Author Archives: Gabriela Piątkowska

13 January 2021
Leave a comment
Business

NOT SO AMAZING AMAZON

Reading Time: 5 minutes

My two prior entries detailed the issues of privacy and were primarily focused on a one key actor – Facebook. That is why I decided to disprove the common view of another “marvelous” tech giant – Amazon. 

While the ongoing pandemic is a true hit for many businesses many of large, multinational companies are actually only getting bigger. One of them is Amazon. Its sales in the last quarter rose as much as 51% in comparison to the previous year. Also, it has surpassed Walmart as the biggest retailer by market capitalization in the United States. While other businesses are closing Amazon is only increasing its power and commercial reach. Do not get me wrong, there is nothing bad in “bigness” and with developing. The argument that Amazon creates terrific opportunities both in terms of creating the jobs and facilitating people setting up their own business is also perfectly logical and rational. However, too often have we fallen for the alleged benefits and too little have we considered the risks that stem from company’s enormous market power. 

Opinion | Is Amazon Bad for America? - The New York Times

While in Poland Amazon services do not yet have a strong market presence, in the United States and the UK it is a go-to service when it comes to essentially buying anything. You want to buy diapers? You order them on Amazon. You need a new dog toy? You go to Amazon. You are out of cheese? You only need to log in to Amazon Fresh and it can be delivered to you at once. However, with all those possibilities and freedom of choice for customers there has to be a catch. We rarely realize that the ones paying the price for Amazon’s incredible efficiency and speedy deliveries are its employees. Probably many of you are now thinking that it is their job and there is nothing they can complain about. They can always quit or file a complaint, right? Believe me, they do that. In November, when the holiday season started, as much as 600 of them signed and delivered a petition to improve their working conditions. It was only in one warehouse in New York and there are many more. 

Nevertheless, let me show you how working for Amazon looks like. If you worked as a sorter you would have to scan 1800 Amazon packages in an hour. It is 30 packages per minute. Also, you would get 15-minute breaks. However, you would need that 15 minutes to walk to and from the room where you can spend your break. Did I mention that you can get fired every time you miss your hourly rate? 

There is no doubt that working for Amazon, in pretty much any non-senior capacity, is no dream job. Since Amazon is a marketplace, beyond the employees – there are also millions of sellers who use the platforms and as such, drive Amazon’s operations. From this, things can get ugly as well. I will present it in a form of a screenshot from the Amazon forum:  

https://sellercentral-europe.amazon.com/forums/t/amazon-blocked-my-listing-and-now-selling-my-stock/248383

That is not a joke. They did that and that poor seller was not the only one. What is more, there are many other factors which can restrain sellers from making profits or for that matter, selling their products altogether. First of all, one can get banned unexpectedly and usually, there is no appeal mechanisms where we could oppose the decision. One of the banning reasons may be that a product that was sent was damaged or did not match its description. However, it is a classic example of a situation where Amazon (inherent in its policy) have always favored buyers, who tend to abuse it. The thing is if someone wants to return a product and does not want to pay for return shipping, he can always mark a product as damaged. There is nothing as a penalty for buyers and sellers are to ones who have everything to lose: 

“One time, a buyer purchased a bunch of our napkins, used them for a party and soiled them, and then returned them for a full refund stating that the item was not as expected. We had to eat the cost.” – a seller[1]. 

Other negative aspects are that Amazon can force you to sell your products at a certain price. Also, it can force you to sell items on vendor central. It means that you must sell your products at a wholesale price to Amazon directly. The result is you have no control over them and little profit, which can destroy your product sales and listings. Amazon can squeeze all small businesses and they can do nothing about it. 

The third aspect that I would like to stress is obviously data collection and privacy. Amazon’s incredibly rapid growth is a fact. However, increased risks are associated with that expansion. Corruption and potential data leaks are one of them. A company of such size and power should be held accountable and directly responsible for such situations. The problem with Amazon was workers who inappropriately accessed internet data and misused it. They were selling confidential information about sellers on Amazon. Later, that data allowed other sellers to gain advantages on the website. Also, employees of Amazon were selling Amazon Vendor Central Accounts which allowed buyers to enter other sellers’ listings and illegally change them. 

