European Commission says Amazon has breached EU competition laws on abuse of dominance

November 12, 2020

The European Commission has informed Amazon about its preliminary view that Amazon has breached EU competition rules by distorting competition in online retail markets. The Commission takes issue with Amazon systematically relying on non-public business data of independent sellers who sell on its marketplace, which benefits Amazon’s own retail business, which directly competes with those third party sellers.

The Commission has also opened a second formal antitrust investigation into the possible preferential treatment of Amazon’s own retail offers and those of marketplace sellers that use Amazon’s logistics and delivery services.

Amazon has a dual role as a platform: it provides a marketplace where independent sellers can sell products directly to consumers; and it sells products as a retailer on the same marketplace, in competition with those sellers.

As a marketplace service provider, Amazon has access to non-public business data of third party sellers such as the number of products which have been ordered and sent out, the sellers’ revenues on the marketplace, the number of visits to sellers’ offers, delivery data, sellers’ past performance, and claims on guarantees.

The Commission’s preliminary findings show that very large quantities of non-public seller information is available to employees of Amazon’s retail business and flows directly into their automated systems, which aggregate the data and use the information to calibrate Amazon’s retail offers and strategic business decisions to the detriment of the other marketplace sellers. For example, it allows Amazon to focus its offers in the best-selling products across product categories and to adjust its offers in light of what it finds out about competing sellers.

The Commission has issued its Statement of Objections. It says that the use of non-public marketplace seller data allows Amazon to avoid the normal risks of retail competition and to leverage its dominance in the market for the provision of marketplace services in France and Germany- the biggest markets for Amazon in the EU. If confirmed, this would infringe Article 102 of the Treaty on the Functioning of the European Union (TFEU) that prohibits the abuse of a dominant market position. The Statement does not prejudge the outcome of an investigation. 

The Commission has also launched a second investigation into Amazon’s business practices that might artificially favour its own retail offers and offers from marketplace sellers that use Amazon’s logistics and delivery services (the so-called “fulfilment by Amazon or FBA sellers”).

In particular, the Commission will investigate whether the criteria that Amazon sets to select the winner of the “Buy Box” and to enable sellers to offer products to Prime users, under Amazon’s Prime loyalty programme, lead to preferential treatment of Amazon’s retail business or of the sellers that use Amazon’s logistics and delivery services.

The “Buy Box” is displayed prominently on Amazon’s websites and allows customers to add items from a specific retailer directly into their shopping baskets. “Winning” the “Buy Box” (that is, being chosen as the offer that features in this box) is crucial to marketplace sellers as the Buy Box prominently shows the offer of one single seller for a chosen product on Amazon’s marketplaces, and generates the vast majority of all sales. The other aspect of the investigation focuses on the opportunities for marketplace sellers to effectively reach Prime users. Reaching these consumers is important to sellers because the number of Prime users is continuously growing and because they tend to generate more sales on Amazon’s marketplaces than non-Prime users.

This could also breach Article 102 of the TFEU. The Commission will now carry out its in-depth investigation as a matter of priority. The opening of a formal investigation does not prejudge its outcome.

The Times has reported that in 2019 Amazon’s revenues amounted to £280.5 billion (which is likely to be higher in 2020 due to an increase in online sales during the pandemic). The European Commission may levy a fine of up to 10% of Amazon’s turnover, if the allegations are made out.