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Antitrust Regulation Is a Major Threat to Amazon

By Stephen Lovely - Aug 19, 2019 at 10:31PM

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Regulators are starting to pay more attention to big tech.

Amazon (AMZN 0.19%) is a very big and very valuable company. Once a humble online bookstore, it now has its fingers in everything from cloud computing to groceries. Amazon's sprawling holdings have given it some powerful synergies, and its massive online retail platform has given it the inside track with millions of customers. But all of these advantages could also be liabilities should they draw regulatory scrutiny, which they are.

In Europe and the United States, big tech generally and Amazon in particular have become popular targets for regulators, leaders, and campaigning politicians. From vague threats to concrete accusations, Amazon is suddenly facing a whole lot of antitrust scrutiny.

A miniature shopping cart sits on a laptop keyboard.

Image source: Getty Images.

Amazon's dual role

Amazon's trouble overseas comes courtesy of a formal EU investigation opened earlier this month. EU regulators are concerned about Amazon's dual role in online retail as both a marketplace and, in many cases, the seller..

The inquiry is focused on how Amazon uses (or doesn't use) customer data. Independent merchants who sell products on Amazon necessarily give Amazon a lot of information. Amazon can see, for instance, what prices merchants are setting and how popular various products are. And Amazon can decide which products are sold via the "buy box," i.e., are linked to the "add to cart" button on each product page. A box labeled "Other Sellers on Amazon" sits below the button and allows users to see who else sells the product.

Amazon could use all the data it has access to to hurt third-party sellers by denying them buy buttons and pricing its own products below what the other sellers are offering. 

Amazon recently cut a deal with German regulators to end a separate inquiry.

Stateside worries for big tech

Back in Amazon's home country, the United States Justice Department is conducting an antitrust probe targeting big tech. The DOJ hasn't said which companies it's looking at, but the news triggered a plunge in stock prices for Apple, Facebook, Alphabet, and Amazon.

And while the DOJ didn't say Amazon's name, the company did get mentioned over at the Treasury Department. Treasury Secretary Steven Mnuchin went on the record to praise the DOJ's inquiry and made specific mention of Amazon, saying in an interview with CNBC that Amazon had "destroyed the retail industry across the United States." There's "no question," Mnuchin continued, that Amazon has "limited competition." Mnuchin's comments seem to confirm the expectation that Amazon is among the companies the DOJ is looking at and give a pretty clear indication that the government is not any more enamored of Amazon than it is of other tech giants.

Candidates weigh in

Some 2020 presidential candidates have been relatively quick to attack specific companies on the campaign trail. Among them is Elizabeth Warren, who has proposed breaking up Amazon and other tech giants. Bernie Sanders has publicly toyed with the idea, too. Even apparent front-runner Joe Biden, more centrist than Warren or Sanders, has said that he is open to the idea of breaking up large tech companies. Other Democrats, including Amy Klobuchar and Tulsi Gabbard, have suggested serious antitrust action against Amazon, too. (Nearly all Democratic candidates have given some lip service to reining in big tech companies, but the ones listed above have been most strident and most specific.)

Amazon's effect on small businesses and retailers -- and the visible changes that effect has wrought on American towns -- make it an ideal company to rile up crowds with. The fact that Amazon is also under fire for poor working conditions only makes it more appealing for pro-labor candidates. All this indicates that even if there is a new administration in the White House soon, that won't mean smooth sailing for Amazon.

Attack on Amazon

It is far from a forgone conclusion that Amazon will meet with a fate as severe as being broken up. But it is very clear that Amazon is now a popular target in regulatory circles and on the campaign trail. No big tech company should be particularly eager to see this new regulatory mood, but Amazon is arguably the most ripe for regulatory crackdown. Amazon's dual role as vendor and marketplace manager is a sticky one, and the fact that it is a favorite punching bag of political figures from across the spectrum does not bode well.

Even if Amazon can parry individual regulatory attacks, the diversity of its detractors suggest that the company is in for a bumpy ride in the months and years to come.

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