Amazon will be subject to an official investigation by the EU Competition Commission over whether it uses sensitive sales data from independent retailers to its own advantage.
The antitrust probe will investigate standard agreements between Amazon and the small sellers that use its Marketplace section and whether the seller data is used by Amazon unfairly. It will also look into how Amazon uses data to choose which retailer to link to using the 'Buy Box' section of its site.
The announcement dovetails with Amazon's revealing plans to make changes to its third-party seller service agreement in response to a separate antitrust investigation by German regulators.
Commissioner Margrethe Vestager, who is in charge of competition policy, said: "European consumers are increasingly shopping online. Ecommerce has boosted retail competition and brought more choice and better prices.
"We need to ensure that large online platforms don't eliminate these benefits through anti-competitive behaviour. I have therefore decided to take a very close look at Amazon's business practices and its dual role as marketplace and retailer, to assess its compliance with EU competition rules.”
Amazon said it would "fully cooperate" with the investigation, which could lead to a potential fine if violations are found.
To date, Amazon has avoided being hit financially by EU regulators. Rival Google hasn't been so lucky, having racked up a €1.5bn (£1.28bn) fine from European regulators for abusing its dominant position in the online ad market in March.
It comes as Amazon offers consumers $10 of credit in exchange for tracking their shopping habits and the promotions of rival retailers.