Revised transcript of evidence taken before

The Select Committee on the European Union

Internal Market Sub-Committee

Inquiry on

Online Platforms and the EU Digital Single Market

Evidence Session No. 17              Heard in Public               Questions 166 - 175

monday 7 December 2015

5.35 pm

Witness: Paul Misener

USE OF THE TRANSCRIPT

Members present

Lord Whitty (Chairman)

Lord Aberdare

Baroness Donaghy

Lord Freeman

Lord German

Lord Liddle

Baroness Randerson

Lord Rees of Ludlow

Lord Wei

________________________

Examination of Witnesses

Paul Misener, Global Vice-President of Public Policy, Amazon

Q166   The Chairman: Sorry to keep you waiting. We are starting late, but it is very good to see you. Thank you for helping with this inquiry. This is a formal session. It will be recorded. It will be webcast live. You will get a full transcript, so you can double check it. If you need to know the interests of members of the Committee, those are available as far as they relate to this inquiry. The only other thing that I would say is that the acoustics in this room are pretty dire, so please keep your voice up when you are replying.

I will kick off by asking you to spell out your view, which is in your written evidence, of the degree of benefits that consumers and businesses have derived from the advent of Amazon, but also what you think about the Commission’s consultation exercise, its definition of online platforms, where you see yourself sitting in the market and who your competitors are.

Paul Misener: My Lord Chairman, thank you so much. I really appreciate the opportunity to be here. It is a terrific honour both for my company and for me personally. I am thrilled to be here. Thank you.

The benefits offered by my company have always been because of our obsession with our customers. We are so driven to focus on them—we have done this since day one, which is about 20 years ago now, and have continued that practice to date. That has meant that we have relentlessly focused on finding new ways to serve our customers. Our customer set has grown over time. Initially, our customer set was purely consumers buying from our business, which began primarily as a retail business.

Just momentarily, I would like to explain a bit about how our company has evolved and how it now benefits consumers around the world. It began largely as a retail business in which we would buy things wholesale, put them in warehouses and then sell them off at retail. That was not at all novel; the only novelty was that all the sales were occurring online.

We quickly recognised that we could not provide our buyer customers with the kind of selection that they demand and deserve without also inviting third parties on to our website to sell to them simultaneously. While this was a good idea, and a novel one, it was also implemented poorly in its first iteration. We had established a segregated section of our website that was available to third-party sellers. That meant that our buyer customers had to come to the site and search around our retail offerings, and then, if they chose, go over to and also search the offerings of third parties. This was not workable; nor was it particularly good for our sellers, because not many people actually took the trouble to do that.

What we did instead, about the time I joined the company 16 years ago, was to establish what we called at the time a single detail page. That means that a product is featured on a page on the website, and once the consumer finds that product and decides that she wants to buy it based on the information on the site, the specifications and the reviews, she has a choice of sellers. That choice of sellers gives her the confidence that she is getting a great price every time she buys through us.

So we have provided a benefit to our buyer customers, of course, but simultaneously to seller customers, who now have an outlet to all the people who come to Amazon.com. The kinds of benefits that we have tried to bring to our customers, both on the buyer and on the seller side, have grown over the years, and I would like to think that both customer sets are very happy.

Q167   Lord Aberdare: Thank you. Your written evidence suggests that retail and e-commerce are highly competitive, dynamic and very innovative, but last week we heard from the Booksellers Association that it is largely dependent on Amazon alone if it wants to access the e-commerce market. What other online marketplaces are substitutable for Amazon and provide access to the market, or are the booksellers indeed entirely dependent on you?

Paul Misener: It is a good question. We have received this kind of question before, and the answer is absolutely not. We are very proud of the services we provide to our sellers, including our booksellers. You will recall that we have moved well beyond books and now sell some 35 different categories of products, covering tools, toys, shoes and clothes, and so on.

Our marketplace is not something that they are dependent on. Rather, it is an enabler for our sellers to find markets that they would not be able to find otherwise. These are regional, national, even global markets that we offer them. It has been a great success. Fully 45 per cent of the items sold through our website are not sold by Amazon retail businesses but by third parties. So we want them to succeed, and they have been extraordinarily successful.

