Looking for big acquisitions outside its core markets

Amazon has agreed to acquire OneMedical, a US-based healthcare provider, for $3.9bn. The Seattle-based giant is looking for growth in adjacent areas as big acquisitions in its core businesses, mainly e-commerce, are highly scrutinised by regulators due to its significant market share.

After lengthy investigations from Brussels, and in order to avoid hefty fines, Amazon offered concessions to regulators on the way its retail business operates. But with the retailer being perceived as a digital monopoly and the subject of past antitrust and data privacy investigations, its foray into healthcare will be far from smooth.

Amazon wants to consolidate its presence in healthcare

OneMedical is a membership-based service that offers both virtual care and in-person visits. It also works with more than 8,000 companies to provide its health benefits to employees. The primary care provider will join other Amazon healthcare offerings like its online pharmacy, telehealth services and nascent diagnostics business.

Amazon’s new healthcare services could be tied up to its Prime subscription offerings—for example, offers of discounted healthcare to Prime members—similar to pharmacy benefits that the company has already added to Prime.

The dual role is under scrutiny

Amazon has been under increased antitrust scrutiny on both sides of the Atlantic due to its dominance in e-commerce. In 2020, the EU Commissioner Margrethe Vestager hit Amazon with antitrust charges following an inquiry into how the tech giant misuses the data of third-party merchants that rely on its online marketplace to favour its own products.

The EU watchdog condemned Amazon’s dual role of both hosting and competing against other merchants, which means it could potentially use sensitive information about its competitors to its advantage. The company’s dominant position in e-commerce has also come under scrutiny from the US Congress and the Federal Trade Commission (FTC).

Coming to a truce with EU regulators

As part of a deal with Brussels to end the two-year investigation, Amazon has now offered to stop using the huge troves of data it gathers from third-party sellers to benefit its own retail business. Another important concession that the tech giant is willing to make is to increase the visibility of rival products by giving them equal treatment when posting their offers on its ‘buy box’, which directs a large part of purchases on the site.

Amazon’s deal with EU regulators could not have been more timely. The European Parliament has recently approved the final draft of the Digital Markets Act, the biggest overhaul of digital legislation in decades. When it comes into force, the legislation will ban technology groups from ranking their own products and services at the expense of rivals, as regulators seek to ensure a level playing field in Europe.

The power of super platforms

Amazon and other Silicon Valley giants have built large ecosystems of complementary products and services around their core operations. Their vast troves of data and immense scale make it possible for these super platforms to expand their services into new markets, some of which are traditionally dominated by non-digital firms. It is hard for incumbents in these disrupted markets to compete with super platforms that boast superior data and formidable computing power.

Amazon kickstarted its evolution to a high-street retailer from purely an online one with the $13.7bn acquisition of Whole Foods Market in 2017, while its $8.45bn purchase of film and television distributor MGM Studios last year marked its bold move into the entertainment industry. The company’s ambitions in healthcare will, however, need the green light from antitrust regulators in Washington, who have been openly critical of Big Tech’s data monopolies. In a complex industry like healthcare, anticompetitive practices and violations of privacy will not be tolerated.