Explainer: What is the EU's antitrust investigation into Amazon about?

LONDON (Reuters) - The European Commission has 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.

It wants to know whether Amazon’s dual role as both a marketplace hosting third-party merchants and as a powerful retailer in its own right on the same platform, often selling the same products, gives it an unfair competitive advantage.

The probe is examining two main areas: the standard agreements between Amazon and mar ketplace sellers, and the role of data in the selection of the winners of Amazon’s so-called “Buy Box”, a prized button that drives four-fifths of sales.

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The Commission believes Amazon may be in breach of Article 101 of the Treaty on the Functioning of the European Union, which prohibits agreements that prevent, restrict or distort competition within the EU single market, or Article 102, which prohibits the abuse of a dominant position.

Below is an explanation of the issues.

WHAT IS AMAZON’S STANDARD AGREEMENT?

Amazon has a standard agreement with third-party retailers who use its platform to sell their products, which gives it wide-ranging access to those merchants’ data, technology and product information.

The concern is that Amazon could use that information to hone its own competitive pricing strategy, gain information about consumers to make its own marketing more effective, and give its own goods an advantage in search results.

“You’re controlling the whole interface while you’re trying to compete within it,” says Joseph Evans, senior research analyst at London-based media research firm Enders Analysis.

The Amazon standard agreement stipulates: “You grant us a royalty-free, non-exclusive, worldwide, perpetual, irrevocable right and licence to use, reproduce, perform, display (public communication), distribute, adapt, modify, re-format, create and exploit derivative works of, and otherwise commercially or non-commercially exploit in any manner, any and all of Your Materials” - with some exclusions for trademarks.

“Materials” are defined as “all Technology, Your Trademarks, Content, Your Product information, data, materials, and other items or information provided or made available by you or your affiliates to Amazon or its affiliates.”

WHAT IS AMAZON’S BUY BOX?

The Buy Box is the clickable box that appears on the right of a product-detail page on Amazon saying “Buy now” or “Add to basket”. It is estimated that more than four in five of all Amazon sales happen through this box.

Every product has just one Buy Box, for which multiple sellers offering the same product, including Amazon, must compete. It may rotate between sellers. Sellers without the box appear far less prominently.

Amazon, which does not disclose what share of the Buy Box it wins, says this competition is aimed at providing the best customer experience.

It uses a proprietary algorithm to determine the winner using criteria including price and customer reviews.

Some merchants fear this can be manipulated to show biased results, echoing a previous EU case in which Google was found to have given illegal advantage in search results to its own comparison shopping service.

Advisers to Amazon merchants say fulfilment, including ability to fulfil Amazon’s super-fast Prime delivery service, is an increasingly important factor in winning the Buy Box.

(Reporting by Georgina Prodhan; Additional reporting by Foo Yun Chee in Brussels; Editing by Edmund Blair)

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