How EU Amazon Antitrust Probe Spotlights Amazon as an Unlevel Playing Field

Consider the ways that the EU’s announced antitrust probe of Amazon is a game changer in spotlighting how Amazon Marketplace’s conflicted-expanse is a de facto unlevel playing field.

First, the ongoing probe will spotlight that Jeff Bezos, Amazon, investors, and U.S. antitrust authorities can no longer dismiss that Amazon faces antitrust risk.

The EU’s competition commissioner, Margrethe Vestager has launched a preliminary, expert, bulls-eye antitrust probe at by far the most antitrust-vulnerable part of Amazon’s online market-monopsonization model – i.e. the anticompetitive Amazon Marketplace structure where Amazon first commands unchecked, most of its competitors’ most sensitive business confidential information/data and metadata; and second non-transparently and unchecked, determines their competitors’ rank and costs to commercially access Amazon’s monopsonized online consumer demand.

Simply the EU is investigating whether Google’s unchecked dual role as an economy-wide merchant and platform make it an inherently anticompetitive biased-broker?

Just three weeks ago, Amazon’s CEO Jeff Bezos bragged to Forbes: “For all practical purposes, the market size is unconstrained… There are different businesses where the market is limited, but we just don’t have that issue.”  

Two weeks ago, Amazon CEO Bezos dismissed the notion Amazon was a monopoly because "eighty-five percent of sales is still in the physical world. So that's where we face competition." He also implied that because the consumer welfare ends that Amazon provides, i.e. the most inventory, best prices and fastest delivery, implicitly justify any otherwise anticompetitive or monopolistic means Amazon uses.

Evidently, Mr. Bezos foresees no antitrust deterrent constraints or limits on Amazon’s exercise of its exceptional market power.

Mr. Bezos understands very well that gaining a monopoly on merit is legal, but apparently does not understand that a presumed legal monopoly can engage in anticompetitive behaviors to maintain or extend that monopoly power that are illegal -- as Microsoft painfully learned twenty years ago in U.S. v. Microsoft.

The EU announced EU probe changes the game because Amazon no longer gets to self-servingly and deceptively frame the market definition as the global economy and the potential antitrust risk or case -- in a vacuum.

Few know that the EU has already investigated and effectively defined in 2016 Amazon’s market definition publicly to be [online] “merchant platforms” (comprised of Amazon and eBay), as part of its market defining process in the Google Shopping antitrust case.

Importantly, while both Amazon and eBay are the two online merchant platforms per the EU, eBay strongly differentiates itself from Amazon in completely avoiding the inherent biased-broker, commercial conflict of interest of Amazon in being both merchant and merchant platform at the same time.

Simply, unlike Amazon, eBay does not directly compete with their customers.

To make this problem more real and understandable for the average consumer, would any sports league committed to fair play allow one team to be player, referee, scorekeeper, and owner of the whole league’s facilities, operations, and compensation? No.

Another reason a bulls-eye targeted EU antitrust probe of Amazon is a game changer is because Amazon can no longer dismiss its antitrust risk as de minimis to advance its stock price, trillion-dollar market valuation, and world’s wealthiest person chase with a self-serving Amazon “unconstrained” antitrust-immune investor narrative.

Please note that since Lina Khan’s seminal, Yale Law Journal analysis entitled Amazon’s Antitrust Paradox in early January 2017 that spotlighted Amazon’s inherent merchant/platform anticompetitive conflict, Amazon’s stock price has skyrocketed 161%.

Second, online, Amazon is the de facto ecommerce playing field.

In the U.S., Amazon is by far the most comprehensive click-to-door distribution network of commercial goods and services.

A testament to its ecommerce monopsony power is that virtually all of Amazon’s retail competitors believe they must sell on Amazon Marketplace to reach the full online audience for ecommerce.

Consider the evidence of Amazon Marketplace’s unique online ecommerce monopsony power.

Amazon offers ~600 million products and services, about ten times the inventory of #2 Walmart.

In the U.S., Amazon uniquely commands over 95m contractual Amazon Prime subscription members to get free unlimited delivery. That is about 70% of American households, that in turn command >90% of American online consumer buying power, given that Prime customers spend 150% more annually than non-Prime members, and given U.S. income distribution.

Over five million suppliers sell through Amazon Marketplace. In 2017, Amazon uniquely commanded about 10,000 online sellers with sales >$1 million annually and about 100,000 sellers with >$100,000 sales annually.

In 2016, 55% of online shoppers started on Amazon, a percentage that is likely 65-70% today given Amazon’s ~25% growth in Amazon Prime members since then. In 2018, Amazon is estimated to capture ~50% of all consumer online spending, up 13% from its 43.5% market share in 2017.

