(Bloomberg)—Amazon.com Inc., No. 1 in the Internet Retailer 2019 Top 1000, struck a deal with Germany and Austria to shut down antitrust probes into how it handles other merchants on its site, just as it faces a bigger European Union investigation into its use of sellers’ data.
The U.S. retail giant will change its business services agreement worldwide in mid-August to address a number of complaints from sellers, the German Federal Cartel Office said in an emailed statement on Wednesday.
“We have obtained far-reaching improvements for sellers active on Amazon marketplaces worldwide,” Andreas Mundt, president of the German regulator, said in the statement. “The proceedings are now terminated.”
Amazon’s troubles in Europe are only just beginning even as those two probes end. The company faces a full-blown EU antitrust investigation that could be announced as soon as this week. That targets Amazon’s online business model as a host to many smaller retailers in an inquiry that could also affect other tech giants.
The EU has been asking how Amazon might use data it collects from sellers on its Marketplace platform, such as seeing what products do well, and whether Amazon uses that data advantage to launch similar items.
Amazon said it will make changes to its Amazon Services Business Solutions Agreement from Aug. 16 to address issues raised by the German and Austrian regulators. Those probes targeted terms of business, liability provisions, contract clauses on where sellers could sue the company and the process of blocking and closing sellers’ accounts. Amazon’s rules on returns and reimbursements for customers will be unchanged, the German Cartel Office said.
Amazon is also promising to roll out its Vine rating program to marketplace sellers who own a brand name registered with Amazon, the Cartel Office said. This is a response to sellers’ complaints that Amazon prefers its own sales as a retailer because it removes product reviews from external providers. Amazon argued that it’s acting against a considerable risk of fake reviews, the office said.
Amazon challenged on competition
Amazon also was challenged by a top House lawmaker over whether the online retail giant is harming competition as the biggest tech companies faced their harshest antitrust scrutiny in years on Capitol Hill.
Democratic Representative David Cicilline of Rhode Island, who chairs the House antitrust panel, put Amazon on the hot seat at a hearing Tuesday, suggesting its business model suffers from conflicts of interest and that it can use its control over data to thwart competition from third-party sellers on its platform.
“You are selling your own products on a platform you control and they’re competing with products from other sellers,” Cicilline said.
Amazon lawyer Nate Sutton denied the company uses data it collects on sales to favor its own products over third-party sellers. He also argued that it’s common in the retail industry for stores to sell their own brands that compete against others.
Cicilline fired back: “The difference is Amazon is a trillion-dollar company that runs an online platform with real-time data on millions of purchases and billions in commerce and can manipulate algorithms on its platform and favor its own product—that is not the same as a local retailer,” he said.
The exchange, as Amazon’s Prime Day sales event extended into a second day, came at hearing where four of the biggest U.S. tech firms—Amazon, Facebook Inc., Alphabet Inc.’s Google and Apple Inc.—defended their businesses against criticism that they are too dominant. The session marked the first time the companies have faced grilling from Congress about whether they are hindering competition.
Cicilline said his inquiry is still in the fact-gathering stage but the series will eventually lead to legislative steps that go beyond self-regulation.
“I think it will absolutely require some action by Congress, either by way of regulation, new statutory enactments, new resources for antitrust agencies, more likely a combination of those three things,” he told reporters after the executives testified.
Cicilline is bearing down on the companies as antitrust enforcers prepare their own scrutiny after a mostly hands-off approach to the industry.
The Justice Department and the Federal Trade Commission, which share antitrust jurisdiction, have taken the first steps toward investigating conduct by the biggest companies by divvying up oversight with the Justice Department taking responsibility for Google and Apple, and FTC overseeing Facebook and Amazon.
A report by the University of Chicago’s Stigler Center this year found that digital markets tend to be winner-take-all in which one firm comes to dominate. That creates an incentive for the companies to edge out new challengers that could threaten that dominance.
Republican Jim Sensenbrenner of Wisconsin on Tuesday cautioned against calls for breaking up the big technology companies.
“Just because a business is big doesn’t mean that it is bad,” he said. Antitrust laws “do not exist to punish businesses just because they are big.”
All four companies repeatedly insisted that they face abundant competition, from one another and from other companies. Although Amazon controls about half of U.S. ecommerce sales, Sutton pointed out the company makes up just 4% of all retail sales, with competition from Walmart Inc. (No. 3) and The Kroger Co. (No. 17), among others. Facebook’s Director of Public Policy Matt Perault pointed to competition from Apple, Amazon and Google, among others.
That argument met with skepticism from lawmakers. Representative Joe Neguse, a Colorado Democrat, pointed out that Facebook has the most monthly active users worldwide of any social media platform, with its Instagram, Whatsapp, and Facebook messenger in the top six.
“You can understand the skepticism because when a company owns four of the largest six entities measured by active users in the world in that industry, we have a word for that, and that’s monopoly – or at least monopoly power,” he said.