However, misused data collection does not concern the black market only. The company itself has recently been accused by FTC of breaching US federal antitrust rules. Among other things, it allegedly used internal data about its sellers to compete with them. The gathered data allowed Amazon to detect best-selling products and adjust their own products following those criteria. As a result, Amazon basically avoids any risks of fair competition. While the investigation is still ongoing and the case is pending, serious accusations have already been made and charges are still yet to be presented. 

Undeniably Amazon is a huge platform which is only expanding day by day. To be clear, I am not denying that Amazon is a great platform. In many respects, it really is. However, the company should remember that with great power comes great responsibility and that because of its size and influence, it will be expected to constantly improve. Maybe if such improvement was in place, Mr. Bezos would still be the World’s richest person. 

Sources:

[1] Chou S, “The Dangers Of Selling On Amazon And Horror Stories From Real Amazon Sellers” (MyWifeQuitHerJob.com)

2. “Amazon: It All Ads Up” (Subscribe to read | Financial TimesOctober 30, 2020)

3. Emont J, McMillan R and Stevens L, “Amazon, Amid Crackdown on Seller Scams, Fires Employees Over Data Leak” (The Wall Street JournalDecember 10, 2018)

4. Risicaris G, “Forums” (Amazon2006)

5. Weise K, “Prime Power: How Amazon Squeezes the Businesses Behind Its Store” (The New York TimesDecember 19, 2019)

6. Wisniewska A and Bradshaw T, “How 2020 Changed the Way We Use Technology” (Financial TimesJanuary 2, 2021)

Tagged ,
5 January 2021
Leave a comment
Bez kategorii

Taking action against Facebook

Reading Time: 2 minutes

In my last entry, I have highlighted the most pressing regulatory and governance issues in today’s digital markets. That piece was primarily focused on threats to privacy, consumer welfare and fair competition. Since then, the US Federal Trade Comission (antitrust body) has sued Facebook for “illegal monopolization”[1], taking into account most of the concerns addressed in my previous piece. Therefore, I believe it is worth looking at the FTC lawsuit against Facebook more closely.

FTC sues Facebook for illegal monopolization – Instagram and WhatsApp at risk - SlashGear

Generally speaking, it is relatively rare for the US authorities to take action against tech giants. The reasons are twofold. Most importantly, US and its Silicon Valley is a technological hub, where major companies such as Amazon, Google, Facebook are headquartered. Thus, in the recent years it was European Commission that appeared to be more “proactive” in regulating tech industry. Secondly and more generally, the US system of governance is rooted in free-market and ‘self-regulation’ with little State intervention. 

It is precisely for these reasons why the lawsuit is so surprising, interesting and yet – very much overdue. The essence of the FTC’s claim is that Facebook is “illegally maintaining its personal social networking monopoly through a years-long course of anticompetitive conduct”[2]. In simple terms, the US competition authority alleges that the company has eliminated nascent competitors by simply buying them. The best example would be Facebook’s acquisition of WhatsApp, a service that until then has prided itself in high levels of privacy and encryption; employed less than 20 people and made no profit[3]. Despite this, Facebook decided to purchase WhatsApp for a striking $19 billion, when it was struggling with its own messaging app (Messenger)[4]. Interestingly, when the merger was taking place – it was unconditionally cleared by the FTC. European Commission has investigated its potential anticompetitive effects, but eventually cleared it. Soon after the acquisition, WhatsApp has published new policy and subsequently, downgraded its privacy standards. 

Another up-and-coming rival that was purchased by Facebook and is at the center of FTC’s lawsuit is Instagram. Overall, the US competition authority has characterized Facebook’s conduct over the years as “harmful to competition, leaving consumers with few choices for personal social networking and depriving advertisers of the benefits of competition”[5].

The FTC’s lawsuit foreshadows greater scrutiny of tech giants by competition authorities in the coming years. It remains to be seen how the regulators and law enforcement worldwide catch up with the rapid development of technology. On one hand, fair competition and consumer welfare are of utmost importance, but on the other – regulators must be careful not to squelch innovation. 

