EU Files Antitrust Charges Against Amazon Over Data Use

Interviewer 1: We’re talking to Ben Barry from Martin, Harding & Mazzotti. And Ben, I was reading an article entitled “EU Files Antitrust Charges Against Amazon Over Use of Data.” I’ve been in the marketing business for over 25 years. I know quite a bit about how data plays in marketing and especially with companies like these. But let me start off with this particular question, who owns your data? Is it the company you signed up for or is it you yourself?

Ben: Generally, it is the company through which you are subscribing, for example, Amazon Prime subscriber. And so, the data when I signed up for that program, there is fine language that indicates that they would at the very minimum use my data. And therefore, if I’m granting them the use of the data, it may still technically in some way belong to me, but it’s out there being used in whatever way they want to use it.

It’s like if you let me borrow your car and I say, “Look, I’m going to borrow your car, but I’m going to be able to use it in whatever way I want,” and you say, “Okay. Yeah, it’s still my car, but go ahead and do whatever you want with it.” And to some extent, I think that’s the analogy here is that companies can use data freely basically as long as it’s not illegal use once you subscribe to their services, and that’s true with a lot of different companies, Amazon included.

Interviewer 2: So, Ben, the European Union is basically making the charge with these antitrust charges against Amazon, that they’re abusing their dominance in online shopping and that they’re putting other people at a competitive disadvantage, other businesses.

Ben: That’s correct. That’s correct.

Interviewer 1: And where does the U.S. come down on this? Well, the European Union is doing this, but what does our country think about it?

Ben: Relatively the same, in fact, the judiciary, the U.S., I think it was the judiciary commission or…I’m not sure what body in Congress but there was a study done and actually what we will be seeing, I think is additional litigation that is brought in the United States that follows similar arguments as the arguments that are laid out in the EU complaint. Ultimately, what the EU is saying is look, Amazon, you are a marketplace and you’re a retailer. You’re not only the place that people come to sell their goods, but you are also a goods provider.

And the EU complaint basically says Amazon is using the data that they are able to compile by being the marketplace, the parking lot where people are selling their goods, they’re obtaining all of the data from the individual stalls, using that data to then put up their own stall and in doing that, they are gaining a competitive advantage. That’s an oversimplified version of what’s going on here. But the EU is saying, you cannot do two things at the same time, the conflict of interest there of being the place where people sell their goods and also a goods retailer, you can’t use their data in your algorithm to then make your marketplace, your stall, where you’re selling the goods, the most competitive place to sell.

You can’t outprice everybody else while you’re using their data to figure out what your prices are going to be. So, Amazon is removing all of the risks that the market has. In a way, they are changing sort of the ecosystem is the term that was used in a couple of the news articles I’ve read about this subject. But it’s very interesting, it’s very nuanced, and I think that we’re going to see litigation just like that in the United States. And, in fact, there was recently a complaint lodged against Google that really has a lot of the same themes.

We’re talking about legislators across the world, particularly, in the U.S. and the EU, figuring out what we do with these companies that are able to compile these huge, massive caches of data and how those companies that are amassing that data are using that data to gain a competitive advantage and choke out any other potential provider in that same marketplace.

Interviewer 1: And Ben, Amazon being the e-commerce giant company that they are, I’m sure is not just gonna roll over and accept this. What is their basic defense?

Ben: I’m sure that they have a number of defenses, for one, they have a huge legal department and they have unlimited funds to pay for private counsel. So, they’ve got big, big attorneys that are working their…this particular claim. But also, Amazon has suits all the time. I mean, there’s a lawsuit every day. So, I think that one of the defenses that Amazon will use is, “Hey, look, I’m not doing anything different than what a supermarket is doing.”

A supermarket that has their own brand of bread, for example, is able to obtain data about the other breads that are being sold in their marketplace. And so, we’re no different than that. I think they’re also going to say, “Look, Amazon is a marketplace, but you have to consider us in light of all of the other transactions that are going on at any given time.” And although Amazon is a giant, I buy from Amazon, I think that there was a study that showed that like 80% of the U.S. population has placed an Amazon order within the last 30 days, and that’s a huge, huge chunk of retail business.

