Amazon staring at a possible $425 million fine from the EU, here’s why

The penalty represents a little more than 0.1 per cent of Amazon's $386.1 billion in yearly sales in 2020.

Amazon staring at a possible $425 million fine from the EU, here's why
The Luxembourg case is linked to alleged violations of Europe's GDPR - General Data Protection Regulation, related to Amazon's collection and use of personal data. (Photo credit: AFP)

Amazon.com Inc could be penalised over $425 million under the European Union’s Privacy Act, part of a process that could generate the biggest fine under the union’s privacy law, a few individuals familiar with the matter said. According to reports, Luxembourg’s CNPD (National Commission for Data Protection), has distributed a draft decision and recommended a penalty underlining Amazon’s privacy practices amidst the bloc’s 26 national data protection officials. The CNPD is Amazon’s top privacy regulator in the European Union because Amazon has its European Union base in the Grand Duchy.

Why the fine?

The Luxembourg case is linked to alleged violations of Europe’s GDPR – General Data Protection Regulation, related to Amazon’s collection and use of personal data, and isn’t linked to Amazon Web Services, its cloud-computing business as per the reports.

The spokesperson from Amazon declined to comment.

The e-commerce giant has earlier said the privacy of its patrons is a priority and it complies with the law in all countries where it provides its services. According to a spokesperson for the CNPD, the regulator isn’t allowed to say anything on individual cases.

Before the draft resolution can be finalised, it must effectively be accepted by all the other members of the European Union. A process that could take months at best and therefore lead to significant changes, including a higher or a lower fine.

How much could Amazon be fined?

The penalty represents a little more than 0.1 per cent of Amazon’s $386.1 billion in yearly sales in 2020, and under GDPR, a company can be penalised up to four per cent of its annual global sales for the harshest violations of the law. Translating, that Amazon could face a maximum fine of almost $ 1.5 billion.

Amazon adding its name to the list

Earlier this week, Alphabet-owned Google was supposed to pay a $268 million fine as announced by France’s competition regulator, to settle a case related to misuse of dominance in the online advertising sector, as well as overhaul its global ad business model.

And earlier this month, regulators in both EU and the United Kingdom opened formal probes into Facebook over whether it unjustly practised user data to improve its classified ads platform.