Amazon’s revenues reached half a trillion dollars in 2022, having increased tenfold in a decade. There are few companies as fascinating and impressive as Amazon and arguably no other company occupies such a central position in the modern retail economy in the US and Europe. Its famous e-commerce platform represents more than half of e-commerce in some countries, but it also has a leading position in activities including logistics, cloud computing services, voice assistants, video on demand subscription, book publishing, smart speakers, batteries, diapers (nappies), and advertising, to name just a few.
As a result, many businesses including brands, manufacturers, wholesalers, and third-party sellers rely on Amazon to reach their customers. They appreciate its ability to connect them efficiently to a wide array of customers, but they do want it to provide a level playing field where businesses that offer the best products can prosper because consumers can easily find and buy their genuine products for the best price.
This is why they are coming together in the Responsible Online Commerce Coalition (ROCC), which has been founded by Damien Geradin and Tom Smith of Geradin Partners (covering the EU and UK), and Amanda Lewis of Cuneo Gilbert & LaDuca (who led the Amazon aspects of the seminal US House Sub-Committee investigation into digital markets), with significant input from leading industry expert, Jason Boyce of Avenue7Media.
ROCC members include some of the world’s largest household brands as well as small businesses (there are 225,000 small businesses who sell through Amazon Marketplace in Europe alone). ROCC’s focus is primarily on the U.S., the European Union, and the UK, but these issues are global in scope. We will work constructively with policymakers, legislators, competition authorities and courts in making balanced and evidence-based submissions that will improve the quality of the debate.
12 Key Principles
ROCC proposes to pursue a level playing field by promoting the following principles in online commerce:
- Equal Access to Platform: Every business should have access on reasonable, fair, and non-discriminatory terms to the major multi-brand e-commerce platforms. Furthermore, every business should be free from being coerced into any particular type of business relationship with a platform. For example, a brand should be able to freely choose between acting as a wholesaler or third-party seller (or both) on platforms that offer both options.
- Fair Dispute Resolution: Platforms should not bully or punish business customers arbitrarily and without due process for conduct that may be perceived as a breach of the platforms’ explicit or de facto policies. Platforms should provide transparency and a clear, impartial, and timely method of resolving disputes.
- Competitive Fees and Commissions: Business customers often have no choice but to accept the terms that a dominant e-commerce platform such as Amazon dictates. No business customer should be required to pay unfair, unreasonable, or discriminatory fees or revenue shares to a platform.
- Equal Access to Data: When businesses lack useful data about how their business performs on a platform, including data related to their sales or advertising, this interferes with their ability to satisfy consumer preferences and compete effectively with other brands or sellers, including the platform. As such, business customers should have timely access to the same data and technical information about their activities on the platform as the platform owner.
- Ability to Communicate Freely with Customers: In some cases, e-commerce platforms disintermediate businesses from their customers in a way that is not justified by the need to protect user data or security. Business customers should be permitted to communicate and conclude contracts directly with their consumers, without interference from the platform, and should also be given the means by which to do so.
- No Self-Preferencing: When platforms are vertically integrated and compete against their own customers in a downstream market, they should be prohibited from giving their own downstream offering an unfair advantage. For example, Amazon’s use of a business customer’s data to benefit Amazon’s own private label or retail business, when that business user is an actual or potential competitor, is an unfair commercial practice. Platforms should therefore verifiably firewall their business customers’ competitively sensitive data from the platform’s actual or competing business lines, including their product development and private-label teams. If this cannot be done successfully, a dominant e-commerce platform, such as Amazon, should be prohibited from operating as a seller on its own platform. Furthermore, platforms should not be allowed to give their own products an unfair advantage over competing business users’ products when it comes to product search, results listings, promotions, recommendations, or other aspects of the platform’s user interface.
- Prevention of Fake and Counterfeit Products: Because the contravention of intellectual property rights stifles innovation, and harms both businesses and consumers, platforms should remove products that contravene brands’ intellectual property or otherwise mislead consumers in a timely manner. They should provide a clear and transparent process through which intellectual property owners can protect their rights. In this regard, businesses who are not currently present on the platform should be treated equally to those who are. In addition, a platform should not weaponise its ability to loosen or tighten the flow of counterfeits on its platform as a stick to punish business customers who do not bend to its will.
- No Tying of Products or Services: In addition to the core platform service, business customers are often effectively required to purchase various other services from the platform including services related to advertising and marketing, supply chain and logistics, printing, account management, and data analytics. This is the case although business customers often do not want to, and would not, buy these additional services absent the platform’s tying. Platforms should not tie services that could be offered independently; nor should they effectively force brands to purchase additional services from the platform with carrots (that do not result directly from verifiable cost savings) or sticks.
- Freedom to Set Prices and Offer Discounts: Platforms should not prevent or disincentivize business customers from selling their products for a lower price or at a discount elsewhere. For example, Amazon’s most-favoured nation (MFN) clauses currently restrict third-party sellers from offering lower prices for the same products sold through other channels – including the sellers’ own websites. In doing so, Amazon effectively sets the minimum price at which a seller can sell a product anywhere at a higher rate, as the price on Amazon includes the platform’s high commissions and other fees. The clauses therefore artificially increase the prices available through other channels. Dominant platforms like Amazon should not impose these or similar MFN clauses, whether as an explicit or de facto condition of selling on the platform.