I think Amazon is going to say, even though we work for e-commerce, you have to look at the whole commercial picture. And we’re actually a very small portion of overall the transactions that are occurring on a daily basis. And so, yeah, we’re big, but we’re not that big. And so, therefore, we can’t dominate the market based on the analytics we’re deriving from our data.

Interviewer 1: The bread example you brought up is a perfect example because you go into a Price Chopper, you’re signed up for their rewards card. They’re collecting the data on what you’ve shopped and how you shop, how often you shop. So, they’ve got that information and so they can look and go, okay, what are the generics that we should be carrying, you know, their Price Chopper branded products, and they can do something similar. But not on this scale, this scale is so huge.

And it’s also not only do they have the data from the fact that, you know, what these companies are selling, with the type of products they’re selling, and then, of course, copying it because I’ve seen them do it with batteries, all kinds of products, they’re remaking, and they’re kind of copycats of other brand products you would buy. But then they’ve got a level of consumer data that no other company in the world has.

Ben: Yeah, that’s correct. I like to think of this, for one, I think we’re on the cutting edge of legislation for big tech companies. So, this stuff is extremely exciting to me. It’s this kind of stuff that attorneys can geek out on when you start to read how the nuanced article…how the nuanced arguments are. But in my mind, I think of this particular case in one particular way, if you’re looking at a supermarket, it’s kind of like an old man on a boat throwing a line into the water with a worm on the hook. That’s the kind of data that they’re trolling for. That’s the kind of dataset they’re going to derive from regular shelf space.

Amazon is like one of those huge boats you see with these nets that can catch whole schools of fish at any given time. That’s the kind of data they’re able to derive from their program. And they’re able to kind of get all those fish on the boat, figure out what kind of fish they have, figure out what they want to be fishing for, have just troves of data, whereas the supermarkets are kind of like they’re all individually out there on their boat, it’s one hook, it’s one line, it’s one sinker, and that’s what they’re getting.

That’s what they’re basing their… that’s how they’re going to derive any advantage in the supermarket space if they’re going to derive anything at all. Amazon, on the other hand, is not limited to that one hook. They’ve got a net. It’s a totally different animal, a different type of fishing, a different type of amassing data.

Interviewer 1: So, Ben, for the average person following this that doesn’t understand or know what this means exactly, what will this mean? If this lawsuit, the antitrust charges lawsuit is successful, this could be a huge fine, of course, but what else could it mean to Amazon?

Ben: I think it means that Amazon is going to try to get what they want in a different way. What way that is I don’t know. I think the animal still exists, it just has to shape-shift. In the alternative, it might mean that there are other third-party vendors who will receive the benefit of Amazon not using their data. How that plays out, how those analytics are determined whether or not this type of litigation actually benefits third-party providers, I don’t know. I don’t know. I’m sure that there are people who crunch numbers and do the analytics on the market space. But for me, I don’t know.

Interviewer 1: Ben, I agree this is going to be an interesting story to follow, but I also think the same thing that this is going to come down to legislation, not the litigation. Litigation’s just going to spend a lot of money. I’m not sure how much it’s really going to accomplish outside of maybe setting some parameters to help legislators go, “Oh, this is how we need to write some new laws in order to keep a competitive edge in a capitalist society.”

Ben: Yeah, you’re right. I mean, this really is society shaping in a lot of ways. And that’s why I think these lawsuits can be so important. And there’s a whole other picture. I mean, the lawsuit says a certain thing, but it’s speaking to how we’re going to run our marketplaces in this new frontier. E-commerce is the wild west in a lot of ways. And so, I think that this is just really sending a signal through the judiciary to the legislative bodies, “Hey, we’ve got a real problem here.” And the only way that we’re going to kind of shake Amazon up a little bit is to… but it’s really kind of the bell for people who can legislate and are empowered to legislate if there’s a problem.

And this problem is hurting all of the other smaller entities that are essentially lifting Amazon up into this place where Amazon is able to basically just knock out the competition. They’re able to derive the analytics that other producers would only be able to amass over decades of putting things on the market.

Interviewer 1: Ben Barry, he’s an attorney with Martin, Harding & Mazzotti. Ben, it’s always great to talk to you. Thanks for the insight.

Ben: Thank you, gentlemen. Nice talking to you.

Interviewer 2: Thank you, Ben.

Interviewer 1: All right. Talk to you later. And we’ll be right back on “The Morning Drive.”