July 16, 2019 / 8:59 PM / 2 months ago

Breakingviews - Amazon’s data deal invites D.C. scrutiny

The logo of Amazon is seen on the door of an Amazon Books retail store in New York City, U.S., February 14, 2019. REUTERS/Brendan McDermid

NEW YORK (Reuters Breakingviews) - Amazon.com’s data deal is inviting D.C. scrutiny. As its executives appeared at an antitrust hearing in Congress alongside those of other tech firms, the e-commerce giant offered customers $10 to track their web browsing. It’s a smart way to grab business from rivals, and the price low-balls the value of user data. That’s a demonstration of how dominance works.

There’s nothing new about retailers extending discounts for information on shoppers. Companies used to offer a few bucks or a prize entry to those who filled out surveys. Amazon is offering $10 to new users of Amazon Assistant, its shopping comparison tool, if they spend $50.

What’s different is the scale of information being collected, and the potential anti-competitive effects given Amazon’s size. The tool collects and processes information such as search results and page content from rivals. And it shows Amazon offers and reviews to consumers as they browse rival sites.

Amazon is worth nearly $1 trillion because it has a commanding lead in e-commerce. Google parent Alphabet and Facebook have also grown hugely valuable by dominating search and social networking. It’s difficult to prove these businesses harm consumers under conventional antitrust theories. Amazon’s profit margins are razor thin. Alphabet and Facebook don’t even charge for most of their offerings.

One reason these firms dominate their respective categories is because of their huge collections of data. Amazon, for example, can use its trove to figure out the best way to price goods – attracting skinflints with cheap prices and charging more to those who can’t be bothered to comparison shop. It can also precision-target potential buyers with its own-label offerings. And the value is snowballing over time. Amazon’s growing collection of product reviews, for example, makes the site useful and sticky.

While the value of consumer data to these behemoths is high, the price isn’t. Consumers are willing to part with it free, or for a song in this Amazon case. It would be hard for consumers to band together to demand higher remuneration, even if they wanted to. That leaves it to lawmakers to consider measures such as limiting data collection, or requiring firms to pay a data dividend to consumers. That might start to level the playing field.

Breakingviews

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