This all combines to make Amazon America’s number one: direct retailer, platform for most all its retail competitors, and fulfillment and delivery provider for many of its retail competitors.

As a result, Amazon commands the most extensive, click-to-door commercial ecommerce infrastructure network in the U.S. -- by far.

Third, the EU probe spotlights how Amazon Marketplace’s hyper-centralized structure is antithetical to a competitive free market.

Free markets are characterized by competitors competing independently and differently to determine their own destinies.

In stark contrast, Amazon Marketplace has the economy-wide, market power to aggregate demand, centralize supply, commoditize market price and terms, and discriminatorily rank competitors’ online opportunities – a quintessential artificial and favored marketplace and unlevel playing field.

Please see a one page infographic here to see the anticompetitive big picture of Amazon Marketplace.

Amazon Marketplace has attributes of a central-planned commissary where Amazon’s opaque algorithmic determine, if Amazon or a competitor gets ranked first i.e. high to make sales, or low i.e. where few look and minimal sales occur.

Amazon, via its centrally-planned, opaque Marketplace algorithms, has the market power to largely dictate which online suppliers get before which online buyers, at what price and terms.

Simply, Amazon Marketplace can unilaterally pick itself as winner and self-deal and front-run their competitor-customers and pick their captive competitors as losers for any product or service at any time or period with impunity, because their competitors have minimal alternatives or other effective recourse.

Making these matters much worse, is Amazon Marketplace’s non-transparent “Black Box” model that effectively confers winner-take-all monopsony and monopoly bottleneck power where all the info/data goes through one centrally-planned, algorithm system where Amazon has gatekeeper power over what consumers discover at what price, and toll-keeper power over what suppliers must pay Amazon for placement, fulfillment and advertising.  See infographic of this here.

And by increasingly and non-transparently, tying Amazon Marketplace placement to fulfillment services and/or advertising terms, Amazon can anticompetitively and unilaterally drive up its direct competitors’ overall costs at the same time forcing competitors to effectively subsidize Amazon’s direct retail revenue growth and margins. This is just one of Amazon’s winner-take-all, can’t lose, network effects.

How has Amazon defied the investment law of big numbers, and maintained extraordinary, ongoing 30+% revenue growth off an immense ~$200b revenue base? The most logical explanation for this extraordinary ongoing revenue growth series, is extraordinary unfettered abuse of exceptional unfettered market power.   


The EU’s antitrust probe of Amazon’s use/abuse of Amazon Marketplace information/data from most of Amazon’s direct competitors is a very shrewd, disciplined, and targeted enforcement focus -- meaning it could have the most potential for success.

Until now Amazon has deftly misdirected most everyone’s attention from this bulls-eye of their substantial antitrust vulnerability.

Note how tightlipped Amazon is about how it runs Amazon Marketplace. If Amazon operates a free market, is an honest broker, does not abuse its Marketplace omniscience of ecommerce supply, demand, inventory and price, why not be more transparent like other economy-wide exchanges are?

The structural anticompetitive advantage of Amazon’s inherent merchant and platform conflict of interest is its asymmetric and one-way, near-perfect market information of supply, demand, inventory, and price -- i.e. Amazon’s ultimate unbeatable “flywheel” of network effects.

That structural conflict is the epicenter of Amazon’s exceptional market power and abuse of market power.

That conflicted structure enables Amazon to be a direct fierce competitor with everyone, while at the very same time corrals all its competitor-suppliers into one Amazon Marketplace under Amazon’s largely unlimited control and where the competitors are made increasingly dependent on Amazon for access to online demand and are skimmed from to subsidize Amazon’s extraordinary market power and revenue growth.

Remember, it is legal to become a monopoly on merit, but it also is illegal to monopolize in ways that foreclose competition by maintaining and extending one’s monopoly.

Forewarned is forearmed.




Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, an Internet competition and policy consultancy for Fortune 500 companies, some of which are Internet platform competitors, and he is Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests. Cleland has testified before the Senate and House antitrust subcommittees on Google. Eight different Congressional subcommittees have sought Cleland's expert testimony and when he worked as an investment analyst, Institutional Investor twice ranked him the #1 independent analyst in his field.




