Will Amazon Be Busted Up? Amazon Hit by Antitrust Investigation
Sellers on the Amazon marketplace allege the company’s marketplace favors Amazon private label brands over independent sellers.
The largest internet company in the world, Amazon, is being investigated for monopoly power abuse in Germany. While Amazon has long cornered the market for online shopping, governments have been hesitant to challenge the retail giant’s power, until now.
Germany is Amazon’s second largest market after the US. Amazon marketplace users in Germany who sell products on the site have complained that the company uses its power to give its own product listings an unfair advantage. The complaints have sparked an investigation into the alleged abuse of its position by Germany’s antitrust agency.
According to Bundeskartellamt, or the Federal Cartel Office, Amazon may be involved in several unethical practices. These practices include blocking seller accounts with no explanation, misuse of seller information and withholding payments. In fact, the office received many complaints about the treatment of third-party sellers, the bureau said in a statement.
Andreas Mundt, the Federal Cartel Office president, said, “Because of the many complaints we have received we will examine whether Amazon is abusing its market position to the detriment of sellers active on its marketplace. We will scrutinize its terms of business and practices toward sellers.”
The German investigation comes as the European Union’s Competition Commission is already investigating Amazon’s use of data to the possible disadvantage of marketplace sellers.
Sellers Allege Amazon Favors its Own Private Label Brands
One company has taken Amazon to court over it’s alleged unfair marketplace practices. Ella Moss, a Los Angeles-based clothing company, sued Amazon for favoring Amazon’s own private label clothing line “Ella Moon” over Ella Moss products in algorithms and search results.
Ella Moss alleges that Amazon creates private label products that look like or are similarly named and priced as existing brands in an attempt to confuse costumers into buying Amazon’s private label products.
Amazon has approximately 100 private label brands with thousands of products. According to a New York Times report, “few of those are sold under the Amazon brand. Instead, they have been given a variety of anodyne, disposable names like Spotted Zebra (kids clothes), Good Brief (men’s underwear), Wag (dog food) and Rivet (home furnishings).”
In an example of Amazon’s success with private-label, after just three years Amazon’s private label battery brand outearned both Energizer and Duracell in online sales. As the New York Times report revealed the success of Amazon’s battery line may be due to its marketplace manipulation. If a user asks Amazon’s Alexa to buy batteries, users are only presented with one option – to buy AmazonBasics batteries.
“I think there is a potential monopolization case against Amazon,” said Chris Sagers, an antitrust professor at the Cleveland-Marshall College of Law in Ohio, to the New York Times.
“The Amazon marketing people are geniuses. They’re brilliant,” Mr. Sagers said. “But if they are getting massive penetration in the market and preventing customers from buying products from their competitors? Well, it’s like they’re writing the plaintiff’s complaint for them.”
How Did Amazon Get So Big?
Below is a timeline created by the Daily Mail of Amazon’s rise to a trillion-dollar company:
- 1994: Jeff Bezos incorporates what would become Amazon under the name Cadabra Inc. He later renamed the company under its current name. Bezos chose the name Amazon in reference to the Amazon River, the biggest river in the world, as he hoped Amazon would be the biggest bookstore in the world.
- 1995: Amazon opens up shop as a bookstore. The first book sold on Amazon was titled “Fluid Concepts and Creative Analogies: Computer Models of the Fundamental Mechanisms of Thought” by Douglas Hofstadter.
- 1997: Amazon goes public at $18 per share on the Nasdaq under the symbol AMZN.
- 1998: Bezos begins selling more than just books on Amazon. The firm opens up sales of music, movies, consumer electronics, video games, toys and more.
- 2000: The firm introduces its now-famous logo, which features a curved arrow leading from A to Z, with an arrow shaped like a smile. The logo is meant to suggest that Amazon sells every kind of product from A to Z.
- 2001: Amazon turns a profit for the first time ever, proving to investors that the firm’s business model could stick.
- 2002: The company launches Amazon Web Services (AWS) as a service for internet traffic data, but it would go on to grow into the firm’s cloud computing behemoth.
- 2006: Amazon rolls out Fulfillment by Amazon, its massive logistics unit that now threatens the likes of UPS and FedEx.
- 2007: Amazon releases the first Kindle e-reader in a move that was perceived as a disruption of the traditional publishing industry.
- 2012: Amazon doubles down on consumer hardware, launching the Amazon Fire HD tablet.
- 2014: Amazon launches the Fire phone, meant to be an iPhone competitor, which ends up flopping. The firm discontinued the device a year later.
- 2015: Amazon launches the original Echo speaker, a groundbreaking device, due to its speech recognition and AI capabilities.
- 2017: Amazon becomes the first streaming company to earn an Oscar nomination for the drama “Manchester By the Sea.” Later that year, Amazon announced it would purchase Whole Foods for $13.7 billion.