehousing)... and white label products are also higher risk(not shared risk) for the retailers and are always lower margin.

There's a very clear difference between financial incentives between traditional retailers and Amazon. Equating them - is ignorance at best.

> Is a traditional store also not a marketplace for product manufacturers and distributors to sell their wares?

I think amazon is better compared to the whole street where the stores are, than to any store.

And CVS is technically also the marketplace just in physical form. I get where they're coming from, but don't really agree with the standpoint.

CVS (or really any large retail chain that sells 3rd party products and produces their own) is in a similar situation. One could, and rightfully so I think, make the argument that CVS etc should not be allowed to produce their own products, because they have significantly more insight into what is sold. Amazon noticed that several products were selling quite well and decided to get a piece of the action. Beyond showing their own products as higher ranked you'll also often see them listed under the "cheaper alternative" section on product pages.

In comparison, CVS might see that neck pillows are really popular and decides to sell their own neck pillows and put competitor ones on lower shelves. It's quite similar behavior.

Part of the reason why the EU decides to go after Amazon and not other though, I think, is because of their market share. Amazon is huge in the EU. They hold about 29% of the market. Depending on the country, even more.

Amazon also does this on a scale that other "marketplace" type companies have not. If you ever go to the Amazon website and look under Amazon basic, you'll be surprise by the amount of stuff they sell.

The difference is that CVS paid for all of the neck pillows that appear on their shelves, even the ones under their own white label.

The suppliers of the white label neck pillows provably made the other neck pillows. From their POV, they're largely indifferent because they've already been paid.

>By this logic though shouldn’t “store brands” at the grocery store or “CVS brand” medicine at the drug store also be “illegal.”

No they don't. Stores buy their stock. They can choose to stock other brands or to make their own products, but they invariably have to purchase what they sell.

The Amazon market place makes you think it's the same but it's not. Sellers are using the platform to sell their own products and they pay Amazon for that service.

Amazon is accused of using sales data from the sellers, like their sales volumes, margins and customers profiles, and then undercut them by producing their own version. Amazon basically benefit from the traffic, interest and sales data of sellers to then displace them and promote their own product.

It's like if you had a small business but your landlord had access to all your data and saw that they should also sell their own copies of your most profitable items by opening a bigger shop right next to you and selling for cheaper because being the landlord, they don't need to pay rent.

Maybe illegal, maybe not, but in any case it's cause for at least some amount of concern and deserves some overseeing.

It's way too tempting to abuse that absolute power in some way, whether as a matter or policy or just because some overzealous Amazon manager found that pushing the envelope was in their own interest.

You can't just ignore that and brush it off. We've created a potential bully and we should at least keep watch.

The B&M retail story is ... considerably more complicated. For grocery stores, "slotting fees":

“Slotting fees” (or “slotting allowances”) are fees that manufacturers pay retailers to appear on their scarce shelves. It can cost millions of dollars to launch a product in the nation’s groceries, and through that cost, these fees shape our supermarkets and diets long before we’re able to make a purchase decision ourselves.

It’s easy to think that these fees show supermarkets are “rigged” — against both consumers and smaller manufacturers that can’t afford the fees. But as the above video shows, the debate is an intense one, with strong partisans, and decent arguments, on both sides.

https://www.vox.com/2016/11/22/13707022/grocery-store-slotti...

Not excusing or arguing for Amazon (I'm not a fan), just noting real-world complexity.

Importantly, those fees are only paid to launch a new product. They pay them because retailers won't buy inventory of a new product until they know it sells.

So again, not even remotely the same thing as what Amazon does.

This is not correct. There are also placement fees that are paid to put the products on better locations on the shelves etc

Not all stores “buy” their own stock. Take Walmart what doesn’t sell they just give back to manufacturer and don’t pay for it.

Walmart outright buys most of its stock.

> No they don't. Stores buy their stock. They can choose to stock other brands or to make their own products, but they invariably have to purchase what they sell.

This is technically true, but I don't think it accomplishes what you think it does. In large retail agreements, it is fairly common to include buyback clauses. I.e. if the goods don't sell within a specified time frame, the supplier is contractually obligated to buy them back from the retailer. In some cases, they are not even required to return the inventory they have left, but the supplier must still "buy them back". In other agreements, payment isn't made until the goods are sold (which is what Amazon does).

So having to buy the goods doesn't give a brick and mortar store much extra incentive to make sure the stuff they "bought" sells. They can still undercut a product with an in-house version and suffer no losses from not selling whatever they replaced.

It's a shitty business model, but Amazon isn't alone here. If it makes sense to stop Amazon from doing it, we should stop everyone from doing it.

Buyback clauses are very rare. Generally, most suppliers refuse buyback provisions except for new product lines.

And most retailers build spoilage into their profit models. It's why margins are so low even though they sell everything marked up by double digits.

