Vass Bednar: Why is the Competition Bureau taking so long to rule on Amazon?

Amazon’s practices are remarkably well established, but they have not been quantified in Canada

Article content

Thanks to the work of researchers and regulators in the United States and Europe, we know that Amazon.com Inc. is anti-competitive at the very least.

Advertisement 2

Article content

The Institute for Local Self-Reliance, a think tank, recently found that Amazon is “abusing its position” as the primary gatekeeper of online retailing to impose ever-increasing fees on merchants using its platform. Amazon penalizes sellers who offer lower prices on other shopping sites. This hinders competition by causing Amazon’s high rates to drive consumer prices up on the Internet and not just on its own website.

In the European Union, regulators have opened a formal antitrust investigation to assess whether Amazon’s use of sensitive data from independent retailers selling on its marketplace violates competition rules. This comes on top of an investigation into whether Amazon is unfairly positioning its own products over those of smaller retailers. The company that Jeff Bezos built has offered to limit the use of seller data and increase the visibility of competing products on its platform. The prospect of a hefty fine seems to motivate Amazon to change the terms of their marketplace.

Advertisement 3

Article content

The UK Competition and Markets Authority is investigating Amazon over concerns that the company is not doing enough to fight fake reviews on its sites. And US regulators recently had the opportunity to gain insight from Amazon sellers, who publicly criticized the company for spreading “propaganda” and treating them like “idiots”. These comments were prompted by Amazon’s opposition to proposed legislation that would prevent it from preferring itself and likely to be passed by the Senate.

In Canada, Amazon is not under the same pressure. Two years ago, the Competition Bureau asked for input from market participants on an ongoing investigation into Amazon following a wider call on behaviors in the digital economy. But little has been said about it since then. Why?

Advertisement 4

Article content

The purpose of the Competition Bureau’s invitation to independent online sellers to share their experiences was to inform an ongoing investigation into whether (and how) Amazon’s behavior in its Canadian market affected competition. As an investigation was underway, the agency could have sought court orders to extort information from traders.

But this method is not very suitable for digital markets and platform companies, as it involves hundreds of thousands of individuals and smaller companies, and it is not always clear how to get in touch with them. So the agency decided to ask traders directly about their experiences and hope for useful responses. Unfortunately, this was about the best it could do. The agency does not have the power to extort information for market studies prior to an investigation. This means that it cannot proactively access information from companies that can help highlight potentially anti-competitive market trends, as other competition authorities can. The agency was unable to study the broader implications of e-commerce markets prior to the Amazon study, which could have made a future study more specific.

Advertisement 5

Article content

In a recent response to former Senator Howard Wetston’s inquiry into whether Canada’s Competition Act is appropriate for the digital economy, the agency argued that “the commissioner needs powers to collect market research information” and that “regulators should be required to respond to market research.” So the agency has recognized this limitation itself.To appreciate competitive dynamics in a data-driven economy, it takes the ability to extort information directly from companies for proactive market studies.

Amazon’s practices are remarkably well established, but they have not been quantified in Canada, where more than 40,000 third-party sellers advertise their products on Amazon.ca. In the two years since the agency’s call for feedback, there has been a growing body of international investigation and a series of antitrust cases that clearly spell out Amazon’s anticompetitive practices and associated harm. This global work should motivate the agency’s consideration, despite its current inability to conduct market studies in Canada.

Advertisement 6

Article content

Scientific journals, white papers and antitrust regulators around the world have considered the various ways Amazon is manipulating its market and inappropriately using data from third-party sellers, including self-preference and copycatting (All Birds’ AmazonBasics replication is an infamous example of the latter) . For example, an pending antitrust lawsuit in Washington, DC is investigating a “rule” that requires sellers to price their goods on Amazon.com the same rate as they do on their own websites.

Canada’s nascent and fluid Big Tech accountability agenda is currently ignoring most of the Amazon popularized tactics that hurt competition. Overall, Amazon may be undervalued as a threat to competition, even as the company builds digital infrastructure for sustainable market power.

Advertisement 7

Article content

Although the Competition Bureau reached an agreement with Amazon on pricing practices in 2017, the federal government’s silence on Amazon’s potentially problematic business behavior is particularly baffling, as governments in Canada encouraged companies to “go digital” during the pandemic. We failed to recognize the realities of data-driven competition for these companies, and their efforts to grow and scale are unnecessarily complicated.

Amazon’s failure to explicitly address the prospect of anticompetitive behavior appears to be largely due to the Competition Bureau’s inability to be proactive in learning about digital markets. Perhaps Competition Commissioner Matthew Boswell will take a conservative approach, given the other investigations underway. It is certainly helpful for the agency to engage in dialogue with market participants, even if it seems foolish to ask traders for input directly. The agency may announce the findings of the preliminary investigation in the near future.

Advertisement 8

Article content

While it may seem lazy to rely on investigative and antitrust cases from other jurisdictions, piggybacking on cases elsewhere could increase the pressure on Amazon to make company-wide changes that benefit consumers and businesses in Canada. As a result, it could be wasteful to expect the Office to commit resources to iterating similar investigations.

Recent amendments to the Competition Act strengthened the agency’s investigative powers and clarified the law’s provision under which the commissioner obtains information from the parties under investigation. This is helpful, but does not help the agency determine whether an investigation is warranted.

Advertisement 9

Article content

The agency also has a new digital enforcement and intelligence division that will reportedly use advanced analytics, intelligence techniques and behavioral economics to identify and stop damage in the marketplace. While it’s not clear whether this new branch has investigated Amazon, it could help the agency do its job in a new economy.

But until the Competition Office is endowed with the ability to extort relevant information when conducting market studies, the regulator must complement its investigative work with “market studies” of recent investigations and antitrust cases from other jurisdictions. Competition investigation milestones should also be less opaque – citizens could receive simple updates on the agency’s progress and timeline, as is the norm in the UK.

Amazon cannot continue to be ignored by the Canadian Competition Bureau simply because of its limited data collection capabilities. Amazon’s approach has already proven harmful to consumers and small businesses in other countries. There is little reason to believe that Canada’s strategy is any different.

Vass Bednar is an adjunct professor of political science at McMaster University and executive director of the school’s Master of Public Policy in Digital Society program.

Advertisement

Comments

Postmedia is committed to maintaining a lively yet civilized discussion forum and encourages all readers to share their thoughts on our articles. It can take up to an hour for comments to appear on the site. We ask that you keep your comments relevant and respectful. We’ve enabled email notifications – you’ll now receive an email when you get a reply to your comment, there’s an update in a comment thread you’re following, or a user follows comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

Leave a Comment