The rise of e-commerce has created a number of online marketplaces where digital platforms connect buyers and sellers. Consumers use platforms like Amazon, Etsy, Instacart, Uber, Lyft, and Airbnb to purchase goods and services from third parties while the platform itself takes a fee for operating the marketplace. Online platforms are not the only businesses that use such a “two-sided” marketplace model. The Supreme Court recently addressed antitrust concerns in this type of marketplace in Ohio v. Am. Express Co. ¹ Two-sided markets invoke a number of novel legal issues that impact both those who buy and sell over them, most prominently in the field of antitrust and consumer protection.

Among these online marketplaces, Amazon has recently come under intense scrutiny from regulators in the European Union and the United States. Amazon is part of a quartet of American tech companies, joined by Facebook, Google, and Apple, that have raised alarm bells over their seemingly ever-increasing market power. Critics of these companies’ business practices have urged aggressive antitrust and consumer protection enforcement actions.

Using its significant resource advantage, Amazon has allegedly developed cheaper versions of successful products that undercut sales for the product of the original third-party seller who developed it. While antitrust remains perhaps the most obvious means of addressing such competition concerns, existing antitrust jurisprudence in the United States presents considerable hurdles because Amazon’s allegedly anticompetitive behavior, while perhaps unfair to merchants, likely benefits consumers by providing lower prices.

Rather than view this behavior exclusively through the lens of antitrust or consumer protection law, this Note will advance the position that Amazon, and other operators of online marketplaces’ use of third-party commercial data, should be regulated under a fiduciary-like standard. This approach adopts the spirit of Jack Balkin’s information fiduciary concept, but after analyzing its application in the e-commerce concept, argues in favor of a more concrete regulatory approach. By drawing from existing data protection regulations in the healthcare and securities sectors, Congress or a regulatory agency could impose a standard of data use that would instill greater trust in online marketplaces between merchants and platforms.

Introduction

A. Amazon’s Dominance of e-Commerce and Abuse of Seller Data

The consolidation of significant market power in the hands of one or only a few private companies has long been a cause of major concern for policymakers in the United States. Fear of corporate “trusts” during the late nineteenth and early twentieth centuries led to the development of antitrust law in the United States.² Throughout the course of the twentieth century, and especially after the end of the Cold War, the idea that governments should set and enforce competition policy spread outside the United States, most notably in the European Union.³ The timing of the expansion of antitrust law roughly coincided with the development of the internet, and so it is fitting that the internet poses some of the biggest questions for the future of this area of the law. The proliferation of online platforms has been a cause of anxiety for policymakers, as many of these online companies have embraced Facebook’s formerly unofficial motto to “move fast and break things.”⁴

While antitrust law spread globally at the end of the twentieth century, it has remained a creature of the nineteenth century in many ways. In the United States, antitrust law prohibits monopolistic tactics that restrain trade to the detriment of consumer welfare.⁵ The proliferation of online platforms has disrupted consensus among antitrust practitioners as to whether antitrust should remain focused only on market power that harms consumers, or whether antitrust should expand its purview to protect “competitive structures” in order to mitigate consolidation of the type currently seen in markets in which online platforms operate. ⁶

This brings us to Amazon. One of the world’s largest online retailers, Amazon controls about thirty-eight percent of the United States’ e-commerce market.⁷ But Amazon is more than just an online retailer; it also provides cloud computing services and hosts an online marketplace, Amazon Marketplace, where third-party sellers sell goods to buyers.⁸ Amazon also manufactures and sells its own goods under the Amazon Basics label. ⁹ Moreover, Amazon is a highly vertically integrated firm that owns its shipping and fulfillment services. ¹⁰ This integration has made possible free, two-day shipping to “Amazon Prime” members, customers who pay an annual subscription fee in exchange for speedy delivery, among other perks. ¹¹ Amazon’s size, diverse business line, and integrated services provide consumers with a cheap and efficient online retail experience. Despite a lack of serious competition in the online retail space, Amazon’s prices remain reasonable, and purchasers continue to buy more and more through Amazon.

The picture for third-party sellers is, at least anecdotally, not as rosy. Amazon’s network effect provides major benefits to third-party sellers: access to a large customer base, reduced advertising costs, and a robust shipping network. But Amazon’s size means selling on its marketplace brings some major drawbacks. Sellers feel that they must operate on Amazon Marketplace or else lose out on a significant chunk of potential revenue. ¹² While other online platforms like Walmart.com and eBay host marketplaces similar to Amazon’s, their customer bases are dwarfed by Amazon’s. As a result, according to one third-party merchant, Walmart.com and eBay marketplaces account for a miniscule portion of sales. ¹³ Lack of competition for sellers means that they cannot vote with their feet and move to a different platform if they feel the charges that they pay are unfair or if they feel that Amazon’s practices toward them are abusive. There is great potential for abuse by a marketplace operator who also sells its own goods.

