By Daniel Tortis
Amazon is a globally renowned company that is currently the 4th largest company in the world based on market capitalization. It currently operates on three continents and is trying to enter new national markets and industries as we speak. However, Amazon’s European division was slapped with an antitrust lawsuit, where it could face a fine of up to 28 billion USD. This equates to 10 percent of its annual worldwide revenue. This article will take a closer look as to why Amazon is receiving this fine, as well as what antitrust laws entail.
Antitrust laws are regulations that encourage competition for the benefit of customers by limiting the market power of any particular firm. This often involves ensuring that mergers and acquisitions don’t overly concentrate market power or form monopolies, as well as breaking up firms that have become monopolies.
Amazon has been accused of violating these laws by using its real-time data from companies and vendors that sell products on its platform in order to gain an unfair advantage over them. This data has helped them decide which products to launch and how they should market and price them. This hampers competition and essentially allows Amazon to monopolize certain industries.
A recent statement by the Federal Trade Commission says that ” the use of non-public marketplace seller data allows Amazon to avoid the normal risks of retail competition and to leverage its dominance in the market“.
The European Union antitrust council has been very busy lately looking to restrict the power of big tech companies and put an end to unfair business practices. Recently, Google was slapped with a 10 billion dollar fine and Apple has two ongoing investigations that could result in the same within the European Union.
The EU will also investigate another claim as to whether Amazon “might artificially favor its own retail offers and offers of marketplace sellers that use Amazon’s logistics and delivery services.”
Third-party sellers are a key part of Amazon’s marketplace and make up more than half of the company’s sales. The company makes the case that the use of these sellers is a success for small businesses. However, by using these tactics Amazon is essentially finding ways to improve its own sales, and the small businesses Amazon touts as integral lose out on profits and put at a disadvantage as a result.
Many new antitrust laws are being put in place in the U.S and Canada that are legislated in response to large tech companies who are using their vast resources to stymie competition.
It is essential that these government agencies promote fair and ethical business practices. These antitrust laws are put in place to create competition in the marketplace. Competition is what drives down prices for consumers and results in the greatest economic welfare for society. If small businesses are unable to form or succeed due to unfair practices by Amazon, this would be detrimental to the global economy and result in monopolies not seen since the likes of Standard Oil.
Photo by Christian Wiediger, Unsplash