Why the EU’s New Amazon Antitrust Investigation Could Get the Retailer Into a Heap of Trouble

September 20, 2018, 10:19 AM UTC

Amazon has attracted the scrutiny of the European Union’s antitrust regulators yet again, this time over the way it runs its core e-commerce business.

If the EU’s preliminary investigations morph into a full-blown probe, Amazon (AMZN) could be in a world of trouble. Here’s what you need to know.

What’s the problem?

Amazon provides a platform through which it sells products itself, while also inviting third-party merchants to sell their products.

EU Competition Commissioner Margrethe Vestager, whose picture must surely be pinned onto dartboards across Silicon Valley by this point, said Wednesday that her department has launched an initial investigation into whether Amazon is using the data it holds on third-party merchant activity to unfairly give advantage to its own e-commerce business.

This is a very early-stage investigation; it isn’t even a formal probe yet. At this point, Vestager’s team has merely sent out questionnaires to merchants that use Amazon’s platform, in order to gauge their experiences.

“The question here is about the data,” she said. “Do you then also use this data to do your own calculations, as to what is the new big thing, what is it that people want, what kind of offers do they like to receive, what makes them buy things?”

Has Amazon had run-ins with Vestager before?

This is certainly not Amazon’s first rodeo with the Danish liberal.

Last year, she forced the company to change its e-book contracts with publishers so that the publishers would no longer have to give it terms that are as good as those they offer rival e-book platforms.

Then, later in 2017, Vestager ordered Luxembourg to recover $294 million in back-taxes from Amazon, after her department found the country had effectively given the firm illegal state aid in the form of a sweetheart tax deal. To be clear, that was a decision against Luxembourg—but Amazon was the loser.

So Amazon’s in trouble?

Could be. There are a couple things worth noting about Vestager.

The first is that she is a fastidious layer of groundwork. As demonstrated in her achingly slow-moving antitrust cases against Google (GOOGL), which have resulted in separate fines of $2.7 billion (over comparison shopping) and $5 billion (over Android,) Vestager takes her time. This is always a risky trade-off in the antitrust world—yes, it makes it more likely that the resulting fine survives an appeal, but it allows guilty companies to continue distorting the market while their cases drag on.

The second thing is that, appropriately for a regulator who regularly takes on Big Tech, Vestager is innovative in the way she approaches her work. This has been demonstrated in the way she folds tax avoidance into her competition remit (hi, Apple) and it’s about to be demonstrated again in the new Amazon investigation.

Vestager has been tutting for a while about how market-dominating giants use their troves of “big data” to shut out competition, and now it looks like she’s pursuing that line of inquiry. It’s not just Amazon that should be sweating at the thought of this.

One more thing to note is that Vestager may not stay on as the EU’s competition enforcer for much longer. The Juncker Commission will draw to a close in just over a year’s time, and the next Commission president may want someone else to fill that seat—although Vestager has expressed a willingness to stay on in order to secure her legacy.

Fun fact, though: Vestager herself is widely expected to be the Liberal candidate for the Commission presidency.

Amazon has antitrust worries elsewhere too, right?

Yup, particularly back home in the U.S., where President Donald Trump has a vendetta against Amazon CEO Jeff Bezos, who is also the owner of the Trump-critical Washington Post.

Trump isn’t the only one to be highlighting Amazon’s potentially abusive market practices in the U.S. The legal scholar Lina Khan has gained a lot of attention for her analysis of the problem, which boils down to predatory pricing and Amazon’s vertical integration of business lines. But the president has waded into the matter with the seemingly clear motive of riling Bezos—a tactic that could well derail the debate.

So if Vestager’s new probe does turn formal, and the Commission does end up deciding against Amazon and hitting it with a fine and a demand that it change the way it does business—and if Trump is still president by that probably distant point—the EU can at least take solace that it’s unlikely to see Trump lambast it for taking advantage of the U.S., as he did after Google’s most recent fine.

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