Unlike a normal marketplace, where competitors operate on roughly an equal informational footing, Amazon competes with a significant advantage: it knows what its competitors are doing. Amazon tracks a significant amount of data from third-party sellers, including sales numbers, prices, and how frequently buyers are viewing a particular product. ¹⁴ According to allegations from third-party sellers, Amazon has used this data to drive the development of its own products, which it then promotes above the goods of third-party sellers in customer search results, siphoning away their sales. ¹⁵

B. Do We Need Intervention? Why not Antitrust Alone?

Is this simply the cost of doing business online? Does this require structural changes? ¹⁶ There is certainly a risk, at least from a consumer welfare perspective, of over-intervention. Amazon provides consumer goods at affordable prices with prompt delivery right to purchasers’ doorsteps. Evidence suggests that these consumer benefits are only possible due to the interplay between Amazon’s retail business, Amazon Marketplace, and Amazon’s cloud computing arm, Amazon Web Services. ¹⁷ Disrupting the present structure of the corporation, through, for example, breaking up the firm into distinct parts might leave one or more of the pieces of a split-up Amazon as non-viable. ¹⁸

Amazon has fallen squarely in the sights of a number of antitrust reformers who argue that it and other large tech companies represent a breakdown of the American antitrust tradition. A number of critics of the existing antitrust regime, Tim Wu and Lina Kahn among them, have argued that American antitrust has drifted too far away from its origins. ¹⁹ These “neo-Brandesians,” so named because they trace their intellectual lineage back to United States Supreme Court Justice Louis D. Brandeis, argue that contemporary antitrust law is overly focused on consumer welfare, a term never used in the Sherman Act, and ignores other drivers for the creation of the American antitrust regime, like ensuring that markets are not consumed by one or only a few competitors. ²⁰ These commentators point to online platforms as examples of entities that monopolize markets but cannot be reined in by conventional antitrust law since they do not cause financial harm to consumers, but cause (non-monetary) damage to consumers and (financial) harm to competitors through the misuse of both groups’ data, among other issues. ²¹

The case for intervention ultimately leans on the normative value judgments at the heart of the current debate within American antitrust law. Do we return to a vision of antitrust based on the populist energy that drove the passage of the Sherman Act in 1899? Such a turn could decrease market efficiency in the short term, at least in terms of the prices that consumers pay for goods. But, in return, consumers could also benefit from having greater competition for their business and, perhaps, lower prices and better service in the long run. Small-scale capitalists, like Amazon’s third-party sellers, could also benefit since they would be competing on a (slightly) less-tilted playing field.

Or should we strive for market efficiency? According to this viewpoint, Amazon has gained a dominant position in online commerce by offering a superior product and its success is self-promulgating through the network effect, not anticompetitive tactics. ²² If there are one-off instances of abusive behavior toward third-party sellers on Amazon Marketplace, those should be handled through litigation. Overly vigorous enforcement of antitrust will simply harm Amazon, consumers, and ultimately third-party sellers. ²³

While the harm surrounding Amazon’s use of third-party seller’s data has largely been anecdotal thus far, the Federal Trade Commission and the European Commission have both recently opened investigations into Amazon’s practices surrounding seller’s data collection. ²⁴ The European Commission is further along in its investigation and has alleged that “Amazon systematically rel[ies] on non-public business data of independent sellers who sell on its marketplace, to the benefit of Amazon’s own retail business, which directly competes with those third party sellers.” ²⁵

While hefty fines could undermine the rationale for misusing third-party sellers’ data, without knowing how widespread the issue is, enforcement agencies run the risk of either under or over deterring this behavior. On a more basic level though, American antitrust authorities face an uphill battle of actually succeeding in these actions. ²⁶ Given the lack of an essential facility doctrine in US antitrust law and the durability of the consumer welfare standard, Amazon may not have committed a cognizable offense by using its controlling position to examine competitors’ data.

Antitrust alone, even if there was a consensus to break up Amazon, for example, might not be enough to mitigate future abuses of similar data. Even if there were many e-commerce platforms, none of which competed with third-party sellers, the value of sales data might drive them to monetize it differently than Amazon, but in a no less harmful way. Antitrust remedies may be only one of a constellation of necessary reforms to enable small-scale capitalists to succeed on the internet. ²⁷ Third-party sellers need assurances that their commercial data will be safe online.

C. Sellers Face Significant Challenges in Online Marketplaces

The antitrust dilemma means that, although there is a growing consensus in favor of bringing enforcement actions against Amazon for the misuse of third-party seller data, such enforcement efforts face an uphill battle. Even if these efforts were to succeed, so long as third-party sellers have to operate on an e-commerce platform, their data could be at risk for misuse by the platform operator. While competition between platforms could be beneficial to third-party sellers, in that they have the option to switch to a competing platform if one platform abuses data, for a number of reasons, sellers face a number of costs when switching platforms.

First are the reputational costs. Buyers rank the quality of third-party sellers’ goods, which is then visible to other prospective buyers. Changing platforms means a seller loses its reputation and must start cultivating a reputation through ratings on the new platform. ²⁸ Second is the risk of different customers on different platforms. If your business is focused on selling novelty train sets, and the novelty train set community is very active on Platform A, but not Platform B, a train set seller may have difficulty transferring its business to Platform B since it might need to invest in advertising to its prospective customers that it has moved to a different e-commerce platform. ²⁹ Given the network effects that attract and keep customers on a single platform, like Amazon Prime memberships, customers may be unwilling to change platforms along with a business. While neither of these factors is insurmountable for a third-party seller, both highlight that greater competition may not be a perfect panacea for the problems small-scale capitalists confront online.

One of the core risks that third-party sellers face is the abuse of data. ³⁰ Sellers on Amazon Marketplace necessarily hand over reams of data about their business to one of their competitors. ³¹ Given that sensitive data may be abused in many more ways than just to compete unfairly, it might be appropriate to subject online marketplace operators to a duty to safeguard market participants’ data.