Amazon and EU Commission reach agreement over two antitrust probes
December 2022 will be remembered as a time of great change regarding the way some Amazon business practices operate in Europe. The EU Commission and Amazon have settled two antitrust cases signaling an end to competition probes throughout Europe. This new agreement means that customers will now have more visible choices when purchasing products on Amazon. For Prime members, this new agreement also means there are more delivery options.
The antitrust commitments were offered by Amazon and were agreed upon after a few adjustments made by the EU Commission and some seesawing back and forth, seeing one of the biggest shake-ups in EU antitrust rules. The main commitments identify the Commission’s conflicts regarding the use of non-public marketplace seller data by Amazon.
There has been growing concern over a potential bias in allowing sellers access to the platform’s Prime and Buy Box program leading to this new agreement.
EU Commission Concerns: What Are They?
Made up of 27 Commissioners, one from each member state of the EU, the EU Commission (EC) is the executive arm/branch of the European Union (EU). It is responsible for implementing various decisions, drafting legislation, and the management of business throughout the EU on a day-to-day basis.
The EC has a wide range of responsibilities, including promoting the interests of the EU and its citizens, managing the EU budget, enforcing EU laws and competition rules, and negotiating international agreements on behalf of the EU. It also plays a key role in shaping the EU’s policies and priorities. It comes as no surprise, then, that there have been many concerns related to these issues.
One of the major concerns was regarding Amazon’s use of non-public data associated with its marketplace sellers. An investigation was initiated in July 2019 and in November 2020, a Statement of Objections was issued by the Commission. This investigation found that Amazon was dominant in the provision of online marketplace services to third-party sellers in the French and German markets. Moreover, Amazon was shown to rely on non-public business data from marketplace sellers to help adjust the platform’s retail decisions. This prevented fair competition on the site.
In November 2020, a second investigation was undertaken, assessing the protocol surrounding Amazon’s selection of Buy Box winners and the platform’s allowing sellers to offer products under the Prime Programme. The Commission wanted to ascertain whether there was preferential treatment of the platform’s retail business or of the sellers who use Amazon’s delivery services and logistics.
This second investigation concluded that Amazon exploited its position of power on the German, French, and Spanish markets, providing online marketplace services to third-party sellers.
There’s more (cue dramatic music). Another preliminary conclusion was that the Buy Box and Prime rules and criteria, set out by Amazon, favoured the site’s own retail business, plus marketplace sellers who utilise the platform’s delivery services and logistics.
As you can see, the EU Commission decided it was time to take action (dramatic music crescendo).
EU Commission and Amazon Commitments.
Amazon felt a little sheepish after these findings. Rather than fight the Commission’s investigation conclusions, Amazon decided to address the concerns head on by proposing a selection of commitments.
To address the Commission’s data use concern, here is Amazon’s proposal:
- To not use any non-public data that relates or, or derives from, the activities of independent sellers on its marketplace, to benefit its own retail business. This commitment applies to Amazon’s employees and automated tools (anyone or anything that could merge the data from Amazon Marketplace, for decisions surrounding retail).
To address the Commission’s Buy Box concerns, Amazon had other proposals up its sleeve:
- To display a secondary competing offer to Buy Box winners if a different seller has a second offer that has an adequate distinction from the first offer (i.e., price and/or delivery). Both offers will also provide the same information and purchasing experience.
- When ranking offers for the purpose of selecting the Buy Box winner are made, to treat all sellers equally.
And, responding to major concerns surrounding Prime, Amazon proposed the following commitments:
- To establish non-discriminatory criteria and conditions for qualifying marketplace sellers and offers to Prime.
- To allow Prime sellers to select any provider for their logistics and delivery services and enter negotiations directly with that carrier.
- To not use any information that has been garnered via Prime about the performance and terms of third-party carriers, that can be used to benefit its own logistics services.
What Happened Next?
The EU Commission decided to test these commitments between July 2022 and September 2022, as a sort of “try before you buy” scenario. It consulted with all interested third parties to check whether they would be happy to remove the competition concerns.
Once this “test” was complete, Amazon revised the proposed commitments to the following:
- Make the second competing Buy Box offer more prominent, including a review system to improve its presentation. This is if the presentation does not attract enough attention from consumers.
- To provide a mechanism for independent carriers to contact their Amazon customers directly, but in accordance with data-protection regulations, therefore allowing them the chance to provide delivery services comparable to those provided by Amazon.
- Increase transparency and early flows of information to carriers and sellers about the commitments and newly gained rights, allowing for early transitioning of sellers to independent carriers, among other things.
- Enhance carrier data protection against use by Amazon’s competing logistics services, particularly for cargo profile data.
- In the event of suspected non-compliance with these commitments, to establish a centralised complaint method that would be available to all carriers and sellers.
- To boost the monitoring trustee’s authority by imposing additional notification requirements.
- Increase the length of the Prime and competing Buy Box commitments to seven years, rather than the originally suggested five years.
By committing to this, the EU Commission found that Amazon would not be able to use marketplace seller data to support its own retail operations, as well as allowing for non-discriminatory access to Prime and Buy Box.
Amazon is now legally bound to these commitments by the Commission.
For Prime and the display of the second competing Buy Box offer, these final commitments will continue for seven years. The remaining obligations will be in force for five years.
To monitor these commitments and ensure Amazon complies with each one, an independent trustee will supervise the company. So, Amazon, don’t misbehave!
If Amazon does decide to rebel (who knows what could happen in this crazy world?), the company would be imposed with a fine of up to 10% of its total annual turnover. That’s A LOT! This is without any infringement of EU antitrust regulations. There can also be a penalty payment of 5% per day of the platform’s daily turnover. This periodic fine would be in place for every day the company does not comply with the new commitments.
Amazon may not agree with these stringent responsibilities but promise to ensure they can “continue to serve customers across Europe and support the 225,000 European small and medium sized businesses selling through [their] stores.”
Now, we just wait and see if Amazon will abide by this new agreement. If not, get the popcorn ready!
1 February 2023
1 February 2023
1 February 2023