It is important to recognise at the outset that online retail in the UK is less than 15 per cent of retail. More than 45 per cent of retail remains offline, so to focus narrowly on online is to miss all the competition that happens offline.[1]

Lastly, I would like to point out that by letting third-party sellers sell through our website, especially on the same page, as I described—right next to each other, right next to our retail business—ensures that there is competition not only across online and then across all the offline retail, which is the bulk of sales in the UK, but right there on the website.

So booksellers and other sellers have options. Of course, the high street has booksellers such as Waterstone’s and WH Smith. Even Tesco is involved in bookselling. Online, there is a variety of opportunities for platforms—not only ours, but companies such as Alibris and Hive.co.uk that provide specific kinds of selling services to third-party bookshops. Not only is the competition great horizontally and even within our website, there are also those options for booksellers, so they are certainly not dependent solely on Amazon.

Lord Aberdare: One service that I used to use was AbeBooks, but I discovered that that is now part of Amazon, along with Goodreads, the Book Depository and, apparently, several others. One might be tempted to think that this was a way of reducing or removing competition in the book field.

Paul Misener: To the extent that that was a question, I disagree. I was also a big fan of AbeBooks before and after the acquisition. AbeBooks tended to specialise in rare books. I am a big history buff, so I buy a lot of old, rare history books. It was a great source for that, and remains so, but that was complementary to our business. Sellers such as Hive.co.uk and Alibris are more directly competitive to us, and are of course thriving.

Q168   Lord Wei: In one of his annual letters to staff, Amazon CEO Jeff Bezos referred to traditional publishers as gatekeepers, with the idea that Amazon was liberating authors. The Commission has suggested that some online platforms may also be gatekeepers. What do you understand the term to mean? Is Amazon a gatekeeper? Would you not regard removing the buy button from the Amazon website for certain publishers that you are in dispute with, or blocking certain products from others such as Google and Apple from your platform—for example in streaming—as gatekeeping?

Paul Misener: That is a great question. There are several things in that. First, Amazon is not a gatekeeper; we are absolutely the opposite. We are an enabler; we allow third parties who use our services to reach audiences that they would not have access to otherwise. Jeff’s letter was published with our 2011 annual report; every year, with our annual report to the SEC, Jeff writes a letter that he puts on the top. He was quoting an author who had been frustrated by not being able to get a publisher interested in his works. He was then able to self-publish through Amazon services and reach an audience of readers.

In this instance, publishers are undoubtedly gatekeepers, but there is nothing nefarious going on; that is just their economic model. They are justified in being gatekeepers, because the upfront investment involved in traditional publishing is not insignificant. First, an author comes to a publisher and provides a manuscript. Then editors are assigned to help the author turn it into something saleable. Then it is formatted, printed, advertised and sent out to multiple bookstores—all that upfront investment before there is a single sale. So publishers have every reason to want to gate keep, in the sense of deciding which authors they will take on and which they will not. That is perfectly understandable.

We have offered an alternative whereby no one needs to approve it because there are no upfront costs. An author can provide us with a manuscript. We can make it available either in electronic form or by a service that we call print on demand, where the electronic form of the book may be stored and never printed until someone buys it. I buy a lot of these, because I like rare books. They are not available anywhere in print, including at Amazon, but when I buy it from Amazon, it is printed and sent to me within a day or two. It is a great model that allows those authors who could not convince a publisher to let them through the gate.

We see these models co-existing for a long time. We have a very good relationship with thousands of publishers, and we work with them all the time. The publishing industry is an important partner for us. The models are not mutually exclusive.

With respect to the dispute that you mentioned with a large publisher called Hachette, I want to be clear that that was very distinct from a small author or seller trying to sell through our site. This is a case of a commercial negotiation between two large companies—Hachette is, I think, more than a £1 billion company —and the dispute was about contractual terms. We went back and forth on it. It had to do with us wanting to ensure that we could offer our buyer customers low prices and as a result, we held out until we could reach that point. It was resolved amicably. During that dispute, those titles were still available for purchase at Amazon; the only difference was that we were not purchasing them at wholesale at their prices that Hachette wanted us to purchase them at until we got a purchase—until someone wanted to buy one. Obviously, that slowed down the customer experience for our buyers, which was not good, but we felt it very important to make sure that we were buying it at a price that we thought was fair and then passing that low price to our buyer customers.

Lord Wei: The final point was about streaming services—allowing competitors’ apps, for example, to sit within your ecosystem to stream, or to use other streaming services.

