Big internet companies are on solid ground when they defend their right to collect and process data on consumers to improve their services. The problem begins when individual privacy is not sufficiently guarded.
In a nutshell
- Some of the criticism that President Trump directed at Amazon misses the mark
- Internet firms have built new retail tools that cause creative destruction in business; this process helps the economy
- It is the government’s role, though, to limit the emerging risks to consumers’ privacy and the creation of monopolies in the market
As commercial enterprises, Amazon and other technology giants have made fantastic progress, not only in sales but also in their stock valuations. However, they have come to public attention for other reasons lately. A controversy over the possible misuse of users’ personal data accumulated by Facebook has not yet subsided as another technology giant begins to receive unwanted publicity. President of the United States Donald Trump has fired some tweets critical of Amazon and its business model.
Amazon controls some 45 percent of the online retail business in the U.S. (or about 4 percent of the country’s total retail sales) and has become a retail powerhouse in several other developed countries. President Trump has raised several issues with this company. One charge is that Amazon does not pay enough to the postal service for delivery of its merchandise. Another, that the retailer pays insufficient taxes, and third, that as online shopping expands, jobs are being lost in shopping malls and other traditional outlets.
Problems no longer
One finds it rather odd that the issue of whether a company pays sufficiently or insufficiently for a postal service has become a topic of interest for the U.S. president. Presumably, this is a business issue between the postal service and Amazon. Also, it appears that the taxation matter is being addressed and the company is liable to pay taxes in nearly all U.S. states. The European Union, too, has looked into the matter and Amazon is likely to be charged more for conducting business here as well, at the expense of its profitability.
As part of natural market evolution, consumers increasingly do their shopping online, instead of driving to malls or visiting high street shops. Of course, a reduction of jobs in traditional retail most likely will follow, but new jobs are already being created elsewhere – in the distribution systems that service the online transactions. Amazon is the front-runner in this field. This revolution in retail can be slowed down by protectionist regulations. But eventually, the new system will prevail if that is what the consumers want.
The access to personal data by technology groups is a legitimate concern.
There are, however, two real concerns about the company that are not so easily dismissed.
There is Amazon’s towering market position, which can be used to squeeze suppliers and to push possible competitors out of the market. It is up to the U.S. legal system to decide whether these circumstances justify putting in motion an antitrust procedure. In this context, it is not reassuring that Amazon has a strong lobbying team and a publishing platform already in place in Washington.
Another point of concern is data protection. In the process of doing business, Amazon collects a wealth of information on individuals, their spending attitudes, their likes and dislikes and their behavior as consumers. This data is so comprehensive that Amazon’s algorithms can anticipate what people may order. Its pool of stored information is probably even bigger than the one Facebook has, and it covers a large part of the population in developed countries.
The biggest risk here is obvious: Is this information going to be put to other uses, to the detriment of Amazon’s customers? In this context, the coming update of the EU Data Protection Directive of 1995, which regulates the processing of personal data within the European community, may merit attention, despite its complexity, as a part of a possible solution.
The use of big data for business should not be a primary concern, but only as long as the objective is to improve services, not to acquire a dominating market position. Data misuse also becomes a threat when third parties trying to influence politics and media get hold of this valuable information.
To sum things up, the access to personal data by technology groups is a legitimate concern. It is especially dangerous now that governments are making broad demands for information about individuals, which is illicit, as it undermines the right to privacy, an essential ingredient of a free society. If accessible to the authorities or media, pools of information such as those collected by Amazon can facilitate damaging intrusions in citizens’ privacy.
President Trump might be correct on another point, though. As the issues of Amazon’s data and its retail market position arise, it is a concern that the company’s founder and CEO, and one of the largest shareholders, also owns the Washington Post, the U.S. capital’s most influential daily. One has to assume that neither the famous newspaper nor Mr. Jeff Bezos have the intention to misuse the information that is in possession of the retail behemoth. If it ever appeared to be to the contrary, this would make for a very unfortunate precedent.