Social Europe/Susanne Wixforth: Welcome to GAFA land—where the winner takes it all

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Welcome to GAFA land—where the winner takes it all

By Susanne Wixforth on 30th May 2019
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The Big Tech platforms have established monopolies which disempower their competitors as well as their workers. EU competition law can be used by unions seeking to bring them to heel.
GAFA

Susanne Wixforth

Amazon symbolises the four platform giants, also known as GAFA (Google, Apple, Facebook and Amazon). The company is Europe’s largest platform retailer and its turnover is twice as high as that of its 20 largest competitors. While Amazon´s chief executive earned 2.16 million dollars per hour in 2017, its workers must be grateful if they receive the statutory minimum wage, which in the EU varies between €1.42 and €11.27 per hour.

In 2018, Amazon generated a turnover of about 210 billion euro worldwide, an increase of over 30 per cent on the previous year’s. The company has more than 600,000 employees across the globe. With a market capitalisation of more than 730 billion euro, it is one of the most valuable listed companies. Its operating profit amounts to around 11 billion euro. Nevertheless, thanks to a ruling it had agreed on in advance with the tax authorities of Luxembourg, Amazon did not pay taxes on 75 per cent of its turnover between 2003 and 2014.

In the long run, the platform economy not only poses a risk to the stability and budgets of countries where the corporations earn their money but do not pay taxes—it also undermines social cohesion. If the European Union wants to win back the trust of its citizens, it has to make sure that burdens are equitably distributed.
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EU competition law offers an approach to tame those platform giants: the European Commission obliged Amazon to refund 250 million euro in taxes; Google had to return 12 billion. But the losses to the exchequer are only one facet of the problem. Others are the exploitation of workers and the elimination of market competitors through unfair business practices, as well as the deleterious environmental impacts of, for example, excessive packaging by Amazon and the destruction of returned mint-condition goods.
Market power

Amazon generates its turnover mainly through four channels: as one of the biggest online retailers, as the operator of by far the largest online marketplace for third-party suppliers, as one of the largest providers of online services and as the distributor of the ordered products.

Because of its large market power in some trading segments, independent traders depend on Amazon to reach their customers. There is evidence that Amazon is trying to force traders out through its sheer market power, for instance through copying products and undercutting prices.

But traders are fighting back—meanwhile, several competition proceedings against Amazon are pending due to their numerous complaints. The German Federal Cartel Office initiated an anti-abuse proceeding in 2018 and the Austrian Federal Competition Authority followed in 2019. But what about the company’s employees?
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Brutal piecework

Amazon’s rapid growth is at the expenses of its employees and the social-security systems of its countries of establishment. According to reports by UNI Global Union, the international umbrella organisation of service unions, Amazon´s company strategy is based on brutal piecework, carried out under permanent control using advanced monitoring technology.

Workers can cover distances of 16-20 km per hour and lift 50 tons of packages per day. They may be expected to handle 300 packages per hour—taking breaks is often not possible, even to go to the toilet. Because of work accidents or overloads ambulances had to be called fully 600 times during a three-year period to Amazon’s UK warehouses, where 87 per cent of workers reported suffering chronic pain in their joints.

Amazon cleverly plays with what is legally possible: to break strikes, temporary workers are hired. Safeguard measures are often reduced to a minimum. Through classification into more favourable sectoral collective agreements (‘sector shopping’), the company chooses the lowest possible collective tariff. To that end, it pretends to be a logistics company in Germany, while in France it operates as a small trader.

Because the company is not paying living wages, the German trade union ver.di organised strikes in several locations on May 2nd. Italy, where a collective agreement with Amazon on wages, shiftwork and working hours was introduced for the first time in 2018, was taken as a model. UNI Global Union has successfully established the UNI Global Amazon Alliance as a network straddling14 countries.
Competition law

EU competition law is armed with strict sanctions to prevent unfair competition, not only between companies but also between member-states. The idea behind it is that a European single market can only function if both sets of parties abide by fair rules.

The greater the market power of a company, the easier it is to enforce (unfair) conditions against its rivals. Therefore, the Treaty on the Functioning of the European Union (TFEU) prohibits the abuse of a market-dominant position. It is obvious that because of its threefold function—as marketplace, seller and deliverer—Amazon holds such a position. It is already responsible for most online trade.

Through network effects and economies of scale, the company is further expanding its position and thus driving competitors out of the market, following the motto ‘the winner takes it all’. This is fatal for other market participants as well as workers. Amazon’s monopoly position makes it easy to break strikes in pursuit of living wages by recruiting temporary workers or outsourcing to countries with lower minimum wages.

Therefore, trade unions are urged to use the anti-abuse procedure of EU competition law to their advantage. The commission is conducting a market survey to identify any abusive practices by the company. Provided there is sufficient evidence, it will open a procedure in which third parties will have the opportunity to submit comments.

The concerns of employees, such as application of the correct collective agreement or the maintenance of rest periods, have a competition-law aspect. According to article 102 of the TFEU, obtaining an unjustified advantage by imposing unfair trading conditions on other market participants (including workers and consumers), solely through market power, is prohibited. In such a case, penalties of up to 1 per cent of a company’s worldwide turnover can be imposed. Further, the commission can require a dominant undertaking to unbundle or divest certain parts of the company.
Regulation

Electronic platforms have the same characteristics as classic physical infrastructures such as the post, rail, telecommunications and energy. While in the US and the EU these have been subject to strict regulation for years, there is no such regulation in the new sector of the GAFA companies—also referred to as ‘BAADD’ (big, anti-competitive, addictive and destructive to democracy). From a trade-union point of view, unbundling and regulation in this sector are urgently needed, mainly because the gap between these large corporations and the rest is constantly increasing.

Especially with the GAFA companies, the higher their market concentration, the more the share of wages in their net product decreases. For example in Ireland, the wage ratio fell by 13 per cent between 2008 and 2014. Its counterpart, the profit share, increased at about the same rate. The business model of the GAFAs does not allow for the passing on of productivity improvements to their employees.

Wealth for all requires competition for all. Competition law alone does not go far enough here: it only becomes relevant when oligopolistic structures have already been consolidated. In the digital age of winner-take-all markets, the platform economy has to be subject to legal regulation. An economy of untamed superstars produces one thing above all—many losers.
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About Susanne Wixforth

Susanne Wixforth is head of unit in the Europe and International Department of the German Trade Union Confederation (DGB). She was formerly senior legal and economic adviser on European affairs in the Austrian Chamber of Labour (AK Vienna).
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