Competition Bureau Investigating Amazon For 'Potential Abuse Of Dominance'

The Competition Bureau has launched a probe into Amazon’s conduct to determine whether the online retailer is harming competition.

The investigation, which is seeking confidential information from Canadian businesses, will include a particular focus on “potential abuse of dominance,” the watchdog said.

“The bureau is examining whether Amazon is engaging in conduct on its Canadian marketplace, Amazon.ca, that is impacting competition to the detriment of consumers and companies that do business in Canada,” the agency said in a release Friday.

Specifically, it is reviewing whether Amazon policies impact sellers’ willingness to offer their products at a lower price on other retail channels, such as their own websites or rival online marketplaces.

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The bureau is also looking into any efforts by Amazon to tilt consumers toward its own products over those offered by competing vendors, as well as any disadvantage that sellers incur by opting out of Amazon’s shipping, customer relations and advertising services.

Amazon said it is co-operating with the bureau’s probe and will continue working to support small businesses that sell products on Amazon.ca.

The investigation is ongoing and there is no conclusion of wrongdoing at this point, the bureau said.

The agency’s request for public input comes amid rising concerns of monopoly power in the tech world and questions around the use of sellers’ data to create rival products.

Last month, CEOs from some of the biggest U.S. tech titans faced tough questions from congressional lawmakers over market dominance and whether they need to be regulated more heavily, or even broken up.

The potential conflict of interest between Amazon’s role as both a platform to sell goods and a seller of goods itself remains a key area of concern.

“The main issue, which came up at the congressional hearing in July, is that Amazon can collect data on its ‘competitors’ — i.e. sellers who use Amazon — and then develop products that compete with those sellers,” said Kean Birch, who heads York University’s graduate program in science and technology studies, in an email.

Cautionary tale

Birch pointed to the cautionary tale of Diapers.com, which Amazon elbowed out of the market by discounting rival brands on Amazon.com in 2009 before buying up the depleted online retailer the following year.

Restrictive contractual provisions between Amazon and the sellers in its online marketplace may also be under the Competition Bureau microscope.

“If I’m some kind of competitor to Amazon — Adidas or Nike, say — one way I could compete would be to say, ‘Hey, because of my lower cost structure, I’ll be able to sell products to consumers at lower prices,’” said John Newman, a former Justice Department antitrust lawyer who now teaches law at the University of Miami.

“But if Adidas can’t sell any products on its website or elsewhere at a lower price than it sells on Amazon (due to contractual terms), then it makes it harder to do that.”

The outcome may be to drive prices down in the near term — the opposite of traditional monopolistic goals — but they could rise down the road as power concentrates in the hands of a dominant player.

“This kind of thing could suppress competition, prevent some innovative new company from entering the market and deprive us of all the wonderful but intangible benefits of innovation,” Newman said in an interview.

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In July 2019, the European Commission launched a formal antitrust investigation into Amazon to examine whether its data use violates competition rules. The U.S. Department of Justice and the Federal Trade Commission have also opened investigations into the four Big Tech companies — Google, Facebook Apple and Amazon — to suss out whether they were engaging in monopolistic activities.

The Competition Bureau probe, which kicked off quietly early this year, could result in a negotiated settlement or a case before the Competition Tribunal — if the investigation uncovers any contravention of Competition Act provisions.

“Remedies under these provisions are primarily behavioural, including ordering an action to be taken or prohibiting an action from being taken, but can also include administrative monetary penalties,” spokesman Jayme Albert said in an email.

It declined to confirm whether a broader investigation of other Big Tech companies is ongoing, “as the bureau is required by law to conduct its work confidentially.”

This report by The Canadian Press was first published Aug. 14, 2020.