Amazon settles EU allegations regarding third-party sellers on Amazon Marketplace: some progress made but much remains to be done

The European Commission has accepted a set of legally-binding commitments offered by Amazon to settle two long-running antitrust investigations into whether Amazon has abused its dominant position in e-commerce.  In doing so, the Commission will not issue a formal infringement decision and will not impose a fine.  

This is a significant outcome for these headline cases. The commitments will be of relevance to the 225,000 European businesses who rely on Amazon to reach their retail customers, and they have been tightened to some extent since the draft commitments that were published in July 2022. However, Amazon should feel lucky to have escaped without an infringement finding and with some manageable tweaks to what were arguably some egregious practices.

The commitments are limited to remedying some specific and narrowly-framed allegations. As will be discussed below, the outcome does not touch upon many of the broader criticisms that are levelled at Amazon such as the way in which its Prime bundle of products locks in consumers and excludes competitors, or various ways in which its own products are given preferential treatment in the listings of its e-commerce platform.

The two investigations

The Commission’s two investigations both relate to the ability of third-party sellers to compete on Amazon’s marketplace platform:

• Use of third-party seller data (case opened July 2019): Amazon has access to vast quantities of commercially sensitive data from third-party sellers on its marketplace and also competes as a retailer against those sellers. The Commission issued a Statement of Objections in November 2020 outlining its provisional view that Amazon should not rely on sellers’ non-public data to benefit its own retail decisions, as this distorts fair competition on its platform and prevents effective competition.

• Buy Box and Prime (case opened November 2020): The Buy Box prominently displays the offer of one seller and allows that product to be more swiftly purchased. Amazon’s Prime programme offers premium services to customers for a fee and allows certain sellers to sell to Prime customers. The allegation is that the rules and criteria for the Buy Box and Prime unduly favour Amazon’s own retail business, as well as marketplace sellers that use Amazon’s logistics and delivery services. This bias may harm other marketplace sellers, their independent carriers, other marketplaces, and consumers who are not shown the best deals. In terms of procedure, the Commission did not (yet) issue a Statement of Objections in this case.

The commitments

Amazon is committing not to use non-public third-party seller data in competition with those sellers.  The relevant data covers both individual and aggregate data, such as sales terms, revenues, shipments, inventory related information, consumer visit data or seller performance on the platform. Amazon is committing not to use such data for the purposes of selling branded goods as well as its private label products. The commitments cover both Amazon’s automated tools and its staff.

Regarding the Buy Box, Amazon is committing to apply equal treatment to all sellers when ranking their offers for the purposes of the selection of the winner of the Buy Box. It is also committing to display a second competing offer to the Buy Box winner if there is a second offer that is sufficiently differentiated from the first one on price and/or delivery.  Both Buy Boxes will display the same descriptive information and provide the same purchasing experience.

Regarding Prime, Amazon is committing: (a) to set non-discriminatory conditions and criteria for sellers to qualify for Prime, (b) to allow Prime sellers to freely choose any carrier for their logistics and delivery services and negotiate terms directly with the carrier of their choice, (c) not to use any information obtained through Prime about the terms and performance of third-party carriers, for its own logistics services, and (d) to no longer prevent sellers from contacting the consumer directly. 

Amazon has six months in which to implement the commitments, meaning that they will be in operation perhaps nine months before the obligations contained in articles 5 and 6 of the DMA of the Digital Markets Act (“DMA”) will need to be complied with by designated gatekeepers (amongst which Amazon is expected to figure). The Commission will presumably want to highlight this timing as a benefit of its chosen outcome.

The coverage of the commitments

Both Amazon and the Commission seem to believe that the commitments regarding the use of third-party seller data are sufficient to meet Amazon’s obligations under the DMA on that issue.

In her press conference on 20 December 2022 to announce the commitments, EVP Vestager was at pains to say that the Buy Box and Prime commitments actually go further than the requirements of the DMA. This is true as there is no need to show a second Buy Box under the terms of the DMA, and there is no explicit reference to the Prime criteria in the DMA. This case will therefore be a useful example to give in answer to the common question about the continuing role of antitrust in the digital sector after the DMA is in force. (By contrast, the codes of conduct under the UK’s Digital Markets Unit are still to be drafted, and could reasonably include these issues.) There may even be an argument that the commitments go further than what could legally be imposed by the Commission following an infringement decision.

The Buy Box and Prime parts of the commitments will last for seven years, whereas the data commitments will only last for five years (like Amazon’s previous EU commitments in the E-books sector, which have now expired). The difference is presumably because those parts that are not covered by the DMA need to last longer.