Paul Misener: There are a couple of aspects to this. You are right to point out that we have relentlessly focused on the quality of products available to our customers. In the world of e-books, for example, we want our customers to have the best possible e-book experience. At present, at least, we believe that our e-book experience is the best. There is certainly room for others to improve. I assume that they are innovating on behalf of their formats; we are innovating in ours. Likewise, for the experience for streaming video, we at Amazon believe that our devices are the best ones possible and wanted to make sure that if customers are obtaining content from us, it is through devices that portray it in the highest quality.

Lord Wei: Google is typically regarded as a high-quality provider, but you would not regard it as fit to sit within your platform to stream its content over your devices?

Paul Misener: Our devices have access to a variety of sources. We just believe that the pairing of the quality of our video service is best through our devices. We are in the very early stages of this, of course. All these companies are innovating very quickly—on behalf of their customers, we hope. We are confident that the company you mentioned is; we certainly are. We want to make sure that we are providing the very best possible service. It is hard to imagine Google feeling that it is some sort of small player and left out.

Q169   Lord Rees of Ludlow: I was thinking about a later question, but let me come on to this one.  One of the things that we are concerned about is the asymmetry of bargaining power between the platforms and their clients. As I understand it, you require everyone to undertake not to offer a lower price by any other channel than by you. This must surely be a big handicap for new entrants into the market. It is a familiar criticism.

Paul Misener: It is, Lord Rees. If I may say so, it is a personal honour for me to appear before you. I have known about you for more than three decades. I went to university to be an astrophysicist and ended up becoming an electrical engineer in computer sciences.

Lord Rees of Ludlow: But you made good.

Paul Misener: I tried, Lord Rees. I did my senior thesis under a gentleman whom you may have known, David Wilkinson, at Princeton. Lord Rees and Professor Wilkinson had shared interests.

Lord Rees of Ludlow: Thank very much for your kind remarks.

Paul Misener: I had to take my chance.

Back to your question on price parity. Sellers through our website, our marketplace, are allowed to set their prices any way they want­—full stop. They can set them any way they want. Between 2010 and 2013, we did have price parity clauses, which basically required the seller selling through our website to sell at no higher than their lowest price elsewhere. We thought that this was important for our buyer customers: we wanted them to feel comfortable that when they came to Amazon, that they were seeing the best price from the seller customer. It was in the spirit of providing that confidence that we did that. Since then, we have allowed our buyer customers to price however they would like.

Lord Rees of Ludlow: I see, because they would not have agreed to this unless they were absolutely forced to.

Paul Misener: That was the thinking. It has turned out since we removed the price parity clause that they have continued to offer the lowest prices. We think that there are two reasons for that. First, almost all sellers sell through multiple channels. There is not exclusivity here; it is not as though Amazon is the only way to sell; there are multiple channels. Even within Amazon, those sellers are competing, potentially, against our retail business, but very likely against other third-party sellers. If they do not offer a really good price, they will not get any sales.

The Chairman: So, in effect, you are saying that since 2013, there are no price parity clauses in your relationship with suppliers.

Paul Misener: Yes, Chairman, that is correct.

The Chairman: That was because you saw the way the market was going rather than because of the French and German Governments, for example, stepping in to ban price parity clauses?

Paul Misener: It was a combination of things, for certain. We recognised that this was controversial, but, frankly, we wanted to see whether they would keep their prices low, and they have, which is an indication of the competition not only across sites but even within our site.

Lord Freeman: Just to be clear, are you restricting businesses on your marketplace from offering a lower price than on your main store?

Paul Misener: That is an amazing question. I have seen that allegation before. It makes no sense to us, because of course they can: they do all the time. It is demonstrable on the site. If you look at a particular product, oftentimes we the retail business are not the low-price seller; a third party is. They may, and they do. One reason why we like this so much is that it gives our buyer customers the confidence when they come to the site that if we are not offering the lowest price, they can buy it from someone else right there.

Lord Freeman: Therefore, where does this alleged allegation come from?

Paul Misener: I really do not know, because it is so demonstrable. I encourage you all to go to the site, choose a product and look at the different prices. Sometimes the retail business of Amazon will be the low-price seller, sometimes it will not. If we were always going to do that, we would not have a third-party marketplace: nobody would want to sell through us.

