On Tuesday night, the European Commission, which has pursued multiple antitrust cases against Alphabet (GOOGL) in recent years, announced it's probing whether Amazon violated antitrust law by using data about its marketplace sellers to strengthen its direct e-commerce business.
The announcement comes a month after it was reported that the U.S. FTC is probing the ties between Amazon's direct e-commerce and marketplace businesses. The FTC was also said to be looking into Amazon's charging of higher fulfillment service fees for orders placed on third-party platforms (for example, eBay (EBAY) or Etsy (ETSY) ), and the bundling of various services with Amazon Prime.
Two areas of interest for the EC: How Amazon's direct e-commerce business analyzes and uses the seller data it has access to thanks to the standard agreements that are inked between Amazon and sellers, and Amazon's potential use of seller data to become the default purchase option for the "Buy Box" on a given product page. The Buy Box, it should be noted, is something that marketplace sellers already put a lot of effort into getting top placement for.
Though Europe accounts for a large portion of Amazon's international sales -- the company has especially large operations in the U.K. and Germany -- Amazon's shares are down just 0.5% to $2000.64 as of the time of this article.
Possibly helping Amazon's shares: The company's disclosure that this year's 48-hour Prime Day event saw over 175 million items sold, up from over 100 million items during last year's 36-hour event. One other possible reason why markets are taking news of the antitrust probe in stride: Amazon now gets close to 60% of its physical gross merchandise volume (GMV) from marketplace sales rather than direct sales, and (as Jeff Bezos noted in his latest annual letter) this figure has been steadily rising.
And as a look at recent Amazon earnings reports makes clear, the company's bottom line hasn't suffered much from this trend. Indeed, between the high-margin revenue it gets from commissions and potentially fulfillment services and ads, there are likely many cases in which a marketplace sale for a particular item is more profitable for Amazon than directly selling the item.
Moreover, Amazon might be able to address the EC's concerns by simply making the data that its direct e-commerce business has access to available to marketplace sellers. Or, if Amazon is worried about rivals platforms getting hold of that data, it could choose not to share it with its direct operations. In either scenario, Amazon would still have several ways to profit from marketplace sales, and its direct business could still lean on its economies of scale and negotiating leverage with suppliers as competitive strengths.
As it is, Amazon, ever sensitive to shifts in public and regulatory attitudes, has already been taking steps to address criticism about its sales and marketplace policies. Earlier this year, the company began giving U.S. marketplace sellers the right to sell items at lower prices on other websites if they wish (European sellers have long had this right), and -- though one could argue that Amazon's private-label business isn't too different from that of rivals such as Walmart (WMT) and Target (TGT) -- it pared back the promotion of its many private-label brands on its website.
Unless enthusiasm grows among politicians and regulators for more drastic changes to Amazon's operations -- like, say, a full breakup of its direct e-commerce and marketplace businesses, or an end to Prime's bundling of digital content services -- there are reasons to be cautiously optimistic that the company won't be badly stung by the regulatory probes it's currently facing.