The Amazon Marketplace investigation in the EU and in Austria/Germany

The Amazon Marketplace
investigation in the EU and in
Austria/Germany
Laura Alfayate Alonso
SoSe2021
The Amazon Marketplace investigation in the EU and in Austria/Germany
Table of Contents
1.
Introduction
a.
2.
The Austrian and German Amazon Marketplace cases
a.
Legal issues
b.
How were cases resolved?
3.
4.
What is Amazon Marketplace?
The European Amazon Marketplace cases
a.
Legal issues – why two cases
b.
How could these cases be resolved?
Conclusion
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The Amazon Marketplace investigation in the EU and in Austria/Germany
Table of legislation
European Union
•
Consolidated Version of the Treaty on the European Union [2016] OJ C202/47
(TFEU)
•
Consolidated Version of the Treaty on the Functioning of the European Union
[2016] OJ C202/47 (TFEU)
•
Google search (Shopping) (Case AT.39740) Commission Decision [2017] OJ C
9
•
Regulation (EU) 2019/1150 of the European Parliament and of the Council of 20
June 2019 on promoting fairness and transparency for business users of online
intermediation services laid down in Articles [2019] OJ L 186
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Table of cases
European Commission
•
Google search (Shopping) (Case AT.39740) Commission Decision [2017] OJ C
9
•
Amazon Marketplace (Case AT.40462) Commission Press Release and Opening
of Proceedings [2019-2020] OC J.63.1, G.47.91
•
Amazon – Buy Box (Case AT.40703) Commission Press Release and Opening of
Proceedings [2020] OC J.63.1, G.47.91
Court of Justice of European Union
•
Case C-56/65, Judgement of the Court of 30 June 1966, ECLI:EU:C:1966:38, para
33
•
Case C-32/11, Allianz Hungária Biztosító Zrt. and Others v Gazdasági
Versenyhivatal. Request for a preliminary ruling from the Magyar Köztársaság
Legfelsőbb Bírósága. 2013
Austria
•
Amazonde Marktplatz [2019] Bundeswettbewerbsbehörde
(Bundeswettbewerbsbehörde)
Germany
•
Amazon ändert weltweit seine Geschäftsbedingungen für Händler auf seinen
Markt plätzen – Bundeskartellamt stellt Missbrauchsverfahren ein [2019]
Bundeskartellamt (Bundeskartellamt)
Netherlands
•
Case C-8/08, T-Mobile Netherlands BV, KPN Mobile NV, Orange Nederland NV
y Vodafone Libertel NV v. Raad van bestuur van de Nederlandse
Mededingingsautoriteit, 2009
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The Amazon Marketplace investigation in the EU and in Austria/Germany
1. Introduction
In the following paper we are going to discuss the Amazon Marketplace investigation in
the EU and in Austria and Germany. As it is well-known, Amazon is an international
sales and service company, which acts both as retailer and as a provider. As a result, it
has been continuously growing, so that it reached about $ 200 billion in 2018, of which
approximately $ 41 billion were from Europe. 1
On the one hand, the proceedings in Germany and Austria were focused on Amazon’s
general terms of business and certain practices. Hence, both cases studied Amazon’s
position in the market, whether it was a dominant position that led to abusive conducts or
not. In order to find this out, Austrian and German authorities took into account
complaints from sellers, newspapers articles, associations and internet fora. 2
No special attention had been focused on national regulation because the legal
proceedings were closed swiftly due to Amazon changing its general terms of business.
Additionally, the writer of this paper does not understand German to a sufficient level,
thus unfamiliar with German and Austrian Law to the fullest extent. It is worth noting
this is perhaps a potential limitation when approaching these themes.
On the other hand, the European Commission conducted two separate cases: one focused
on the use by Amazon of non-public business data of independent sellers and another one
in regards to ranking and Amazon Buy Box. Both cases were opened once the German
federal Cartel Office and the Austrian federal Competition Authority had closed their
litigation, as soon as Amazon changed its general business terms. Therefore, we will
explore the logistics of these decisions and what follows these proceedings.
a. What is Amazon Marketplace?
