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

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

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The Institute for Local Self-Reliance, a think-tank, recently found that Amazon is “exploiting its position” as online retail’s primary gatekeeper to impose growing fees on sellers that use its platform. Amazon penalizes sellers that offer lower prices on other shopping sites. This thwarts competition by ensuring that Amazon’s steep fees inflate consumer prices across 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 who sell on its marketplace violates competition rules. This is in addition to an investigation into whether Amazon unfairly positions its own products over those of smaller retailers. The company Jeff Bezos built has offered to limit its use of seller data and boost the visibility of rival products on its platform. The prospect of a considerable fine seems to be motivating Amazon to amend the terms of their marketplace.

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The UK Competition and Markets Authority is investigating Amazon over concerns that the firm does not do enough to combat fake reviews on its sites. And U.S. regulators recently had the opportunity to gather insight from Amazon sellers, who publicly lambasted the company for spreading “propaganda” and treating them like “morons.” These comments were prompted by Amazon’s pushing back against proposed legislation that would prevent it from self-preferencing and will likely be passed by the Senate.

In Canada, Amazon isn’t under the same kind of pressure. Two years ago, the Competition Bureau sought input from market participants on an ongoing investigation of Amazon after a broader call out examining conduct in the digital economy. But there has been little said on the matter since. Why?

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The goal of the Competition Bureau’s invitation for independent online sellers to share their experience was to inform an ongoing examination of whether (and how) Amazon’s conduct in its Canadian marketplace was affecting competition. Because there was an investigation underway, the bureau could have sought court orders to compel information from merchants.

But this method is not well-suited to digital markets and platform companies because hundreds of thousands of individuals and smaller companies are involved, and it isn’t always obvious how to contact them. So, the bureau decided to ask merchants directly about their experiences and hope for useful responses. Unfortunately, this was about the best it could do. The bureau does not have the power to compel information for market studies ahead of an investigation. This means it cannot proactively access information from firms that might help to illuminate potentially anti-competitive market trends as other competition authorities can. The bureau was unable to study the broader implications of e-commerce markets ahead of its Amazon investigation, which could have made a future investigation more specific.

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In a recent response to the former senator Howard Wetston’s examination of whether the Canadian Competition Act was suitable for the digital economy, the bureau advocated that “the commissioner needs market study information-gathering powers,” and that “regulators should be required to respond to market studies.” So, the bureau itself has acknowledged this limitation. Appreciating competition dynamics in a data-driven economy requires the power to compel information directly from firms for proactive market studies.

Amazon’s practices are remarkably well-established, yet they are not quantified in Canada, where more than 40,000 third-party sellers advertise their products at Amazon.ca. In the two years since the bureau’s call for feedback, there has been a growing body of international research and a suite of antitrust cases that clearly describe Amazon’s anti-competitive practices and associated harms. This global work should inform the bureau’s consideration despite its current inability to conduct market studies in Canada.

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Academic journals, white papers, and antitrust regulators around the world have considered the various ways in which Amazon manipulates its marketplace and may inappropriately use data from third-party sellers, including self-preferencing and copycatting (the AmazonBasics replication of All Birds is an infamous example of the latter). For example, a current antitrust lawsuit in Washington, D.C. is exploring a “rule” that requires that merchants price their goods on Amazon.com at the same rate as they do on their own websites.

Canada’s emerging and fluid Big Tech accountability agenda currently ignores most of the tactics popularized by Amazon that harm competition. Overall, Amazon may be underappreciated as a threat to competition, even though the firm is building digital infrastructure for durable market power.

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

The failure to explicitly address the prospect of anti-competitive behaviour by Amazon seems to be largely a function of the Competition Bureau’s inability to be proactive in learning about digital markets. Perhaps Competition Commissioner Matthew Boswell is taking a conservative approach given the other investigations underway. It is certainly useful for the bureau to have a dialogue with market participants, even if it seems silly to have to ask merchants directly for input. It could be that the bureau will announce the findings of its preliminary investigation at some point in the near future.

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While it may seem lazy to rely on research and antitrust suits from other jurisdictions, piggybacking on cases elsewhere could increase pressure on Amazon to make company-wide changes that benefit consumers and businesses in Canada. As a result, expecting the Bureau to dedicate resources in order to replicate similar investigations could be wasteful.

Recent amendments to the Competition Act enhanced the bureau’s investigative powers, clarifying the provision of the act under which the commissioner seeks information from parties under inquiry. This is helpful, but does nothing to support the bureau determining whether an inquiry is warranted.

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The bureau also has a new Digital Enforcement and Intelligence Branch that will reportedly use advanced analytics, intelligence techniques, and behavioural economics to detect harm in the marketplace and put a stop to it. While it is not clear whether this new branch has investigated Amazon, it can help the bureau conduct its work in a new economy.

But until the Competition Bureau is endowed with the ability to compel relevant information when conducting market studies, the regulator should supplement its investigative work with “market studies” of recent research and antitrust cases from other jurisdictions. The milestones of competition investigations should also be less opaque — citizens could receive simple updates about the progress and timeline from the bureau, as is the norm in the UK.

Amazon cannot continue to be ignored by Canada’s Competition Bureau simply due to limited data gathering abilities. Amazon’s approach has already been found to be harmful for consumers and small businesses in other countries. There is little reason to think its Canadian 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.