The power of platforms
When a platform enjoys near monopoly status on a worldwide scale, it is inevitable that regulators will pay closer attention to it. Amazon, a selling platform with billions of visitors every day, is coming under increasing scrutiny.
Amazon provides a selling platform, and a very successful one too. Many small retailers have given up trying to run their own online shop tailored to their own product range and instead choose to have an Amazon store front in the world's largest online shopping mall.
There are certainly advantages for retailers using the Amazon platform, not least in product visibility. Rather like a conventional shopping centre, the concentration of shops generates plenty of passing traffic. Consumers looking for a product often start and end at Amazon rather than Google, they get to see similar products and prices from a range of suppliers, there is a well-defined basket and checkout process which small shops lacking the economies of scale couldn't hope to match, and there is a single point of payment from the consumer's perspective. A great many small businesses benefit from using the Amazon shopping platform.
However, the EU watchdog, Commissioner Margrethe Vestage, has acknowledged that the commission has begun an investigation into the retail giant's practices, to ensure they are fair and do not abuse a monopoly position.
The concern of the commission is that Amazon is not only a shopping platform, it is also a retailer of products and competes with the retailers using its platform. Amazon collects a massive amount of data on the products people are looking at and buying. It is perfectly reasonable for Amazon, as a platform provider, to use this data to improve the service it provides to retailers and customers. But as a retailer, it is the only retailer on the site which has access to all of its competitors' sales and customer data, and it is that conflict which is troubling regulators. What if it is using this data about other retailers' sales to work out what products are most in demand, to spot the emerging trends faster than individual retailers can do, so that it can better offer its own rival products, and undercut prices in real time, cherry picking trending products, and poaching customers, all on the basis of information it gets for free from its retailer clients?
Another concern is that when you search for a product, Amazon sometimes lists its own products above those of its retailer customers, often labelling it as "Best Buy", or "Amazon Recommends" or similar. Are these listings created with a fair and transparent algorithm, or does Amazon unfairly favour its own products in the listings?
Some Amazon products are listed as add-ons, low cost items which would be uneconomic to deliver individually, but can be added on to orders totalling in excess of £20. From the consumer's point of view, this is a great way to handle these items, but does it mean that other retailers' deliveries are, in effect, subsidising Amazon's delivery costs?
These are not accusations, only questions, the sorts of questions that should have clear and transparent answers. Amazon has done a lot to improve online shopping, but it has to provide a level playing field to be of enduring benefit to the economy as a whole, and it is that protection of the wider economy and ensuring fairness which is the job of governments.
27th September 2018
This article comes from the SKILLZONE email newsletter, published monthly since January 2008, and covering topics related to technology and the internet. All articles and artwork in the SKILLZONE newsletter are orignal content.