The concept of marketplace refers to an online site or platform where different
companies join together in order to sell their products to customers. As a result,
manufacturers and providers upload their products to offer them online and anyone who
Kristina Mertens, 'Amazon Europe Marketplaces - The Complete List & Overview'
(SERMONDO, 2021)
<https://sermondo.com/amazon-europe-marketplaces/> accessed 7 April 2021.
2
Martin Gassler, 'The Austro-German Proceedings Against Amazon And Its Online
Marketplace' [2019] 10 Journal of European Competition Law & Practice p.563-571.
1
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accesses the marketplace can buy them. In this sense, Amazon is one platform that relies
on this model.
Any company that wants to sell on Amazon needs to register and choose a plan for selling,
which depends on how many products one wants to sell. There are two possible plans:
•
The Individual plan: in which companies only paid when their products are sold.
•
The Professional plan: which is especially for big companies, since they pay a
fixed fee of 39.99$ “no matter how many units they sell”. 3
On the other hand, companies need to pay a relatively high seller fee to Amazon, which
depends on product category. In addition to this, there are also fulfilment fees for
companies counting on Fulfillment by Amazon, as well as there may be other additional
fees in regards to advertising or getting a premium account.
However, Amazon has a dual role, since it is not only a provider of a marketplace but
also a retailer which sells its products on this marketplace. Therefore, Amazon collects
private (or non-public) business information of other sellers, for example, data relating to
how many visits to their pages during offers and which guarantees are activated.
4
Amazon can then take advantage of being a marketplace service provider and use nonpublic information of its competitors to best adjust its offers to what is being demanded
in the market.
It is curious though how a company that started as a book seller has expanded to this
degree. These days, Amazon is “the world’s largest online marketplace”,
5
and it also
plays an important role as AI assistant provider; a cloud computing platform and a live-
'Beginner's Guide: How To Sell On Amazon' (Sell.amazon.com, 2021)
<https://sell.amazon.com/beginners-guide.html> accessed 2 May 2021.
4
'Program Policies - Amazon Seller Central' (Sellercentral.amazon.com, 2021)
<https://sellercentral.amazon.com/gp/help/external/521?language=en-US&ref=mpbc_
537776_cont_521> accessed 2 May 2021.
5
'What Are The Biggest Online Marketplaces In The World? | Edesk' (The Ultimate
eCommerce Blog for Online Sellers | eDesk, 2021)
<https://blog.edesk.com/resources/biggest-online-marketplaces-in-the-world/> accessed
4 April 2021.
3
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The Amazon Marketplace investigation in the EU and in Austria/Germany
streaming platform. Therefore, it is such a valuable company whereby in 2020 had the
highest global brand valuation. 6
Third-party sellers represented around 40% in 2008 of Amazon’s sales, and the
percentage has been increasing throughout the years ever since. More recently, the Selling
partner Service team of Amazon - an internal team occupied by third-party sellers estimated that in 2020, profits from having them selling on Amazon were “between $25
billion and $39 billion (…)”. 7 Amazon is mostly a retailer, whose annual revenue was
of US$ 386.064 billion in 2020. Additionally, Amazon’s market capitalization went
over US$1 trillion once again in February of last year. 8
Given that so much revenue is generated from Europe, it would be sensible to explore
Amazon’s most popular European URLs. There are six European marketplaces, listed
as follows:
1. Amazon.co.uk
2. Amazon.fr
3. Amazon.es
4. Amazon.it
5. Amazon.de
6. Amazon.nl (although this one did not exist when the proceedings began). 9
Since this paper is about the Austrian and German Cases (as well as the Commission
cases), we must pay special attention to how the marketplace looks there. On the
Amazon.de website, more than the 80% of customers are German, and only around 5-
'What Is Amazon? - Definition From Whatis.Com' (WhatIs.com, 2021)
<https://whatis.techtarget.com/definition/Amazon> accessed 5 May 2021.
7
'Amazon.Com, Inc. - Annual Reports, Proxies And Shareholder Letters'
(Ir.aboutamazon.com, 2021)
<https://ir.aboutamazon.com/annual-reports-proxies-and-shareholder-letters/default
.aspx> accessed 5 May 2021.