Precursor LLC Research on Asymmetric Accountability Harms:

Part 1:   The Internet Association Proves Extreme U.S. Internet Market Concentration [6-15-17]

Part 2:   Why US Antitrust Non-Enforcement Produces Online Winner-Take-All Platforms [6-22-17]

Part 3:   Why Aren’t Google Amazon & Facebook’s Winner-Take-All Networks Neutral? [7-11-17]

Part 4:   How the Google-Facebook Ad Cartel Harms Advertisers, Publishers & Consumers [7-20-17]

Part 5:   Why Amazon and Google Are Two Peas from the Same Monopolist Pod [7-25-17]

Part 6:   Google-Facebook Ad Cartel’s Collusion Crushing Competition Comprehensively [8-1-17]

Part 7:   How the Internet Cartel Won the Internet and The Internet Competition Myth [8-9-17]

Part 8:   Debunking Edge Competition Myth Predicate in FCC Title II Broadband Order [8-21-17]

Part 9:   The Power of Facebook, Google & Amazon Is an Issue for Left & Right; BuzzFeed Op-Ed[9-7-17]

Part 10: Google Amazon & Facebook’s Section 230 Immunity Destructive Double Standard [9-18-17]

Part 11: Online-Offline Asymmetric Regulation Is Winner-Take-All Government Policy [9-22-17] 

Part 12: CDA Section 230’s Asymmetric Accountability Produces Predictable Problems [10-3-17]

Part 13: Asymmetric Absurdity in Communications Law & Regulation [10-12-17]  

Part 14: Google’s Government Influence Nixed Competition for Winner-Take All Results[10-25-17]

Part 15: Google Amazon & Facebook are Standard Monopoly Distribution Networks [11-10-17]

Part 16: Net Neutrality’s Masters of Misdirection[11-28-17]

Part 17: America’s Antitrust Enforcement Credibility Crisis – White Paper [12-12-17]

Part 18: The U.S. Internet Isn’t a Free Market or Competitive It’s Industrial Policy [1-4-18]

Part 19: Remedy for the Government-Sanctioned Monopolies: Google Facebook & Amazon [1-17-18]

Part 20: America Needs a Consumer-First Internet Policy, Not Tech-First[1-24-18]

Part 21: How U.S. Internet Policy Sabotages America’s National Security [2-9-18]

Part 22: Google’s Chrome Ad Blocker Shows Why the Ungoverned Shouldn’t Govern Others [2-21-18]

Part 23: The Beginning of the End of America’s Bad “No Rules” Internet Policy [3-2-18]

Part 24: Unregulated Google Facebook Amazon Want Their Competitors Utility Regulated [3-7-18]

Part 25: US Internet Policy’s Anticompetitive Asymmetric Accountability - DOJ Filing [3-13-18]

Part 26: Congress Learns Sect 230 Is Linchpin of Internet Platform Unaccountability [3-22-18]

Part 27: Facebook Fiasco Is Exactly What US Internet Law Incents Protects & Produces [3-26-18]

Part 28: How Did Americans Lose Their Right to Privacy? [4-14-18]

Part 29: The Huge Hidden Public Costs (>$1.5T) of U.S. Internet Industrial Policy [4-15-18]

Part 30: Rejecting the Google School of No-Antitrust Fake Consumer WelfareStandard [4-20-18]

Part 31: Why New FTC Will Be a Responsibility Reckoning for Google Facebook Amazon [4-27-18]

Part 32: “How Did Google Get So Big?” Lax Bush & Obama FTC Antitrust Enforcement [5-23-18]

Part 33: Evident Internet Market Failure to Protect Consumer Welfare -- White Paper [5-31-18]

Part 34: What Happened Since FTC Secretly Shut 2012 Google-Android Antitrust Probe? [6-8-18]

Part 35: Buying WhatsApp Tipped Facebook to Monopoly; Why Didn’t FTC Probe Purchase? [6-19-18]

Part 36: The Sea Change Significance of Simons-FTC Privacy and Antitrust Hearings [6-27-18]

Part 37: New U.S. Privacy & Data Protection Law Is Inevitable Like a Pendulum Swing [7-9-18]

Part 38: Why a US v. Google-Android Antitrust Case Is Stronger than US v. Microsoft [7-16-18]

Part 39: Google-Android’s Deceptive Antitrust Defenses Presage a US v. Alphabet Suit [7-20-18]

Part 40: Case Study of Google Serial Over-collection of Private Data for FTC Hearings [7-30-18]

Part 41: The Unfair and Deceptive Online-Offline Playing Field – FTC Hearing Filing [8-7-18]

Part 42: What Most Stunts FTC Antitrust and Consumer Protection Law and Enforcement? [8-21-18]

Part 43: Why New U.S. Privacy Data Protection Law Will Preempt State Privacy Laws [8-27-18]

Part 44: What’s the FTC Hearing before their Hearings on the Unlevel Playing Field? [9-6-18]

Part 45: Google Facebook & Amazon’s Anticompetitive Nontransparent Exchange of Ideas [9-12-18]

Part 46: The Unlevel Playing Field of Asymmetric Competition Expectations [9-17-18]