The stores would have to have a dominant position or abuse that position.

EU competition comission only cares about maintaining a competitive market. Until the overwhelming majority of the stores in my area are Amazon - there's no ground to target B&M stores.

>No they don't. Stores buy their stock. They can choose to stock other brands or to make their own products, but they invariably have to purchase what they sell.

This is incorrect. I wish people would stop repeating this in this thread. Some stores purchase their stock. But the really big players do not operate like that.

When you go into Target and go to the cracker aisle, Target has not actually purchased all of the cookies and crackers that you see on the shelf. Target effectively rents out shelf space to Nabisco, who then comes in and puts their items on the shelf (or will pay Target to take the product and put it on the shelf for them). The pricing agreement can get quite complicated and depends on the amount of shelf space, location in the store, and can also depend on number of items eventually sold... but the takeaway is that Target does not just outright buy boxes of Oreos and then try to resell them. If the Oreos don't sell (say perhaps because the customers opted to buy the Target brand sandwich cookies instead), Target isn't out any money, because they still got their shelf rental fees from Nabisco.

Going even further, Target also engages in the same type of activity Amazon does with their analytics (including sales volume, margins, customer profiles etc) and use that information to decide who gets to rent how much shelf space and where. Target et al spend incredible amounts of money optimizing this stuff, which isn't far off from what Amazon does.

People have this old rusty view of brick & mortar stores, but the reality is that they've been masters of this stuff far longer than Amazon has even been around. Amazon championed bringing these practices to the online space and became the most obvious juggernaut, but that doesn't mean these other companies are angels.

in Europe a supermarket buys the products; usually it will pay in 90/120/180 days and it has the option to return unsold items and will have advertising agreements for better/larger shelves, but everything is in the store is own by the store

This is not universally true. Slotting fees and shelf rental agreements are a thing in Europe, just like they are in the US.

Having a Nespresso concession stand that sells stuff on their own, doesn't change the fact that the retail side of the operation is inherently the owner of the products.

I used to have customers in both retail and on the supplier side. What you have deacribed is not at all how Target operates.

You've inverted the dependency of the relationship. People don't buy Nabisco because it's at Target; they go to Target because it has Nabisco products, hopefully for cheaper than other stores.

Thus, stores absolutely pay for every item of inventory that appears on their shelves except for some new products that might have special consignment arrangements.

Suppliers do not pay for better shelf placement. Stores determine that based on sell through and margin; the products that generate the best overall revenue get the best placement on the shelves.

Suppliers will pay for in store marketing, like displays, etc. This is usually a separate term for which no money changes hands or which offsets part of the invoice. They may also pay stores for analytics, but most stores provide that for free since it is in their interests to have better selling products.

>You've inverted the dependency of the relationship. People don't buy Nabisco because it's at Target; they go to Target because it has Nabisco products, hopefully for cheaper than other stores.

This is true for smaller stores (eg the mom-and-pop corner store or even large stores), but once retailers get to the super-large sizes, eg Target/Walmart, the relationship flips. People go to Target first and buy Nabisco because its at Target. If Nabisco wasn't there, they buy something else, but they don't stop shopping at Target.

>Thus, stores absolutely pay for every item of inventory that appears on their shelves except for some new products that might have special consignment arrangements.

>Suppliers do not pay for better shelf placement. Stores determine that based on sell through and margin; the products that generate the best overall revenue get the best placement on the shelves.

This is 100% incorrect. As I mentioned in my previous comment, some stores may operate like this, but not all. I can tell you from personal expertise in this space, but also just from a simple Google search about how retailers operate (do a search for the terms: slotting allowance, shelf-space rental, pay-to-stay, pay-to-display). See below for some links to get you started. Big retailers do not own all of the products on its shelves, and they certainly do make arrangements where manufacturers can pay extra fees to get preferential endcap placement, shelf placement, and shelf space. I have even seen agreements where a manufacturer will literally own (rather than rent) a specific shelf in an important store and can do whatever they want with it, as long as they pay recurrent fees (it reminds me of someone owning a condo in a building and paying HOA fees).

Big retailers may of course choose to not sell a certain shelf placement to a specific product because they want to reserve it for another purpose (like another competing product), but as a general rule of the thumb, if you're willing to pay enough, you can have whatever shelf spot you want.

Big retailers will also charge fees to manufacturers for the transportation and storage of the product for when the product is being stored in the retailer's warehouses or being moved by the retailer's trucks (sound familiar to what Amazon does?). The reason they can do this is because the retailer doesn't own the product, the manufacturer still does. The retailer profits by facilitating the sale of the product.

In some situations, big retailers may indeed purchase a block of products, but in every scenario I have personal experience with, the agreement was always one in which the manufacturer was obligated to buy back any product which did not successfully sell in the store, which ultimately has the same effect as just renting shelf space.