8
'Amazon.Com, Inc. - Annual Reports, Proxies And Shareholder Letters'
(Ir.aboutamazon.com, 2021)
<https://ir.aboutamazon.com/annual-reports-proxies-and-shareholder-letters/default
.aspx> accessed 5 May 2021.
9
Mertens, (n 1).
6
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10% are Austrian. 10 This URL “generates Amazon’s second largest volume after US and
it is the largest marketplaces of Amazon’s five European marketplaces”, as it represented
around “40-50% of the sales volume of all European marketplace in 2018”. 11
Third-party sellers on amazon.de represented more than 55% of the sales volume in
2018, and such number has been increasing as years go by.
12
However, around 30% of
these sellers were not from Germany, and more alarmingly, less than 2% were from
Austria.
2. The Austrian and German Amazon Marketplace cases
a. Legal issues
Firstly, it is important to bear in mind what Theories of Harm are in order to fully
understand what are these two cases about and why national authorities closed them as
they did. The two proceedings were started after the Commission had announced its
preliminary investigation against Amazon and they were based on complementary
investigations which studied “the lack of fair commerce by Amazon as the marketplace
provider”. 13
On the one hand, both cases focused on qualitative exploitative theories of harm, so
we will explore their meanings and significance in context. Overall, theories of harm are
used to explain why a conduct or behaviour goes against competition law, and thus,
causes harm to competition. In other words, they explain why conducts constitute a breach
of competition law -according to the legal texts - as well as why they should be prohibited.
'Bundeskartellamt - Homepage - Bundeskartellamt Obtains Far-Reaching
Improvements In The Terms Of Business For Sellers On Amazon’S Online Marketplaces'
(Bundeskartellamt.de, 2021)
<Bundeskartellamt - Homepage - Bundeskartellamt obtains far-reaching improvements
in the terms of business for sellers on Amazon’s online marketplaces> accessed 7 April
2021.
11
Bundeskartellamt (n10).
12
Gassler, p.565.
13
Gassler, p.564.
10
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On the other hand, the term exploitative refers to Amazon’s dominant position in the
market and if the company is abusing of such market power. 14
The Austrian and German cases were conducted by national authorities that mostly
focused on Amazon’s general terms of business and practices with sellers. Therefore,
both cases were contract-focused and they were initiated due to complaints from
companies which were selling on Amazon’s marketplace. As a result, although both
authorities cooperated within the ECN, they did not necessarily focus on the same
issues. 15
Although one may assume that both authorities referred to national markets, it is
impossible to know the exact geographical scope. Whereas the German authority
focused on German online sales, we can see in the Austrian case that it could referred to
either the Austrian and German market as one or treated them separately. 16
17
However,
they both took into account Amazon’s dominance and its relative market power, since
it was not clear if there was the needed balance of interest between parties -between
Amazon and sellers, who may be suffering from Amazon’s impositions and lacking of
their right of self-determination. Therefore, they raised concerns in regards the following:
1. Court of jurisdiction: whenever there was a problem with Amazon, sellers could
only bring actions against Amazon at Luxembourg courts and only the
Luxembourgian law was taken into account – so despite neither of the authorities
raised concerns about it, there was also no choice of law.
2. Lack of transparency: not only it was hard to find Amazon’s terms of business,
but also they were changed without informing sellers. In addition to this, the
Austrian authority specifically mentioned the lack of communication between
European Commission, 'Antitrust: Commission Sends Statement Of Objections To
Amazon For The Use Of Non-Public Independent Seller Data And Opens Second
Investigation Into Its E-Commerce Business Practices' (2020)
<https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2077> accessed 12 April
2021.
15
Gassler, p.564.
16
'BWB Informiert: Amazon Ändert Geschäftsbedingungen' (Test, 2019)
<https://www.bwb.gv.at/news/detail/news/bwb_informiert_amazon_aendert_geschaefts
bedingungen/> accessed 4 May 2021.
17
'Bundeskartellamt (n 10).
14
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Amazon and its sellers, since the latest found it difficult to contact with Amazon,
which usually replied to their complaints with automatic responses.
