Business

Amazon Under Government Scrutiny Again, But Now It's Amazon.de

Germany announced on November 29 that Amazon is under investigation for “abuse” in its regional drive for e-commerce market share.

Amazon's app as it boots up on a smartphone. Photo: Photo by Christian Wiediger on Unsplash.com, CC0

it has become increasingly dominant in almost every aspect of the e-commerce industry, Amazon.com has been the subject of lawsuits regarding its previously unfair advantage of not having to charge sales tax, unreasonably lower cost shipping rates through the U.S. postal service, and leveraging of Federal purchase rules which have given Amazon priority access to over $53 billion in U.S. government purchases for everything from office furniture to routine computer purchases.

All that happened within the confines of United States borders. This time the government that’s investigating Amazon for abusive practices is Germany.

The investigation the German government launched Thursday against Amazon.de, Amazon’s German e-commerce portal, is being conducted via the Bundeskartellamt. That’s Germany’s agency responsible for competition oversight.

According to that Germany agency, what triggered the investigation were “numerous complaints” from third-party sellers. The question isn’t just about Amazon.de being big and in many ways a virtual monopoly as a seller. It is also about Amazon’s steps to block competition from those third-party sellers.

In a statement about the investigation, Andreas Mundt, President of the Bundeskartellamt, said the problem is that “[Amazon’s] double role as the largest retailer and largest marketplace has the potential to hinder other sellers on its platform”.

The problems cited against Amazon.de is a long one, apparently. The competition agency is looking into delayed or withheld payments to suppliers, blocked accounts, the product rating system and even shipping conditions at the company.

Amazon is also under fire in Europe from the European Commission as well. They started their own digging into Amazon’s European business practices in September 2018.

The German justice department, which would likely work hand-in-glove with the competition agency in studying Amazon’s practices, gave strong support for the decision to look more deeply at Amazon. As German Justice Minister Katarina Barley of the center-left Social Democrats (SPD) said in a recent interview, “The large internet platforms not only shape our everyday lives, they have also gained significant market power. They must not abuse this dominant position against small traders… And if necessary, the appropriate measures must be taken.”

This investigation may be centered in Germany and even on top of an even bigger one in the European Commission, but Amazon is likely soon to see even more serious anti-trust questions raised over its development of its own online brands. In just the last few years, Amazon has launched a total of over 70 of its own carefully-crafted brands while also buying its own high-end grocery store chain, Whole Foods.

The internet retailer’s private brands are for the most part offered with little mention of that Amazon is the company making the products (or having them made for them). They were created using the ultimate best possible marketing input, the information from its existing customers as to what matters most to them. Many are recurring buys, the kind of items many of us buy again and again, bringing the purchasers back to the website and the well-known virtual walls of the retailer’s ecosystem. Amazon also can suggest other products to those same customers, again using leverage and market power no competitor of Amazon’s private-branded products could possibly muster.

Those private brands began popping up on Amazon going back to 2016, when it launched two clothing lines, one for women called Lark & Ro and one for children called Scout and Ro. It has since added over 60 other brands in the clothing, shoes, and jewelry sector (including multiple denim lines), two grocery lines, three Health & Household areas (including laundry detergent and similar items), and three Home & Kitchen product categories. In all of those, only Amazon Basics (a brand covering ‘everyday products” ranging from pots and pans to computer cables to towels and bedding), Amazon Essentials (with the tag line “Every Day Clothing Made Better”), and Amazon Elements (focusing to a large extent on clothing items, from underwear to shirts, blouses, pants, skirts, and jackets) carry the Amazon brand.

As the Amazon.de investigators made clear, Amazon’s ability to favor brands such as their owns over other others, combined with their major e-commerce market share, is making them an even bigger target than ever in the past. With the European Commission also looking into the same matters, regulators could force Amazon to be the second major internet company to have to ‘unbundle’ some of its product offerings from the e-commerce ecosystem.

The first internet company forced to do something like that was Google, which earlier this year agreed to a settlement under which it could not force smartphone manufacturers in Europe to bundle Google’s own apps along with the Android Operating System (OS).

Amazon’s German operations headquarters in Munich said about the German investigation that it will “cooperate fully with the Bundeskartellamt and [will] continue to work to help small- and medium-sized businesses grow.”

It is perhaps telling that Amazon didn’t say anything in its statement about helping large businesses grow.