"Amazon faces EU inquiry over treatment of small retailers"

" The European Union has launched a formal investigation into Amazon, opening a new front against US tech giants.

Announcing the decision, the European commissioner for competition, Margrethe Vestager, said she wanted to take “a very close look” at whether Amazon’s business practices broke EU anti-trust rules."

" The latest investigation will assess the agreements between Amazon and the thousands of independent retailers that sell goods on its site. After a preliminary investigation launched last year, the commission said Amazon appeared to use “competitively sensitive information” from those independent retailers.

The formal investigation, launched on Wednesday, will study how the use of this data affects competition, with a focus on Amazon’s “buy box”, which allows customers to add items from a specific retailer directly into their shopping carts." From: The Guardian

Long expected, now officially announced. Thoughts?

I was trained as an industrial economist. For my discipline of origin, antitrust legislation and its application is the weapon of choice, because it studies large corporations and large corporation have an in-built incentive to collude (“competition is for losers”). Of course, antitrust became very difficult to do in recent decades, because most companies worth regulating transcend jurisdictions. I love the example of Goldman Sachs in the interactive visualization by OpenCorporates. Play with it, it’s sobering. As a result of this and other phenomena, hardline antitrust decisions have all but vanished in America. No company was forced to break up after AT&T… in 1984.

I have long believed that the EU finds itself in a privileged position, because it has stumbled across a way to regulate companies that are not in its jurisdiction. It is based on market access: “if you want access to 500 million relatively affluent people, you have to play by our rules”. Some past commissioners, like Monti and Vestager, were able to regulate American companies in the past. This is, IMHO, one of the strongest card that Europe possesses.

There have recently been calls to come down hard on some of the tech giants, as in “break them up”, not just fine them (one, two). The antitrust rationale is clear: their position is no longer contendible. Textbooks, in these cases, recommend breakup or a tightly regulated monopoly, possibly nationalized. What would happen if the EU told Facebook that it has to break up or stay out of the European market? Either way, it would be competition-enhancing: if it did break up, we would have two or three companies instead of one. If it did not, we would have spectacular growth of alternative services based on their access to a market where Facebook itself cannot operate.

This might seem extreme, but, I repeat, it’s actually industrial organization 101, and I find it worth considering.

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