By clicking “Accept All Cookies”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. View our Privacy Policy for more information.

5 things you need to know about the Amazon antitrust probe

Do giant ecommerce platforms like Amazon pose a threat to consumers and the economy overall? Here is what you should know about the antitrust probe.
Victor Malachard
Last updated:
February 9, 2022

According to Bloomberg, a team of Federal Trade Commission investigators are interviewing small businesses that sell products on Amazon to understand whether or not Amazon is using its market power to stifle competition. Meanwhile, in July, the European Commission opened a formal antitrust investigation to assess whether Amazon's use of sensitive data from independent retailers who sell on its marketplace is in breach of EU competition rules.

In recent months, regulators have been looking ever more closely at the “big four”: Amazon, Facebook, Google, and Apple. Their concern is that the largest digital platforms are so dominant that competition is being restricted, potentially causing harm to consumers and the economy overall. 

Why Amazon?

Amazon attracts over 200 million unique visitors each month in the US. Amazon accounted for nearly 37% of US consumer spend online, according to Digital Commerce 360. More than half of all goods sold on Amazon are from retailers who pay a commission on each sale. 

The net result is that more than one-third of the Internet Retailer Top 500 currently sell on Amazon. And those retailers are increasingly paying to promote their products and brands using Amazon Advertising.

Amazon might be big, but what makes Amazon so interesting is their focus on transforming every element of retail into a single platform: becoming a retailer, marketplace, and logistics supplier all in one. They have even begun expanding into physical stores. Most interestingly, however, is that this doesn’t make Amazon revolutionary, it makes them a department store. And the success of these expansions are certainly up for question. But it’s exactly this kind of multi-leveled delivery system that has caught the eye of regulators.  

So, what do you need to know about this probe? Both sellers and consumers alike might be affected. Here, we are going to break down the key facts you need to be prepared. 


1. Antitrust is back in vogue

The original intent of antitrust laws was to place consumer welfare and the protection of competition at its center. The main focus was to prohibit cartels from fixing prices, and to avoid mergers that created monopolies.  

The first wave of antitrust laws in the US dates back to the early 20th century as a response to major monopolies that had emerged. John D. Rockefeller’s Standard Oil controlled as much as 90% of refined oil production. The company was broken up, leading to the emergence of companies that would eventually become Chevron,  Exxon and Mobil.

The 1980s saw major antitrust activity in the tech and telecommunications industries, mainly the breakup of AT&T, which was split into several regional “baby bells.”  Microsoft also had to face a major battle with regulators in the 90s and early 2000s, which ended with an order to break up the company into two separate groups — but this never happened. As to reasons see Item 4.

Antitrust cases traditionally emphasized harm to consumers and this became the bell-weather for any antitrust action. Particularly in the US, consumer production has become the primary focus, whereas the EU is much more likely to take action based on anti-competitive practices. 

From a consumer-focused perspective, Amazon is a particularly interesting case. They have driven down prices for consumers and increased product choice. Antitrust regulators are now looking to find other ways to identify and restrain the company’s growing market power. The fact that many products offered by digital business are technically free has created a conundrum for regulators looking to apply old antitrust standards to the modern economy. Ultimately, how Amazon is handled may be a sign of things to come for the other digital giants in the future. 

Consumer focus

Commissioner Margrethe Vestager, in charge of competition policy, has said she will look closely at Amazon’s dual role as marketplace and retailer to assess its compliance with EU competition rules.

When providing a marketplace for independent sellers, Amazon collects data about the buyer and seller activity on its platform. Based on the Commission's preliminary fact-finding, it reckons Amazon is making use of competitively sensitive information — about marketplace sellers, their products and transactions on the marketplace.

Based on this, the Commission are going to investigate:

  1. Whether and how the use of accumulated marketplace seller data by Amazon as a retailer affects competition.
  2. The role of data in the selection of the winners of the “Buy Box” and the impact of Amazon's potential use of competitively sensitive marketplace seller information on that selection. 

An interesting side point about Amazon’s ‘retail’ future is that many of the Amazon private label product lines are struggling. Although a significant point of controversy, they only make up 1% of the company’s total profits. However, it’s unclear how regulators will process this information. 


2. Market domination is not necessarily antitrust

Antitrust enforcement is currently geared around consumers and the welfare of consumers. How do you attract a consumer? With lower prices, better quality, or being more innovative. 

It can be argued that such competition is not defined by a market share number, but whether other companies are free to enter the market. Ultimately, market entry is a key indicator of innovation.  Amazon succeeded because it provided a better service than anyone else, and it did so early. 

Antitrust laws do not protect competing businesses from aggressive competition. Competition is tough, and sometimes businesses fail. That’s the way it’s in competitive markets, and consumers benefit from that competition.

Amazon has not prevented others from entering the e-commerce market. For example, Alibaba has a 58.2% share of the market in China — and is a similar size to Amazon. Wish is an online e-commerce platform founded in 2010 and claimed to be the most downloaded shopping app worldwide, and claims to be the third-biggest e-commerce marketplace in the US.

It has always been Amazon’s argument that how you define the market affects how dominant you are perceived to be.  For example, the company claims to only have a 4% share of the total retail market.

So should Amazon be punished for its success?  Should competitors have acted when they had the chance — recognizing the “Tipping” potential of the market. 

