The Economic Times
English EditionEnglish Editionहिन्दी
| E-Paper
Search
+

    Amazon, Facebook, Google and the question of trust

    Synopsis

    Well, it looks like the tech giant is running into rough weather with anti-trust regulators all across the world. Last month, the European Commission issued a charge sheet that Amazon was abusing its dominance, and using its muscle to hurt small businesses.

    AFP
    It is this gatekeeper role of not just Amazon, but also Facebook, Google and Apple, which are under scrutiny by the European competition regulator.
    In the season of Secret Santa, and last-minute Christmas shopping or new year’s gifts, the option of shopping with e-commerce is a godsend. And Amazon is the god of e-commerce in the world outside of China. It has overnight delivery; you almost always get what you are looking for; and the prices are low to the point of being unbelievable. The user interface, even on a tiny mobile screen, is a pleasant experience, and it even nudges you with suggestions to buy other stuff. With wide choices, low prices, overnight home delivery, quality assured, and an easy returns and refunds policy, it’s a customer’s delight. So what could go wrong?

    Well, it looks like the tech giant is running into rough weather with anti-trust regulators all across the world. Last month, the European Commission issued a charge sheet that Amazon was abusing its dominance, and using its muscle to hurt small businesses. Specifically that it uses huge amounts of data generated by transactions on its platform to kill competitors. The European authorities are also investigating whether Amazon’s algorithms do product placement unfairly. In other words, when you are searching for a toaster, or a frying pan, it displays those vendors on top who have paid extra, giving them an unfair advantage. Of course, Amazon has denied the charges. It claims that it has, in fact, helped small businesses to sell to a wide customer base, by providing the e-commerce platform.


    Jeff Bezoz, Mark Zuckerberg and Sundar Pichai
    Jeff Bezoz, Mark Zuckerberg and Sundar Pichai


    This is going to be a long-drawn-out battle between regulators and Amazon. And this is not the first instance of Amazon being pulled up. As if to illustrate its fair or unfair tactics, the Wall Street Journal ran a long piece recently titled ‘How Amazon wins: By streamrolling rivals and partners’. The article recalls many stories -- from diapers to furniture – to show how Amazon was able to wipe out the competition by selling private-label products of well-known brands. There is the story of the Ravelli brand of tripods which were selling handsomely on the Amazon platform. But soon Amazon started selling a clone, sourced from the same manufacturer as the original company, at a price lower than Ravelli. It made it impossible to compete. Eventually, that company
    stopped selling on Amazon, and probably closed down. Ironically, the company which produced the Ravelli brand was called the Pirate Trading Company, and it accused Amazon of stealing its intellectual property (ie design etc) which was denied by Amazon. To undercut a rival on prices and sell an almost identical product -- isn’t that what free market competition is all about? Or is it an abuse of dominance, using its deep pockets and clout, to evict a small company from its
    platform?

    Not only does Amazon have immense data on buyer behaviour and preferences -- which it can use against the very merchants who sell on it -- but it can also act as a gatekeeper, choosing who can or cannot sell their wares on its platform. This is the potential for monopolistic power and its abuse.

    It is this gatekeeper role of not just Amazon, but also Facebook, Google and Apple, which are under scrutiny by the European competition regulator. All of these companies act as marketplaces, and have their own, non-transparent rules, about who gets entry and who does not, thereby effectively abusing their power over millions of vendors. A US anti-trust watchdog, too, is pursuing its own investigation. At least 10 states in the US have filed charges against Facebook and Google about their anti competitive and collusive practices over the space they allocate and charge for advertising. As such Google commands two-thirds of its global revenues from advertising, long having eclipsed the revenues of television and newspapers. Events like Facebook Live or those on Twitter make them de facto broadcasters with virtually very little regulation of content, unlike those who are conventional, licensed broadcasters.

    Facebook has already faced accusations of regulating content that can infringe on free speech, of being too cozy with governments and facilitating undue and unfair influence on elections. The electoral spending via Facebook and other social media is not subject to the same spotlight and scrutiny as that of conventional lobby groups.


    Facebook, Apple, Google, Amazon


    Meanwhile China, too, is coming down hard on its giant internet companies like Alibaba and Tencent. Last month the Chinese government abruptly pulled down the world’s biggest stock offering of Ant Financial, the non-bank finance arm of Alibaba. More than $ 3 trillion dollars of global investors was riding on that IPO which has now been indefinitely postponed. India’s Competition Commission, too, has hauled up Google and Amazon on various occasions. So it looks like the social media, e-commerce and fintech giants have rough weather coming their way in 2021, as regulators flex their muscles and curb monopolistic powers. Either there will be fines and stiff penalties or worse, the too-big-to-fail companies will be asked to break up into smaller entities. And this impending showdown will play out on all continents.

    (Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    The Economic Times