- No Unfair Methods of Competition: Dominant online platforms often engage in unfair methods of competition including, but also in addition to, those identified in our other principles. Such conduct includes predatory pricing and monopoly leveraging. For example, Amazon’s abuse of its monopoly power in online commerce to gain leverage to force businesses to accept take-it-or-leave-it contract terms or gain leverage in adjacent or unrelated markets is an unfair commercial practice. Online commerce platforms should be stopped from engaging in unfair methods of competition to ensure a level playing field for all businesses that participate in online commerce.
- Pro-Competitive Global Trade Policy: International trade agreements should promote competition in digital markets rather than protect or expand the monopoly power of any dominant online platform. Consistent with this, international trade agreements should not include provisions that would undermine efforts by individual countries or groups of countries to put in place policies that would prevent dominant online platforms from abusing their monopoly power to the detriment of businesses that rely on the platform, as well as consumers and competitors.
- Freedom from Retaliation: E-commerce platforms should not retaliate against any business customer that raises concerns with any law enforcement authority, law-making body, or policy-making body about actual or potential violations of law, or any business customer that brings an action to enforce the law. Furthermore, platforms should not retaliate against any business customer for raising or expressing concerns on a public or non-public basis about unfair business conduct or practices, including any abuses of dominance or market power.
Amazon has had some involvement with competition law thus far, but we believe it should receive more attention. The main cases arguably have not focused directly upon Amazon’s core first-party e-commerce platform or its core business model that revolves around the Prime bundle and its flywheel effects. The European cases in Italy, France, UK and at the European Commission have focused on aspects of Amazon’s third-party marketplace, and the existing US cases have focused on its MFN clauses, which is only one part of the jigsaw.
We believe that competition law and regulation still have not fully grappled with the effects of Amazon’s business model (and we will be publishing further articles to explain our views on this). Amazon 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 (although this may change), and it has not been the subject of a market study in the UK by the Competition and Markets Authority (CMA). It also has not been subject to any merger prohibitions, despite making frequent acquisitions of companies such as Evi Technologies (2013), Blink (2017), Ring (2018), MGM Studios (2021), One Medical (2022) and iRobot (2022, but still subject to review) to help develop its voice assistant, cameras, door security, video-streaming content, membership-based primary care and smart home products.
Now is the right time to pursue these issues, with important milestones in legislative, policy, and enforcement initiatives being imminent in the three jurisdictions.
- In the US, the bipartisan American Innovation and Choice Online Act, S. 2992, would prohibit platforms from self-preferencing and represent substantial progress in advancing ROCC’s key principles. The District of Columbia Attorney General and the California Department of Justice have brought proceedings alleging that Amazon’s policies block price competition and increase prices available on other marketplaces through the use of its MFN clauses. Amazon successfully filed a motion to dismiss in March 2022 and the Attorney General is appealing the dismissal. The California Department of Justice filed a lawsuit on similar grounds on September 14, 2022. There is also an ongoing class action in the U.S. District Court for the Western District of Washington pending on a similar subject matter. According to public reports, the Federal Trade Commission has several active and ongoing investigations into Amazon’s potential violation of U.S. antitrust law, so further cases are expected. The FTC has also issued a new policy statement in November 2022 regarding the scope of Section 5 of the FTC Act, which prohibits “unfair methods of competition” and is very relevant to these issues.
- In the EU, the Digital Markets Act (DMA) has been passed and is now in force. There will be a designation process for Amazon and potentially other ecommerce platforms during 2023, and then designated gatekeeper ecommerce platforms will have to apply the obligations contained in Articles 5-7 of the DMA by March 2024. . The German Federal Cartel Office has also designated Amazon as an undertaking of paramount significance, meaning that it will be subject to the new regulatory regime. The European Commission is implementing commitments arising from two investigations into: (1) Amazon’s use of non-public data from independent retailers selling in its marketplace, which are said to be used in Amazon’s own retail decisions, and (2) the rules and criteria for the Buy Box and Prime, which are said to unduly favour Amazon’s own retail business, as well as marketplace sellers that use Amazon’s logistics and delivery services.
- In the UK, the UK Government will publish its draft Digital Markets, Competition and Consumer Bill, which will give the Digital Markets Unit (DMU) regime its powers, in the current session of Parliament and it is expected to become law during 2023. In parallel, the DMU is drafting the new rules that will apply to the digital gatekeepers. The CMA will need to conduct a market study into e-commerce, focusing on Amazon, which will feed directly into the new DMU rules and other regulatory initiatives. The CMA is also investigating substantially the same subject matter as the Commission (note that the EU commitments do not apply to the post-Brexit UK) but has not revealed its intended decision.
We therefore believe now is the time to make a positive contribution on these issues so that all sides of the debate are properly represented.
Get in touch
We look forward to working productively to provoke changes that will benefit businesses, consumers and the wider economy in this vital area. Further information is available at https://theroccoalition.com/, but please also reach out to a ROCC team member if you have any thoughts or queries.