Then there are other concerns. Amazon has the scope to offer other services, for example via Prime, because it makes profits on other activities, for example online advertising. By dismantling Amazon, there is the risk imposing high costs on consumers — being Big is in itself not an antitrust violation.

Uncompetitive practices?

Amazon has been accused in the US of “tying” its marketplace and logistics services together. Another perspective on this, however, is that FBA (Fulfillment-by-Amazon) is Amazon offering its own logistics-as-a-service to sellers -- improving their ability to compete, not diminishing it.  

The real question is whether Amazon is using its dominance in one market to give itself an advantage in another?

Most of the claims concerning anti-competitive behaviour and FBA come down to disproportionate representation of FBA product in the buy-box. Amazon argues this is simply a consequence of quality of service. They quote research indicating comparable options are approximately “50-80% more expensive” than Amazon services. Amazon is very clear in their stance that its logistics prices are competitive and its sellers aren’t penalized for using other options. 

Amazon also denies its search results favored items it delivers. It acknowledges that products offered by merchants using its logistics services tend to get more prominent listing, but states that this is not bias and rather than Amazon logistics “generally provides a better and more reliable experience for our customers than fulfillment through other means.” The key question in all of this is, how would the regulator prove this either way?


3. Antitrust is difficult to make stick

The history of Antitrust, especially in the last 50 years, has not seen a great many successes. It could be argued that the pace of technology used, and the business models supporting them has moved much faster than the ability of the legislation to keep up. IBM wasn’t broken up. Microsoft wasn’t broken up — and with the accelerating rate of change, it is hard to contemplate a 10-year legal battle to determine an antitrust case today.

Large fines seem to be the outcome of most antitrust investigations, coupled with the undertaking of the targeted company to change its operating model. If you are involved in the Amazon market in any way — this may present you with new opportunities. Microsoft benefited from the IBM investigation and there is a view that the “Big Four” benefited from the Microsoft investigation.


4. Concessions are usually made

The Federal Trade Commission investigation against Microsoft accused the company of using its desktop operating-system monopoly to win against its browser rival Netscape. 

A federal judge found Microsoft guilty of antitrust violations and ordered it split in two. The breakup order was reversed on appeal, and the case was quickly settled. Faced with the lengthy investigation, there is an opinion within Microsoft that it took its eye off the ball. The case changed the corporate culture and made Microsoft less aggressive towards its competitors. What seems to emerge from these antitrust investigations are unexpected consequences.

“There’s no doubt that the antitrust lawsuit was bad for Microsoft, and we would have been more focused on creating the phone operating system and so instead of using Android today you would be using Windows Mobile,” claimed Gates. “If it hadn’t been for the antitrust case... we were so close, I was just too distracted. I screwed that up because of the distraction.”


Amazon and Germany

According to a current complaint in the US: “The most intimidating stick in Amazon’s arsenal is the ability to suspend or threaten to suspend sellers.” In Germany, third-party sellers had complained that Amazon’s terms of service were unfair: a view that was upheld by the German Cartel Office.

However, the Cartel Office dropped its investigation after Amazon agreed to amend its Business Services Agreement. Among the changes in its new terms of service, Amazon agreed to comply with European rules governing liability towards its business partners, whereas earlier it had faced no such liability.

Amazon will now also give 30 days’ notice and a reason for removing a merchant from its platform. Previously, it could block a seller without warning or explanation. The changes apply not only to Germany but also to its marketplaces in Britain, France, Italy and Spain, as well as its other worldwide sites in America and Asia. 

Investigations in Europe also caused Amazon to drop ‘price parity’ or ‘most-favored nations’ (MFN) clauses in contracts with third-party European sellers. These prevent sellers from listing their products on other platforms (like eBay or Alibaba) at lower rates than Amazon. Earlier in 2019, Amazon voluntarily dropped these same practices in the US to get ahead of regulators.   

To keep antitrust at bay, we can expect to see more concessions such as this -- especially in the area of sharing data. Already Amazon is offering more of its transactional data to its third-party retailers and this would be an area where they could respond to make their service appear more “open”. Amazon would still have a massive advantage in its own intellectual property in the use of data science — but others could take advantage.


5.  Agile players can take advantage

Amazon will be an important e-commerce platform for the foreseeable future, so it’s important that e-commerce teams exploit the data that comes out of Amazon. To stave off antitrust investigations, it will want to be perceived as fairer to its sellers, as with the German example, by giving them more data, and access to third-party tools. Software is where the playing field can be leveled. Whether antitrust investigations succeed in the long run, it is through making sense of their Amazon customer data that sellers can compete and succeed, even with mega-companies such as Amazon.

Get these insights straight to your mailbox:

Unleash your amazon potential

Dynamic blueprints to help you sell smarter
Explore the guides

More on this topic:

Amazon Seller News: Selling & Advertising Changes in 2022 & 2023 predictions
Amazon Seller News: Selling & Advertising Changes in 2022 & 2023 predictions

A round-up of Amazon news during 2022- what's new, what's improved, and what it all means for you as an Amazon Seller going into 2023

Read more
Amazon Unboxed 2022: Our takeaways
Amazon Unboxed 2022: Our takeaways

Amazon Ads Unboxed Conference took place in New York last week. Here are my main takeaways from all of the exciting announcements across the event.

Read more
4 Things Nozzle Has To Offer
4 Things Nozzle Has To Offer

Find out how the 4 things Nozzle has to offer, from strategic partnerships through to self-service SaaS to help brands maximize performance on Amazon.

Read more