Amazon's new CEO Andy Jassy will inherit a lot of legal trouble. A large portion will be from Europe.
POLITICO reviewed seven major threats to Amazon Web Services and assessed their severity as Jeff Bezos, the founder of the company, takes over.
Andy, you're most welcome.
Jassy is facing a dual front war on competition in Brussels and the national capitals. He is facing an advanced probe by Margrethe Vestager, the EU's competition chief. She charged Amazon with using third party seller data to increase its offerings. However, she is also investigating logistics and delivery services similar practices in Italy.
Jassy is also under fire from authorities in Germany and Spain. Germany's cartel office is conducting the most sophisticated probe. It examines Amazon's influence over pricing and a deal that Apple made with non-authorized dealers to stop them from selling Apple products on the platform. This arrangement is also being investigated by Spain.
He should be concerned about the new EU rules that could affect how Amazon does business. These EU rules could become law as early as 2023. The Digital Markets Act will establish a list of the most important companies (or gatekeepers) that can do and cannot do the rules. The U.K. is currently creating a similar regulatory system, while Germany has its own version in place since January.
Amazon is likely to be targeted by EU as a "gatekeeper", with European Parliament members working hard to include more companies, such as voice assistant Alexa, in the regulation's scope.
He should be very worried. Jassy will have to stop evading antitrust fines unless his battalion comprising lawyers and lobbyists succeeds in saboting the process.
2. 2. Cleaning up the online market
European regulators and lawmakers have pledged to clamp down on illegal and dangerous products being sold on online marketplaces, Amazon among them.
EU companies are required to verify third-party sellers and conduct checks on products sold. Consumer lawsuits can also be brought against companies if they fail to comply with regulations.
Amazon in the U.K. is under investigation by the U.K.'s market regulator over whether it has done enough for fake reviews.
Brussels also introduced legislation last week on product safety. It partly targets online marketplaces and includes time limits for when they must remove harmful products from their sites. Both policymakers and consumer groups want stricter rules.
He should be very worried. The European legislators are not backing down.
3. Prime GDPR fine day
Amazon cannot evade the strict data protection laws of Europe.
POLITICO's investigation found poor management practices that could have put the data of millions at risk. Amazon could also be charged under the EU's GDPR privacy code. The company has been investigated by Luxembourg's data protection authorities. This could lead to Europe's biggest-ever privacy violation fine.
EU regulators and leaders are also watching Amazon closely for its data-holding role. Jassy's highly profitable Amazon Web Services business does business with European governments and corporations. Critics claim that this makes data susceptible to U.S. government snooping, which has legal authority to seize Europeans’ data.
The legal transfer of European personal data to the U.S. was in limbo. Therefore, the regulator responsible to enforce the GDPR in EU institutions opened an investigation into how data was transferred to the United States via Amazon's services.
The bloc is keen to protect industrial data as well as personal data. This data is crucial for digital innovation and the bloc. New laws and initiatives are being considered in Brussels, Paris, and Berlin. They could weaken Amazon's cloud dominance and encourage European alternatives.
He should not be too worried. Amazon's annual profits would make even the largest GDPR fine seem insignificant. Its cloud services are still the most popular in Europe. It is difficult to imagine a European alternative.
4. 4. AI anxiety
Amazon's secret sauce is artificial intelligence. It powers Amazon's near-magical recommendation algorithm and helps it run its logistics machine like a clockwork. It also monitors the efficiency its workers.
The European Commission introduced the first AI law in the world that bans or restricts AI that poses an imminent risk to human health. Amazon's use of AI in many ways will be subject to stricter restrictions. However, how the negotiations between the European Parliament (and EU member countries) go and how well Amazon lobbying both will determine how effective they are.
These new rules may require companies, which are usually very secretive about their algorithms, to be more transparent about how they apply the technology to workers. The new rules will make AI in labor management high-risk and require that it be subject to stricter screening before being allowed into the EU market.
Amazon has placed an indefinite moratorium upon the sale of facial recognition technology to U.S. law enforcement agencies, but it has not stopped selling the technology to other customers. Amazon was criticized for its Ring home security system, which is one of the largest civilian surveillance networks in the world. The company must convince lawmakers that its systems do not allow mass surveillance to be done. This will prevent public opinion from turning against Amazon.
He should be worried: The European Commission's proposed rules give Europe's unions more ammunition for fighting Amazon's worker surveillance practices. It is likely to get messy.
5. Target taxation
Global companies will have to change the way they collect their taxes worldwide. Amazon, thanks to France, is one of them.
Amazon could have escaped from the global tax agreement by 130 countries this month. The levy will apply only to the largest corporations whose profit exceeds 10%, and Amazon's profit margins are often lower than that threshold.
Bruno Le Maire, French Economy Minister, wanted to make sure that the Big Tech company was covered. Final rules were negotiated to ensure Jeff Bezos' company doesn't fall through the cracks. They allow the calculation to account profits of specific business units like Amazon Web Services which has higher profit margins that other parts of Amazon.
Andy Jassy has more questions. The first is when and how EU countries will implement this new global tax. Another question is whether or not the European Commission will create its own tech tax in July, and how it will look if it does.
Jassy will need to be concerned about whether European countries that have a national electronic levy (e.g. France, Italy, and Spain) will eliminate them after the global deal is implemented, as Washington requested.
He should be worried: The company can afford to raise its tax rate. Amazon might have to rethink how it pays taxes but the tech company can still count on the U.S. government's support in fighting local levies.
6. 6. Workers' rights
Amazon's poor record in workers rights is starting to catch up to it. European trade unions and labor-focused MEPs are scathing about Amazon's treatment of its warehouse workers and delivery drivers. There are numerous allegations that workers were forced to urinate in plastic bottles on the job, while trying to keep up with work pace. Also, there was the possibility of courier drivers being fired by algorithm.
It's not a great timing for the backlash, as the European Commission begins to work on its proposal on gig workers rights. They also zero in on how self employed workers (like Amazon Flex drivers) are being denied social protections and labor rights.
Bezos missed a hearing by the European Parliaments Employment Committee on its labor practices. Our invitation was not followed by Jeff Bezos or any representative. They fear an anti-Amazon tribunal. Dennis Radtke, EPPs MEP, responded by tweeting: So balls out stock at the moment Mr Bezos. It's Jassy’s problem now.
How concerned he should be. He should keep an ear on it. Although the public scrutiny of the Commission's proposal is not going away anytime soon, the substance of it is still to be seen. Jassy will keep an eye on it in the latter part of the year.
Amazon was a co-founder and member of The Climate Pledge. This pledge, which is signed by more than 100 organizations and companies, calls for them to be net-zero carbon by 2040. According to an investigation by British broadcaster ITV, the pledge will not cover Amazon's less environmentally-friendly practices like the destruction and recycling of millions of unsold stock each year.
The report prompted Scotland's Environment Protection Agency (Scotland Environment Protection Agency) to announce it would launch a formal investigation. Meanwhile, the U.K. Department for Environment, Food and Rural Affairs, (Defra), issued a warning for industry, stressing the need to comply with the law to follow the waste hierarchy for the transfer of waste. Enforcement action could be taken against those who fail to do so.
The British government announced earlier this year that it was looking at new ways to make online retailers and marketplaces more accountable for returning unwanted or damaged electrical goods. Jassy has plenty to do.
He should be mildly concerned. If France's backtrack on including online marketplaces within its new climate bill is any indication, it doesn't leave him with much to worry about in terms of hard regulation.
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