LLMs Anglia Ruskin Press


The Change of tides to Antitrust Law: The Amazon problem

By Maria Margarida Rocha Duarte

The European Commissioner responsible for competition policy, Margrethe Vestager, addressed the theme “fair play in tech” in the Web Summit, which took place in Lisbon on November 2017. Following with the theme “Clearing the path for innovation”, where she presented the idea of “competition is one of the engines of innovation”and, for that reason, it is necessary to ensure that “all have the opportunity to play.”. “If a company succeeds in the market, must be because it has the best products”, Vestager point out. In this sense,

“it's a problem when successful companies, which dominate the market, decide to use their power to shut down competition.”(1).

The intensification in pressure by Europe on antitrust matters, specifically focus against technological companies, has seen an increase in recent years. Although Google has been the main target for the past years, it is not the only one. Facebook suffered a fine for providing misleading information during its WhatsApp acquisition in 2014(2). And, last year, the European Commission decided to focus on the Amazon “problem”.

The focus of the European Union on antitrust matters is mainly justified by the different approach to antitrust that is observed between the U.S and the EU. In the United States, the focus is on what is in the best interest of the consumer, i.e. was the consumer harmed. In the EU, what counts is based on what is in the best interest of the competitor, on the theory that ultimately, if there is more competition it will bring better consumer results. So, when American Companies try to expand their business to the European markets, a confrontation between the two approaches of antitrust law raises several issues requiring mutual adaptation. The reason for such a confrontation is the fundamental difference in the approach of the same market, one focusing on the customer experience and the other on respecting competitors.

The focus on Amazon can be justified by the problems observed already in the U.S. The problem can be trace to the inability of the U.S in enforcing antitrust laws to modern companies (Amazon and much more), the approach and failure to deal with the lack of applicability of these types of laws to tech companies.

The problem begins with the difficulty in defining all the things a tech company controls, but this is just the beginning. Antitrust laws where created to breakup companies, such as standard oil and the railroads, making them impossible to apply, where the central idea is the consumer welfare, to companies such as Amazon. Why? Because the whole approach of the business module of Amazon is different to the one we typically deal with. As Jeff Bezos (owner of the company) puts it, “we are famously unprofitable company(3). Amazon undercuts its competitors and dominates entire markets, and it is allowed because it hasn’t broken the main rule of Antitrust, the consumer welfare. As a business, it delays company satisfaction to prioritise costumer instant gratification. And it is a problem because Amazon has always been willing to lose money and keep prices low to gain in market share (this can be used as a justification for the European Commission to open discussions related to Amazon’s business plan, specifically dealing with the implication of TFUE, articles 101 and 102)(4). So, how can we expect a law from 1890 to regulate this problem? We cannot. There is always a cost to bigness even if it is not passed on to the consumer.

Now in the EU, the approach is slightly different. Because the focus is not in consumer welfare but rather a fair competition protection.

“Over the years, Amazon’s dual role as both marketplace sales representative and online retailer (“hybrid platform”) has raised concerns both in the US and in Europe.”(5)

A formal request for information was sent by the European Commission to investigate the anticompetitive conduct by Amazon, in September of 2018. The focus being on “Amazon Marketplace” and Amazon’s own online retail operations.

So, what makes Amazon distinct from any other company is the fact that the relevant market is online retail, where it is dominant despite the fact of not being a monopoly retailer overall. This, in Europe, is define by being unfair to competing companies. And the idea of beating adversary companies by abusing market power is the main focus in accusations of antitrust law violations. Of course, that this can sometimes lead to a backseat of the consumer welfare, because of the prioritisation of the best interest of competitors.

If the information requested by the European Commission confirms the suspicions raised, the implication can mean the direct violation of articles 101 and 102 of the Treaty on the Functioning of the European Union (article 101 covers the exchange of competitively sensitive information between rivals, article 102 prohibits abuse of dominant market position), and consequently a fine can be imposed. The Amazon’s position of online retailer and of merchant platform is the main concern of the Commission, and because of it, the European Commission has left open under which of the articles is pursuing the case.

This “dual position allows Amazon to adjust its own offerings on the retail level to the success or failure of other companies selling identical or comparable goods via the Amazon Marketplace.”(6)

Possibly, if confirmed by the Commission, Amazon may well be accused to have collected and used data from its merchant customers to extend its position into online retail markets (possible only because of the dependency of those merchants on using Amazon Marketplace to reach Shoppers).

Too often, large corporations seemed to trample smaller ones underfoot by operating under completely different rules. In the words of Margrethe Vestager (EU competition chief) the base principle is fairness. On the subject, she points out

Technology has given us access that we did not have before. The data give us a new understanding of the world. But when there is only one company that has access to this amount of data it becomes difficult to have companies competing with them.”, “We have to think that we have rules, and these rules have to be followed to have a safe space”,she said “Innovation makes our lives better, but we do not have to ask people to give up values such as democracy and independence to have innovation”.

Clearly, antitrust laws are the most significant differences in business law between the U.S. and the EU. However, diminishing the gap in both laws and enforcement is undoubtedly the goal, but if that will be successful or not will depend on the way the EU tackles the Amazon problem. If the European Commission investigation proves to be successful, we could emphasize on the necessity for the US antitrust law to evolve. In fact, this case could indicate the proper tactic which would be to focus on the competitor welfare, as a fair competition defence. The Amazon case can determine once and for all that “the established principles of Article 101 and 102 TFEU suffice to address this issue”(7).

The possible solution, if successful, can become the evidence needed to change the approach of the U.S related to corporate competition regulation. Proving perhaps, that an approach closer to a fair competition, not forgetting consumer welfare, may be the balance missing to a successful antitrust law in both the U.S and E.U.

(1). Margrethe Vestager, 'Web Summit, Lisbon, 7 November 2017: Clearing The Path For Innovation - European Commission' (European Commission, 2019) <https://ec.europa.eu/commission/commissioners/2014-2019/vestager/announcements/clearing-path-innovation_en> accessed 6th February 2019

(2). Ec.europa.eu, 2019 <http://ec.europa.eu/competition/mergers/cases/decisions/m8228_493_3.pdf> accessed 6th February 2019

(3). However, his personal wealth proves that capitalism and markets do not rely on the immediate profitability nowadays, bizarre for a world that requires a permanent acceleration of its economy and growth to ensure its sustainability.

(4). Further explained in the last paragraphs.

(5). Dr. Thomas Höppner and Philipp Westerhoff, 'The EU’S Competition Investigation Into Amazon’S Marketplace | Hausfeld' (Hausfeld.com, 2019) <https://www.hausfeld.com/news-press/the-eus-competition-investigation-into-amazons-marketplace> accessed 6th February 2019

(6). Ibidem

(7). Ibidem

Other sources used:

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