Amazon Marketplace To Be Investigated By The EU

 

The roaring success of the Amazon machine has met with plenty of vilification, but so far, seemingly, nothing has stuck. From accusations of crushing brick and mortar retailers to a botched establishment of new headquarters in New York, Amazon has stared down critics.

 

Now, however, it appears all is not well inside Amazon’s own house, with independent sellers on the platform accusing the company of unfair practices.

 

The accusations range from treating sellers unfairly to outright spying on them. What is more, regulatory bodies such as the European Commission are starting to notice, and they are moving in to help.

 

 

 

For many years, independent sellers on Amazon’s marketplace have been raising the hue and cry. Numerous postings on SellerCentral, a forum dedicated to sharing tips among independent Amazon sellers, reveal deep seated frustration at the way the platform works.

 

Sellers have mentioned feeling like little David fighting great Goliath. 

 

They share stories of being banned or having accounts blocked, seemingly arbitrarily, and not having a say in how Amazon runs the platform.

 

 

 

The big accusation against Amazon that has finally elicited involvement from regulators is that of spying on sellers.

 

As revealed by the BBC, the European Commission has now decided to investigate Amazon’s handling of sensitive third party seller data. The preliminary investigation will probe whether Amazon has been spying on sellers to gain a competitive edge for its own products.

 

Antitrust commissioner Margrethe Vestager is leading the investigation and has indicated she would take a “very close look” at Amazon’s business practices.

 

 

 

Amazon started out as a regular retailer using the power of the internet to make operations more efficient and scalable. However, it quickly saw the potential advantages of becoming a platform. 

 

What started as a good commercial move to broaden product availability on the platform may have opened the door to anti-competitive moves. 

 

Amazon’s business model might be placing Amazon at an unfair advantage relative to the independent sellers using the platform.

 

 

 

According to Strategy Business, the independent seller business really took off in Amazon’s early years. By 2002, independent sellers already contributed 20% of Amazon’s sales in North America. This figure went up to 35% in 2010.

 

In recent years, the share of sales attributed to third party sellers has grown dramatically. For 2018, the figure was 58%, with CEO Jeff Bezos noting that third party sellers were performing much better than Amazon’s own products.

 

Amazon, however, might not be happy with letting sellers win on its platform. The question now is whether the company has been using underhanded tactics in an effort to gain the upper hand.

 

 

 

Sellers have noted that the Amazon strategy has been seemingly to crush their businesses all along. According to MDM, sellers report aggressive competition from Amazon already in areas such as commodity items and mainstream categories.

 

The subtle undercurrent here is that Amazon is sitting on all the sellers’ data and knows what sells well. As a result, the company is well-positioned to take advantage of all this data and muscle sellers out of profitable product niches on its own platform. 

 

Sellers have accused Amazon of going as far as creating cheap knock offs of their best-selling products then grabbing market share with these “me too” products.

 

 

 

Amazon’s latest controversy underscores just how decisive data has become for deciding winners and losers in our digital economy.This has happened in a time when data, and big companies’ handling of it, has become a touchy topic. 

 

It’s not just Amazon that’s been accused of gaining an unfair advantage from data malpractices. Others, especially comparable big tech players, have been noted for gaining commercial advantages from intrusive data collection.

 

 

 

For long, one of the new tech aristocracy’s most private leaders, Mark Zuckerberg, managed to stay largely out of the spotlight. That all changed, though, when news broke of the Cambridge Analytica scandal.

 

As reported by Wired, Facebook had been key in allowing a company called Cambridge Analytica to use data harvesting to swing the 2016 presidential election. 

 

Cambridge Analytica, according to the report, collected data on millions of US voters without their knowledge. The data then went towards building a “psychological warfare tool” to help elect Donald Trump.

 

On behalf of Facebook, Mark Zuckerberg was called to Washington to testify before the US Congress. Leaders in Washington demanded to know how Zuckerberg’s company had facilitated this incredible data harvesting operation. 

 

This scandal brought to light just how much data big companies were collecting from individuals. Such data, it quickly became evident, has tremendous power and can also be used in harmful ways.

 

 

  

Another leading tech company, Google, found itself in the center of a storm when the Associated Press broke the news about Google’s aggressive location data collection in Android. 

 

The AP found that Google’s services collected user location data on both Android and iOS phones even when users set their settings to stop data collection. An investigation by Princeton University computer scientists came to the same conclusion. 

 

The computer scientists opined that it was wrong to collect data when users expressly forbade the company from doing so.

 

 

 

News of Amazon’s alleged spying on sellers will come as a shock to some. However, other Amazon sellers have been raising concerns for years and were aware of the risks. 

 

Nonetheless, it's too early to say what the findings of the European Commission’s investigation will be. 

 

If you are an Amazon seller, you can educate yourself on what the risks of operating on the Amazon platform are. 

 

You should also be taking measures to safeguard your intellectual property and sensitive product data. 

 

 

Understand Where The Risks Can Come From

 

Independent sellers on Amazon’s platform need to realize they operate at the whims of Amazon. Plan the long term future of your business with that in mind.

 

According to industry commentator site, MyWifeQuitHerJob, these are all risk factors you need to be aware of: 

The site advises putting 20% of your resources into your own independent platform so as not to rely on Amazon for all your sales.

 

 

 

BuzzFeed News spoke to some Amazon sellers to hear their experiences of selling on the platform. Sellers complained that Amazon was in the habit of identifying their best-selling items, then producing its own for cheaper. 

 

These items would then outsell the original, higher-priced items. 

 

With the European Commission investigation under way, sellers now have a neutral third party to help shed light on these practices.

 

 

 

Large platform businesses like Amazon have become increasingly powerful in today’s business world. Due to the nature of the internet, those who control data can wield enormous power and influence. 

 

As scandals at Facebook and Google have highlighted, however, the platforms don’t always act in the end user’s best interests. An EU investigation into Amazon’s data practices will be timely for addressing the concerns of independent sellers using the platform.