Amazon’s rough week

Amazon has a tough ride this week.

In addition to the second-quarter results that did not meet expectations and caused a plunge in shares, the company revealed that Europe has just imposed a mind-boggling fine of €746 million, or about $887 million, in its earnings filings with the Securities and Exchange Commission.

More from WWD

The record fine, first discovered by Bloomberg on Friday, was imposed by Luxembourg’s National Data Protection Commission, the top privacy regulator the Amazon in the EU Luxembourg is home to the technology company’s EU headquarters. On July 16, the CNPD found that the technology company’s processing of user data violates European privacy regulations.

According to Amazon’s 10-Q filing, the CNPD has “taken a decision against Amazon Europe Core S.à rl alleging that Amazon’s processing of personal data did not comply with the EU’s General Data Protection Regulation. The decision imposes a fine of 746 million euros and associated practical reviews.”

The problem apparently stems from the company’s burgeoning advertising business. Amazon wrote the decision was “without merit” and pledged to defend itself “vigorously” and elaborated in a statement to the media: “Maintaining the security of our customers’ information and their trust are top priorities. There is no data breach.” and no customer data has been made available to third parties.These facts are undisputed.We strongly disagree with the CNPD ruling and intend to appeal.

“The decision regarding how we show customers relevant ads is based on subjective and untested interpretations of European privacy law, and the proposed fine is not at all commensurate with that interpretation,” it said.

The maximum fine for fines under the GDPR is 4 percent of a company’s turnover. The CNPD sanction amounts to 4.2 percent of Amazon’s $21.3 billion net revenue in 2020. But it’s only 0.2 percent of its total 2020 net revenue, which was $386.1 billion. . In other words, by some counts, the company could have faced penalties totaling $1.54 billion.

Yet the magnitude of the punishment is staggering. Just last month, experts expected CNPD to go for less than half, or about $425 million. Amazon appears to be on the hook for more than double that amount.

The nature of the case puts Amazon back in the hot seat over data. While this particular situation depends on users’ personal information, recurring allegations against the e-commerce gargantuan claim that it uses third-party trading data to compete with them.

In congressional testimony as of July 2020, former chief executive officer Jeff Bezos said company policy prohibits that, but admitted he was not aware of any violations. In November, EU commissioners said they believe this is exactly what the retail industry in France and Germany has done, essentially accusing Amazon of misusing non-public data to unfairly compete with third-party sellers.

That’s fundamentally different from the personal data privacy issues plaguing online advertising giants Facebook and Google. Both are regularly faced with questions about how they handle user data, and Amazon will have to get used to that kind of research as its advertising business grows. In the second quarter, the latter reported ad revenue of $7.9 billion, a jump of a whopping 87 percent from the same time last year.

What happens next is not at all clear, especially to Amazon, which already seems nervous about what the future holds. The company, now under the helm of a new CEO, shared its concerns with investors about slowdown e-commerce growth in the second half of the year.

That may not happen, given the flattening COVID-19 vaccination levels and rising infections due to the Delta variant making full reopening difficult, possibly even withdrawing. But even as the country’s bad news translates into good news for Amazon, and the e-commerce stream continues to flow — as does Amazon advertising — the company still has logistical challenges to work out, from supply chains to enough warehouse workers to handle. meet the demand. And those will be even harder to plan because of all the uncertainty on the public health front.

Amazon could still try to throw money at the trouble. It will now have a little less of it to work with.