Lord Freeman: Thank you. For the record, you have cleared that up.

Q170   Baroness Randerson: Another complaint from suppliers is that they suffer lock-in because they cannot move their ratings and reviews to another platform. Should they be able to migrate their data from one platform to another?

Paul Misener: Thank you so much for that question, Baroness Randerson. I am not trying to draw out this answer, but it is important to distinguish a couple of things. In this case, these are not suppliers, they are third-party sellers who are using our services to sell through our website. We are not buying anything from them; they are availing themselves of our services to make sales. Secondly, where do these reviews come from? They come from our buyer customers. Our buyer customers tell us, Amazon, how the third-party seller performed. Sometimes it is in the form of a complaint, sometimes it is a compliment. It is a mixture. They are talking about how the seller performed, but it is content generated by the buyer, and they are loaning it to us to post on our website. We fear that if sellers themselves were to take this content—to which they actually have no right—elsewhere, they might cherry-pick it and use just the best reviews, not the bad ones. It has to be taken holistically.

We allow our third-party sellers to link off other websites—whatever website, perhaps their own—to the reviews at Amazon. That is perfectly fine, because anybody who links through and sees that will see all the reviews, not just the ones that they have chosen to feature.

The Chairman: That has raised the more general question about who owns the data that is on your system about both suppliers—or sellers—and customers.

Paul Misener: It is a great question that is difficult to answer, because there is a variety of different circumstances. In the one that we have just discussed with respect to seller reviews, the ownership is with the reviewer, meaning the customer who has posted a review. They give us limited license to use that information so that we can post it on the website to make it available to other customers. If they choose to remove it, they may do so, but it is not owned by the sellers, it is owned by the customers who bought something from the sellers.

However, there are other kinds of data that are stored in the Amazon ecosystem: for example, the product listings themselves. If the seller posts or lists on our marketplace platform 30 items, with descriptions of them, they can take those listings down or take them with them. Another circumstance is our cloud computing business, where businesses, primarily, but also consumers may store information and process it online, instead of doing it locally on their computers. Those customers own their data—full stop. They store it on our servers, but they can take it off any time they want. We have no ownership interest in that whatever.

The Chairman: Right. That is helpful. Baroness Donaghy.

Q171   Baroness Donaghy: Turning to Amazon’s Kindle e-books, we have heard that there is a lack of interoperability, with Kindle content not transferable to non-Kindle apps. E-books bought via Kindle can only be bought from the Amazon store. Non-Kindle e-books cannot be read on a Kindle. Kindle e-books can be read on a variety of devices via the Kindle reading app, but the e-books still have to be bought from Amazon. Would not the mandatory interoperability between e-book formats benefit the consumer and promote competition in the market?

Paul Misener: Thank you, Baroness Donaghy. I have also heard this allegation, not surprisingly. Mandatory interoperability would be a big mistake. It would actually deter competition and inhibit innovation. Let me explain.

First, the Kindle ecosystem is highly interoperable where it matters, which is to say where consumers have a variety of devices. They have iPads, iPhones, Android devices, PCs, laptops and Macs, not just Kindles. They have all those devices, so when one buys a Kindle book from Amazon, we make it available on all those devices: every single one. It turns out that that is a feature of Kindle that customers love. It is practical because they have a variety of devices on which they read. If you are reading in the morning on their iPad tablet and get on the train to go to work with your iPhone, we have a system that will take your last point of reading on your iPad and automatically transfer it to the first point when you read it on your iPhone while you are sitting on the train. It is called Whispersync, which is kind of an interesting brand name, but the idea is that that feature is available because it is in Kindle format. We are completely agnostic about the devices themselves. That is very important, because customers love that.

Where interoperability—mandatory standards—would be harmful is with respect to the format of the software. That would be a problem because right now we have innovated to the point where we think that we have the best e-book format. That might not last for ever; I am sure that other people are working on formats that could easily become more innovative than ours. I assume that they are innovating; we are innovating. To force us at this time, so early in the evolution of Kindle content, down into one standards group would tend to dumb things down.

Competition will flourish where we can make the case that our format is best and they can make the case that their format is best, and let consumers choose. To try to force it into a standard at this point would be highly premature. If you think about it, e-books are, what, eight years, not even a decade old. Everything is happening so quickly that that sort of interoperability would be counterproductive.

