German Regulators Open Antitrust Investigation On Amazon

German Regulators Open Antitrust Investigation On Amazon
November 30, 2018

 

The antitrust authority of Germany has launched an inquiry into whether the US e-commerce giant Amazon.com, Inc. (NASDAQ: AMZN) takes advantage of its market dominance in its associations with third-party retailers using its platform as a marketplace. The decision comes at a time when the European regulators take a hard line on the US technology giants such as Google and Facebook. Germany is the second major market for Amazon.

 

European Commission looking into Amazon’s dual role (retailer and marketplace)

On Thursday, the Federal Cartel Office stated that many traders have recently filed grievances about Amazon’s business practices. Amazon’s marketplace permits third-party sellers to offer their products alongside Amazon’s own goods through its online platform. Shoppers will see merchandise listed in selected postings and have the choice to click a link to take note of prices at other sellers in the Amazon market. Pricing can be better in some cases, and worse in others. Amazon has promoted its marketplace as a breakthrough opportunity for small retailers to connect with hundreds of millions of clients. Amazon also says its marketplace assisted third-party vendors to sell more than EUR 2.1 billion ($ 2.4 billion) in 2017.

Through a press release, the Bundeskartellamt (Federal Cartel Office) said that it had “initiated an abuse proceeding” concerning the online giant’s handling of third-party vendors on the Amazon.de website. German antitrust officials have initiated the investigation to determine whether Amazon’s online marketplace prevents reasonable competition in the country.

Commenting on the investigation, Bundeskartellamt President Andreas Mundt 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.”

Mundt further said: “Amazon acts as a kind of ‘gatekeeper’ to customers. The double role as biggest trader and biggest marketplace means there is a potential to impede other traders on the platform.”

The statement added a list of practices that might be considered abusive practice by Amazon, including detaining payments, blocking vendor accounts without clarification, and use of sellers’ data. The office elaborated that it would also closely scrutinize if Amazon’s supremacy is ruining other online retailers and if sellers have turned out to be dependent on Amazon to market their products.

In a separate investigation, the Competition Commission of the European Union is scrutinizing into the use of data by Amazon. The European Commission also examines the dual function of Amazon and inquires retailers and manufacturers whether Amazon’s sales of its own brand products have damaged their business. Margrethe Vestager, who heads the commission, focuses on concerns that Amazon uses product data of successful rival sellers and then markets cheaper copycats.

The German cartel office said that while it would continue to focus on the impact of Amazon on German sellers, the two investigations “complement one another.”

An Amazon spokesperson has stated that the company is “cooperating fully with the Bundeskartellamt and continue working hard to support small and medium-sized businesses.”

Amazon also stated that “tens of thousands” of small and medium-sized German companies use Amazon.de and export more than 70% of their products to customers worldwide through the platform.

The cartel office said that the probe seeks to deal with any violations of German competition or anti-trust law, but does not foresee significant fines unless they are considered to be part of a final decision requiring a company to stop abusive market practices. Amazon has faced a long-term battle with the country’s unions over wages and conditions for logistics workers, who last week went on another round of strikes. Investigators are also planning to contact retailers using the Amazon platform and study their contracts. The market may react negatively to the news in the days to come.

Technically, the stock has crossed below its 50-day moving average. Furthermore, the MACD histogram has a negative reading. As a result, we can expect the stock to decline in the coming days.

amz - technical analysis - 30th November 2018

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Richard W

Richard W

Richard is the guy who know everything there is about the financial industry, working in a top firm for over 15 years, he will give the lowdown on some of the biggest companies in the world


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