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Amazon is having a bad time this week.
Along with second quarter results which fell short of expectations and triggered a drop in stocks, the company revealed that Europe had just collected a crushing fine of € 746 million, or around $ 887 million, in its tax returns with the Securities and Exchange Commission.
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The record-breaking penalty, first discovered by Bloomberg on Friday, was imposed by the Luxembourg National Commission for Data Protection, the main privacy regulator covering Amazon in the EU. Luxembourg is home to the headquarters of the tech company in the EU. On July 16, the CNPD determined that the tech company’s processing of user data violated European privacy regulations.
According to Amazon’s 10-Q file, the CNPD “rendered a decision against Amazon Europe Core S.à rl claiming that the processing of personal data by Amazon did not comply with the general EU regulation on the protection of data. The decision imposes a fine of 746 million euros and the corresponding practice reviews. “
The problem apparently stems from the company’s nascent advertising activity. Amazon wrote that the decision was “without merit” and pledged to defend itself “vigorously”, and clarified in a statement to the media: “Maintaining the security of our customers’ information and their trust are top priorities. There was no data breach and no customer data was exposed to a third party. These facts are undisputed. We strongly disagree with the CNPD’s decision and intend to appeal.
“The decision as to how we show customers relevant advertisements is based on subjective and untested interpretations of EU privacy law, and the proposed fine is grossly disproportionate even with this interpretation,” said he declared.
The maximum fine limit under the GDPR is 4% of a company’s turnover. The CNPD sanction amounts to 4.2% of Amazon’s 2020 net income of $ 21.3 billion. But that’s just 0.2% of its overall net sales in 2020, which stood at $ 386.1 billion. In other words, according to some charges, the company could have faced punitive measures totaling up to $ 1.54 billion.
Even so, the sheer size of the penalty is staggering. As recently as last month, experts predicted the CNPD would cost less than half, or some $ 425 million. Amazon appears to be on the hook for more than double that amount.
The nature of the case once again puts Amazon in the hot seat when it comes to data. While this particular situation depends on the personal data of users, recurring accusations against the e-commerce giant claim that it is using data from third-party merchants to compete with them.
In testimony to Congress from July 2020, former CEO Jeff Bezos said company policy prohibited it, but admitted he was unsure if any violations had taken place. In November, EU commissioners said they believed that was precisely what retailing had done in France and Germany, essentially accusing Amazon of misusing non-public data to unfairly compete with outside sellers. .
This is fundamentally different from the personal data privacy concerns that plague the online advertising titans Facebook and Google. Both are regularly faced with questions about how they handle user data, and Amazon will have to get used to this kind of scrutiny as its advertising business grows. In the second quarter, the latter reported ad sales of $ 7.9 billion, a whopping 87% jump from the same period last year.
What’s next is not at all clear, especially for Amazon, which already seems nervous about what the future holds. The company, now under the leadership of a new CEO, has expressed concerns to investors about the slowdown in e-commerce growth in the second half of the year.
This may not happen, given the flattening of COVID-19 vaccination levels and the increase in infections from the Delta variant complicating, if not nullifying, full reopenings. But even as the country’s bad news translates into good news for Amazon and keeps the flow of e-commerce gushing – as well as Amazon advertising – the company still has logistical challenges to tackle, from supply chains to number one. warehouse workers to meet demand. . And these will be even more difficult to plan, because of all the uncertainty on the public health front.
Amazon could still try to throw money at the problems. He’ll just have a little less to work with now.
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