Q172   Lord Rees of Ludlow: Another issue is so-called dynamic pricing, which we have been told that you experimented with, there was a bit of flak and you had to give refunds to some customers because of complaints. Are you still doing this, or was it a failed experiment?

Paul Misener: I lived through that, Lord Rees. It was 15 years ago this past September. We were conducting a random price test. We were serving up different prices for DVDs. Several dozen DVDs were involved, and we were serving up discounts of anywhere between 20 per cent and 40 per cent and observing how consumers behaved: where they bought, where they did not. We did this over a five-day period, and it was detected.

There is a sort of humorous story that goes along with this. It turns out that a couple of professors were monitoring eBay variable pricing and using Amazon as the fixed price with which to compare it. Then they noticed, “Oh, gosh, Amazon’s price is changing”. They did things like walk down the hall to try it on another computer. They signed in with a different account. I am sure that they were getting different prices each time, so, not unreasonably, they assumed that we were serving up different prices based on the demographic information that we had about our customers.

I can tell you that that has never been done and never will be. We will never use demographic information to price. We will not use purchase history or whatever other assumptions. We will not do that and never have. In the case of this random price test, there is no other word for it than stupid. It was just a really dumb thing to do. We apologised for it and promised never to do it again, except in the context that if we ever did we would always end up charging only the very lowest price. We have not done it since. It was just dumb.

Q173   Baroness Donaghy: This question is about cloud computing. We have heard various concerns about how difficult it is to switch cloud provider. Netflix has said that switching cloud vendors from Amazon would be a significant multi-year effort. According to Eurostat, almost 30 per cent of European SMEs using cloud services experience difficulties in unsubscribing or changing provider. Is there not a need for clear standards to be introduced that facilitate data portability and the good old word interoperability, so that businesses can switch and competition can be quality-based? Finally, do you support the digital single market cloud initiative in this regard, which, I understand, will introduce cloud service certification and standards regarding terms and conditions of contracts, as well as switching cloud service providers? Of course, you will be aware that the Competition and Markets Authority recently launched an inquiry in the same area, so this will be a very crowded field of inquiry.

Paul Misener: Yes, it will, Baroness Donaghy. It bears at least 30 seconds of explanation of what cloud computing is again. It is a substitute where companies, businesses or individuals used to need to go out to buy hardware and software and pay someone to run it. Then it was highly inefficient and probably ran for only minutes out of a day testing the capabilities of the hardware. This is an alternative in which computing power is purchased as a service, not as a hardware, software and programmer package. It is on demand; you only pay for what you need, what you use. We would like our users, our cloud customers, to be able to move their data into our service and move it out as soon as they need to. For us, data portability is designed into the system. We really want it that way to make it easy. If there was some kind of a trap where data was stored and it was hard to get it out, that might work the first time, but that would be the only time; everyone else would eschew that kind of service.

I do not know whether Netflix’s number is right, but it is probably not surprising, only because of the vast amount of data that it has. All those high definition movies it has stored constitute terabytes of information. There is so much information. If Netflix had built a data centre full of computers and servers, rather than use AWS, our cloud business, and migrated to a new data centre, it would take them the same amount of time, or probably a lot more, to move it.

The Netflix issue is one of the size of its data; it has nothing to do with our cloud computing business. As it becomes clear which cloud service providers can provide that easy interoperability, they will be the very good ones. We have spent a lot of time and energy giving our cloud service customers access to the kind of software and operating systems they want. If they want to run it on LINUX, Windows or Java, they are easily able to do so. The second that they do not want to be on AWS, they can leave with no harm done.

With respect to the cloud initiative, we are participating, supporting it and trying to be as helpful as possible. We have some technical expertise in this area, and are happy to share it. It is very much in the early stages, so it is not clear how it will come out, but we are trying to be as helpful as possible.

Baroness Donaghy: And the Competition and Markets Authority inquiry? Are you aware of it and will you be participating in it?

Paul Misener: It is hard to imagine that we would not as a cloud service provider that is very interested in the entire digital market in Europe, as well as specifically in the UK.

Q174   The Chairman: Thank you very much for that. Perhaps we can begin to wind up this session. Our difficulty in this area is that we recognise a lot of the benefits of operations such as Amazon and those of colleagues from other platforms who we heard from earlier for consumers, at least in the short run, but we have also received a lot of evidence that these may be displaced technologies or displaced ways to do business but people are concerned about some of your practices and are demanding intervention by regulation or otherwise.

