The European Commission Accepts Amazon’s Commitments
Introduction and Background
Amazon, a world-famous company, is an e-commerce company that operates the world’s largest online shopping platform. In the backstage, Amazon is a data-driven company whose retail decisions are mostly driven by automated systems, fueled by the relevant market data. That being said, Amazon has a dual role as a platform: It runs a marketplace where independent sellers can sell products directly to consumers and at the same time, it sells products on its platform as a retailer, in competition with independent sellers. As a result of this dual position, Amazon has access to large sets of data about the independent sellers’ activities on its platform, including non-public business data.
On 17 July 2019, the European Commission (“Commission”) had launched a formal investigation[1] to assess whether Amazon’s use of this non-public data from independent retailers selling in its marketplace breached the European Union competition rules.
In parallel, the Commission had launched a second investigation[2] on 10 November 2020 into:
- Amazon’s Buy Box practice, which prominently displays the offer of one single seller and allows products to be swiftly purchased by directly clicking on a buy button, and;
- Amazon’s Prime program, which offers premium services to customers for a monthly or yearly fee and allows independent sellers to sell to Prime customers under certain conditions.
- Usage of data.
Figure: The Buy Box. When a buyer purchases a product through these buttons (as opposed to viewing all listings), they purchase through a specific seller that was promoted by Amazon (based on price, delivery terms, rating of the buyer etc.). Buy Box often included/prioritized listings by Amazon itself.
In response to the investigations, Amazon had submitted a package of commitments to the Commission in July 2022, attempting to address the three concerns of the Commission, namely those relating (i) to the Buy Box, (ii) to Prime membership and (iii) usage of data. The Commission conducted a market test and received the views of all interested third parties on Amazon’s proposed commitments by 9 September 2022. After collecting the third-party opinions and evaluating the commitments, the Commission has made commitments offered by Amazon legally binding under EU antitrust rules on 20 December 2022.
This article examines the Commission’s competitive concerns and Amazon’s final commitments that were accepted by the Commission.
The Commission’s Concerns
Article 102 of the Treaty on the Functioning of the European Union (TFEU) prohibits the abuse of a dominant position that may affect trade within the EU and prevent or restrict competition.
In this regard, the Commission, in the two investigations it conducted, aimed to determine whether Amazon held dominant position in any markets in the EU area, and whether Amazon’s practices constituted abuse.
The Commission’s Statement of Objections outlined that Amazon was found to be dominant in the French and German markets, for the provision of online marketplace services to third-party sellers.
The Commission provided its preliminary view that Amazon should not rely on independent sellers’ business data to calibrate its retail decisions, as this distorts fair competition on its platform and prevents effective competition. In other words, Amazon gathering business data of its competitors in the retail market through its role as a marketplace operator would bestow upon it competitive advantage its competitors did not have.
Furthermore, the Commission also preliminarily found that the rules and criteria for the Buy Box and Prime unduly favor Amazon’s own retail business, as well as marketplace sellers that use Amazon's logistics and delivery services. The Commission emphasized that this bias may harm other marketplace sellers, their independent carriers, other marketplaces, as well as consumers that may not get to view the best deals. Utilization of the two services in a way that favors Amazon’s listings and products would be discriminatory against its competitors in the retail market.
The Commitments
To address the Commission’s competition concerns in relation to both investigations, Amazon has offered commitments. Amazon’s initial commitments were shaped into the following commitments after the collection of third-party opinions:
- Improve the presentation of the second competing Buy Box offer by making it more prominent and to include a review mechanism in case the presentation is not attracting adequate consumer attention;
- Increase the transparency and early information flows to sellers and carriers about the commitments and their newly acquired rights, enabling early switching of sellers to independent carriers;
- Lay out the means for independent carriers to directly contact their Amazon customers, in line with data-protection rules, enabling them to provide equivalent delivery services to those offered by Amazon;
- Improve carrier data protection from use by Amazon’s competing logistics services, in particular concerning cargo profile information;
- Increase the powers of the monitoring trustee by introducing further notification obligations;
- Introduce a centralized complaint mechanism, open to all sellers and carriers in case of suspected non-compliance with the commitments;
- Increase the duration of the commitments relating to Prime and the second competing Buy Box offer to seven years, instead of the initially proposed five years.
The Commission indicated that Amazon’s final commitments listed above will ensure that Amazon does not use marketplace seller data for its own retail operations and that it grants non-discriminatory access to Buy Box and Prime. Accordingly, the Commission decided to make them legally binding on Amazon pursuant to Article 9(1) of the EU Antitrust Regulation (Regulation No 1/2003).
The offered commitments cover all Amazon’s current and future marketplaces in the European Economic Area.[3]
If Amazon were to breach the commitments, the Commission could impose a fine of up to 10% of Amazon's total annual turnover, without having to find an infringement of EU antitrust rules or a periodic penalty payment of 5% per day of Amazon's daily turnover for every day of non-compliance.
Conclusion
As a result of the acceptance of Amazon’s commitments, two of Amazon’s most prominent business practices, namely the Buy Box and the Prime membership program have taken a significant blow in the EU. Amazon committed to ensure transparency of these practices, which should prevent Amazon from discriminating between certain parties or gaining any advantage in promoting its certain listings or utilizing its certain cargo services. In addition, the Commission has made it clear that data and how online platforms use it - an important topic in current competition law practice – may constitute a form of abuse of dominance and undertakings should pay attention to process business data in conformity with competition regulations.
- Case Number: AT.40462
- Case Number: AT.40703
- They exclude Italy for the commitments related to Buy Box and Prime in view of the decision of 30 November 2021 of the Italian competition authority which already imposed remedies on Amazon with regard to the Italian market.
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