Sources:

[1] Federal Trade Commission, ‘FTC Sues Facebook for Illegal Monopolization’, 9 December 2020, p.1

[2] Ibid, p.4

[3] Wired, ‘WhatsApp: The inside story’, 19 February 2014 

[4] The Conversation. ‘WhatsApp bought for $19billion, what do its employees get?’, 20 February 2014

[5] Federal Trade Commission, 9 December 2020, p.6

Tagged
12 December 2020
Leave a comment
Blockchain, Security Image

Challenges of the digital era

Reading Time: 3 minutes

In today’s era of digitalization, data has surpassed oil in becoming the world’s most valuable resource. It is a strategic asset, commonly referred to as a “new currency”. A testimonial to this is the fact that the five highest valued listed companies in the world are all technology and digital market operators. Their impressive valuations are largely a result of extensive consumer data aggregation, which fuels machine learning and revenue generating processes. While the possibilities of what can be done with data are endless, it’s important to consider the significant privacy, political and legal concerns that have developed as a result of corporate data processing in recent years.

The most important issues surrounding data gathering are neither technological, nor commercial, but rather legal and social. They center around the fundamental right to privacy, safeguarded on an international level by Article 12 of the Universal Declaration of Human Rights. While we also have national protections in place, it is clear that the existing privacy laws are no longer fit for their original intended purpose. Despite constantly increasing volumes of personal information handled by private companies, privacy standards are deteriorating. Consumers, often unaware of the actual value of their online contributions to data mining algorithms, are being deprived of any bargaining power. With limited options to meaningfully opt-out, they have little choice but to accept arcane and non-negotiable privacy policies. One study found that an average internet user would need over 30 working days per year just to read through them. Such information overload, in combination with several other factors, leads individuals to progressively lose control over their digital identities.

 

 

There are also profound concerns about accountability of tech giants. The possibility of surveillance, profiling and hacks are just some of the triggers that have contributed to the case of serious public anxiety that we feel today. In 2018, hackers were able to access the private information of over 150 million users of MyFitnessPal. The Cambridge Analytica scandal was an even more striking example of how access to large datasets may allow private companies to peddle misinformation, thereby undermining democratic processes.

Beyond strict data protection concerns, there is an important interplay with law and fair competition. A significant peculiarity of online services is that they are often provided at “zero price”. This is due to the network effects in dual-sided business models, where cross-financing is enabled by revenue made through advertising and by trading information with data brokers. As a result, the concentration of user data can entrench market power and contribute to higher barriers to entry. Data-driven mergers often occur in order to eliminate nascent competitors, yielding serious exclusionary effects in extremely highly concentrated digital markets. Consequently, there is little incentive for the incumbents to innovate and provide users with optimal privacy protection. Given these negative developments as well as the industry’s general tendency towards monopolization, a wholesome regulatory reform seems inevitable. The EU General Data Protection Regulation and California’s Consumer Protection Act are the best examples of increased awareness surrounding the issues of privacy and transparency of tech giants. They also give hope for greater scrutiny of digital market operators worldwide. Yet, there is no doubt that technological innovations can increase productivity, accelerate business processes and automate mundane tasks. Indeed, it was technological tools such as Zoom, Microsoft Teams or Skype that allowed us to continue working and studying, despite the global pandemic. Thus, it is important to

Overall, while there is a clear need for global action to mitigate some of the risks, we must be careful not to squelch innovation and opportunities of the digital age. Ultimately, it is all about the balance between embracing innovation and effectively safeguarding fundamental rights and freedoms.

Sources:

1. M. Vestager, ‘Competition in a big data world’, DLD 16, Munich, 17 January 2016.

2. A.M. McDonald, L.F. Cranor, ‘The Cost of Reading Privacy Policies’ (2008) 4 I/S: A Journal of Law and Policy for the Information Society.

3. G. Colangelo, M. Maggiolino, ‘Data Protection in Attention Markets: Protecting Privacy through Competition?’ (2017) 8 Journal of European Competition Law & Practice.

4. A.D. Chirita, ‘Data-Driven Mergers Under EU Competition Law’ in The Future of Commercial Law: Ways Forward for Harmonisation, J. Linarelli & O. Akseli (Hart Publishing, 2019), p. 51.