On the other hand, you and your fellow platforms are largely saying, “We do not want any regulation. It will stifle innovation. If we are to have regulation, it should be Europe-wide, so there are no differences between different countries”. Our difficulty is that the classical way of saying, “We don’t need any specific regulation”, is that you fall back on competition authorities’ assessment of abuse of markets as the way to deal with it. You do not need ex ante regulation specific to the particular business. In this field, it is difficult to define your market. Everyone assumes that in the market, Amazon is the biggest fish, but where are the boundaries of that market? Secondly, what is an abuse of that market, even if we could define it and say that you had X per cent of it within Europe, or whatever, as there seems to be some benefit to consumers? There may be some cost to some suppliers, but we would have to aggregate that.

If you were in the Commission looking at this issue, or looking at it from the point of view of a national regulator, how would you define the market and thereby perhaps minimise demands for special intervention or regulation to deal with the new features of the market presented by Amazon and similar platforms?

Paul Misener: Chairman, there is a lot in your question, and I would be happy to try to answer all of it. First, the Commission’s digital single market strategy and its focus on this is important. We are very supportive of it. We are a pan-European company. We are trying to serve our customers, both buyers and sellers, throughout the Union, so we are on the front line of recognising where there are barriers to the digital single market.

We welcome the Commission’s attention to those barriers. One has to do with postal rates and shipping. Within the US, for comparison, which has a similar size geographically and in population, shipping costs are based on distance. That is not so in the Union, where if you cross a few borders the shipping price goes way up. Parcel delivery across borders is just one example where the digital single market needs work, and we are grateful that the Commission is focusing on this, as well as the Lords.

We must remember that platform is a metaphor. It is obviously not a flat surface or a piece of wood that people stand on top of. It is an attempt to describe a set of services in a way that is familiar to individuals who are not familiar with the services. For example, to my teenager, who turns 14 today, I do not need to describe Uber in the context of a platform. If I said, “It is like a platform”, he would say, “What?” It is a GPS-enabled car service. He would know what Uber is, but to people who do not know, it is useful in certain contexts. I can describe Amazon’s marketplace for sellers as “It is a platform for …”, but then I have to quickly get into the detail, which is that these are sellers who are making their products available for sale alongside other sellers and alongside our retail businesses, et cetera.

It reminds me a lot of the period, about 15 or 16 years ago, when I joined Amazon. You may remember that the popular metaphor at the time was the information superhighway. Everyone talked about it and it got almost absurd. You would have on-ramps, off-ramps, speed limits, lanes, bridges and tunnels. It was never useful for regulating. It was too high an abstraction; it did not get you down to where the regulators needed to be, which was: is a DSL modem better than fibre to the home, and how do we deal with wireless and fixed services? The regulators need to get quickly into the detail. The exact same thing is happening with online platforms in the Commission. It is fine to call them online platforms in the context of explaining them to people who are not familiar with the services, but once you get past that first explanation of what a platform is, it completely breaks down.

I read that Ms Vestager said that she cannot see a common denominator in all these services. We agree. They are so radically different that it is hard to imagine developing a regulatory plan that would cover all or even a sufficient number of the services that have been listed. I tend to agree with Mr Chisholm, who said that we need more ex post regulation and less ex ante regulation. I do not know whether the current balance is right; I can say in this context that we do not need ex ante regulation, in large part because we cannot see three, five or 10 years down the road from now. If the same kind of inquiry for ex ante regulation were entered in, say, 2000—about the time I joined Amazon—the companies that the regulators would be focusing on would be America Online, Netscape and, a few years later, MySpace, Lycos and AltaVista. All those companies are moribund; they are gone, 15 years later. The thought that we can regulate this fast-moving, highly innovative market even a couple of years out, let alone five or 10 years out, is just not possible.

One thing I do know is that one thing will not change, and that is the basic demand of customers, at least in the retailing business, to have more selection, greater convenience and lower prices. As you know, my job is global; I am constantly asked what it is like doing business in Japan versus, say, Canada or France. Sure there are differences. One reason why we began Amazon.co.uk was to address those differences and to be able to have our UK customers have a better customer experience that focused on them. We had plenty of customers in the UK when we started as Amazon.com in the US, but there were a lot of reasons why the experience was bad: you had to pay in dollars, there were long shipping costs. Most of all, the content that we were focusing on on the Amazon.com website is of no interest to our UK customers, so establishing a UK website allowed us to focus on UK customers in a way that we could not before.