Given the nature of the commitments, there are many things that are not covered. First, the commitments obviously only cover the European Economic Area and therefore do not touch Amazon’s practices in the US, UK or elsewhere in the world. (NB The Buy Box and Prime commitments do not cover Italy due to the Italian competition authority already having imposed remedies on these issues in November 2021.)

Second, the commitments only benefit “Sellers”, that is, third-party sellers that sell products using Amazon’s marketplace services. They do not benefit “Vendors”, that is, brands/manufacturers/wholesalers who sell their goods to Amazon for Amazon itself to resell on Amazon.com. Amazon can still use Vendors’ data howsoever it wishes. Amazon is also free to push sellers to being Vendors rather than Sellers (which was a practice discussed in the US House of Representatives Sub-Committee on Antitrust report on competition in digital markets of October 2020 (the “US House Report”)).

Third, there are many ways in which Amazon can continue to self-preference its own retail products and private label products to the detriment of Sellers and Vendors (and ultimately consumers who may pay more or buy a product that is less well suited to their needs). Sellers should expect Amazon’s own products to continue to be prominent in its search results. This self-preferencing is a major problem for brands who sell through Amazon, and the commitments do not address this at all.

Fourth, many other business practices are unaffected. The commitments do not help sellers get access to their data about their own sales on Amazon’s platform. Amazon is not prevented from tying or bundling various other services with its dominant platform services, such as services related to advertising and marketing, supply chain and logistics, printing, account management, and data analytics. Amazon remains free to charge whatever fees and commissions it wishes to. The commitments also do not prevent any pricing practices such as the use of most-favoured nation clauses or below-cost predatory pricing. The commitments do not contain a general dispute resolution mechanism for sellers who believe they have been treated unfairly, and they do not protect sellers from bullying or retaliation (such practices again being a focus of the US House Report). None of these topics were at issue in the Commission’s two cases.

Fifth, in terms of monitoring and enforcement, the commitments do not require any operational or structural separation between Amazon’s platform and retail businesses. They are vague about how precisely Amazon will handle sellers’ data in future. Monitoring Amazon’s compliance with these commitments will be a significant challenge for the Commission even with the envisaged monitoring trustee in place.

Conclusion

This is a significant case and the Commission will tout it as a significant victory against one of the Big Tech firms. The commitments address some notable criticisms of Amazon’s practices. However, their effect should not be overstated as they apply only to third-party sellers and they represent a compromise position without setting a legal precedent. The Commission will need to work hard to make sure Amazon complies with their spirit as time goes on.

The cases against Amazon thus far arguably have not focused directly upon its core first party e-commerce platform, or its business model that has the Prime bundle as its flywheel. The European cases in Italy, France, UK and today’s EU commitments have focused on aspects of Amazon’s third-party marketplace, which represents less than a quarter of its revenues.  Indeed, to the extent that the EU and UK cases focus on the advantages given to Amazon’s private label products, we should note that these only represent around 1% of its revenues.  The two US State Attorney-General cases (and the historic e-books case in the EU) focus on a specific pricing practice that uses most-favoured nation clauses to restrict sellers’ pricing freedom on non-Amazon websites.

Therefore, up to this point, Amazon has done relatively well in avoiding competition law hazards compared to its Big Tech rivals such as Apple and Google. It has received no adverse decisions or fines at the EU level; it has not formally been subject to US Department of Justice or Federal Trade Commission proceedings; and it has not been the subject of a market study by the Competition and Markets Authority (“CMA”) in the UK. It also has not been subject to any merger prohibitions, despite making frequent acquisitions of companies such as iRobot (2022), One Medical (2022), MGM Studios (2021), Ring (2018), Blink (2017), and Evi Technologies (2013) to help develop its smart home products, video streaming content, door security, cameras and voice assistant respectively.

This state of affairs may change now that the DMA is being implemented and the UK’s digital markets regime is progressing. More parts of Amazon’s business model will be analysed and affected. There is also proposed bipartisan legislation in the US known as the American Innovation and Choice Online Act, S. 2992, which would prohibit platforms from self-preferencing, but its progress admittedly seems uncertain in the current Congress.

It will be interesting to see how the CMA deals with its ongoing investigation, which is very similar to the Commission’s. Will the CMA simply seek to expand the geographical scope of the Commission’s commitments to include the post-Brexit UK, or will it identify some aspects of the commitments that it deems too soft on Amazon? Will it even consider that this case requires an infringement decision and a fine rather than compromising on a set of behavioural commitments? It is not obvious that there are any substantive differences in the way the relevant markets operate in the UK, so any divergence will be eagerly discussed.