If I look to five or 10 years from now, I cannot tell you what the technological circumstances will be, and I cannot tell you which companies that are around today will still be around then, but I do know that customers will not have changed their desire for convenience, selection and low prices. So bearing in mind that the competition will go and the customers will remain the same, the ex ante regulation is not necessary.

I apologise for the long talk here, but I think this is important: we are not saying no regulation; we are saying that existing regulatory tools work. They are working today. We are involved with litigation right now, based on concerns about competition. We are co-operating with this, and this will go through a justice system that will turn out the right answer. So let us use those tools rather than try to take this metaphor and try to regulate around it, especially in the retailing world.

One last thought: in the retailing world, online remains less than 15 per cent of retail in the UK. It seems unusual, if not highly counterproductive, to focus on regulating just that 15 per cent and to leave the other 85 per cent alone.

The Chairman: Yes, I take the point, but to take one of your traditional competitors—shopping malls, say—shopping malls are probably about 15 per cent of retail trade, but if every shopping mall in the country was owned by the same people, the competition authorities would be worried. [2]

Paul Misener: I do not know if I can claim that we own 15 per cent of that. We actually have only a fraction of that.

Q175   The Chairman: Well, yes, but what we are grappling with is whether the Commission is right in saying that there is a particular problem here. It will probably end up saying, “Yes, there are all these small platforms, fine”, and it will develop something on that, “but there are some very big platforms that dominate particular ways of doing business, and we need to find a way of looking at them”. You are one of those bigger platforms, which are likely to be the victim, if you want to put it that way, of greater attention than the platform universe as a whole. Do you think the Commission is right in starting to look at that issue now? Generally speaking, I think you would say that consumers welcome this development, but there is a way in which, through the networking effect and all those other things, the big fish actually get bigger. Yes, at some point down the line there will be a big technological development or a new idea that will blow you out of the water, but, for the moment, you are the dominant operator in that field.

Paul Misener: Respectfully, I disagree, and here is why. Tesco is, what, nine times our size. We are far smaller than Tesco, yet it does not allow or provide facilities for competition in its stores. We talked earlier about customer reviews. What happens if I walk into a high street store and buy a sweater or a cardigan? I take it home, I wear it and it starts to get holes in it. I take it and wash it, and the dye runs out. May I write a bad review of that sweater, walk into the high street store and put it on the shelf? Absolutely not. So here is a circumstance in which it is not even allowing criticism in its stores, it is nine times bigger than us, the market is 85 per cent, and it is not allowing these things.

Moreover, here is another scenario. What if I see a stack of shoes, and my business sells shoes? What if I walked into the high street store and said, “Here are my shoes. I am going to put them right next to yours, and they might undersell yours”. That is preposterous. It does not happen. We, on the other hand, are providing tools for sellers to come on our site and compete directly with us, undersell us, undercut us. I remember investors, when we started doing this, saying, “This is crazy”, but over the long term it has built up customer trust to a point where customers now know that when they come to Amazon they know that they do not have to buy from Amazon Retail because there is some other seller there who is underselling us.

The Chairman: Okay. I will stop trying to get you to write our report. Do any of my colleagues have any final questions? Is there anything else that you would like to register with us?

Paul Misener: No, sir, only that this is very important. It is important to get it right. It is equally important not to get it wrong. We are very grateful for your sub-committee’s attention to this, because the report that comes out of the Lords, out of your sub-committee, will be very important in Brussels. We will not just express these views here; we will express them wherever we may. But this is such a respected group, not only the Lords but this very sub-committee, that I think what you say will carry great weight in the conversation in Brussels. You will recall that the digital single market consultation that is going on in Brussels is rather large, so it should not be unusual that a few companies do not like parts of it. We like some parts, so we are trying to help to distinguish between the parts that are very helpful to consumers and businesses long term and the parts that are not. So if this sounds like a complaint, it is only because we have been talking about one area.

The Chairman: Fair enough. Thank you very much for being so helpful to us. Good luck. We will call it a day there.