3. Amazon’s liability: the term of liability refers to the needed reparation in the
absence of fault but following damage. In this sense, while Amazon’s had this
liability limited or it was even excluded from repairing, sellers had to face an
extensive liability and indemnify Amazon from any claims from third parties.
4. Rights of use of product information: sellers were forced to grant Amazon the
right of use of product information for an “indefinite, irrevocably and globally”
period of time. This concern was also related to the parity requirement, which
force sellers to provide the same product material of as high quality as the one
they were using in other channels. Additionally, in the case that third parties
complaint, and in line with the latest concern, Amazon was exempted from any
claim.
5. Return policy: Amazon was the one deciding to accept or not product returns through Fulfilment by Amazon and it is well-known that the company has
customer-friendly returns and reimbursements policies. Yet the main problem was
that whenever a customer returned a product, sellers (and only them) had to face
all the costs, even if the return had no justification or if it was fraudulent.
6. Specific obligation for sellers and confidentiality: this concern was only
addressed by German and it referred to the fact that “sellers were required to seek
Amazon’s prior written approval when wishing to make a public statement”. 18
The German and the Austrian authorities also considered exclusionary theories of harm,
which focus on whether or not Amazon was taking advantage of being a provider of the
marketplace when competing with other retailers. In this sense, the following concerns
were pointed out:
1. Amazon’s right to extinct contracts and block accounts: Amazon had an
“unlimited right to immediately terminate the contractual relations with sellers
or block them as well as the right to immediately block seller’s payment accounts
with no justification”. As a result, some sellers were finding their accounts
cancelled and making losses.
18
'Bundeskartellamt (n10).
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2. Parity requirement: which has been previously explained in regard to the
concern of the right to use product information.
3. Product reviews and ratings: on Amazon one can find ratings not just about
products but also about sellers. However, it seemed that only product reviews
from Amazon’s Vine rating programme were shown, whereas the ones coming
from external providers were removed. In addition to this, Amazon was “not rated
as a seller itself”, so it did not have to deal with negative comments coming from
discontent customers.
4. Exclusion from selling: this was only raised by the Austrian authority, in regard
to having some sellers excluded from selling some products on Amazon’s
marketplace whilst others were selling the same exactly products. Was Amazon
discriminating some sellers?
5. Estimated delivery times: which was also mentioned by Austria, since some
sellers had complaint that the delivery times shown to customers were that high
that they were preventing customers from buying. In addition, Amazon was
making some sellers use Amazon services, especially the Fulfilment Amazon
service.
Both cases were based on national law and how it regulates abuse of dominance,
although some European competition law was also considered, such as the Article 102 of
the TFEU. 19 The main question was to find out if Amazon’s had a dominant position and
if it was imposing unfair general terms of business – if there was exploitative abuse
because there is no balance between different parties’ interests. Was Amazon unilaterally
determining the terms of the contracts and eliminating other parties “right to selfdetermination?
In order to constitute exploitative abuse, it is necessary not only to cause damage to sellers
but most important, if with such behaviour sellers find it impossible to carry out with their
activities in a competitive way.
20
For instance, there would be exploitative abuse if
Additionally, it was also considered Commission 'Regulation (EU) 2019/1150 Of The
European Parliament And Of The Council' [2019] Official Journal of the European Union
<https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32019R1150>
accessed 13 May 2021.
20
Manuel Díez Velasco, Instituciones De Derecho Internacional Público (17th edn,
Tecnos 2013), p.756-765.
19
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Amazon requested for sellers benefits without any justification. Hence, exploitative abuse
would refer to having Amazon taking advantage of a better position in the market due to
imposing general terms to other sellers and eliminate competence.
b. How were cases resolved?
As the reader may have noticed, most of the concerns could be easily solved by simply
changing Amazon’s terms of business. Therefore, we can assume that most of these
concerns are mainly about exclusion instead of actually exploitation. As a result, the
Austrian and German authorities opted for closing the proceedings once Amazon had
amended some of its contract clauses and promised to implement the necessary changes
before a specific period of time (30 days). There were no penalties for Amazon, in fact,
neither a formal commitment was adopted. 21
To begin with, it is important to bear in mind that both cases have already been closed
despite of having left some issues unsolved. On the one hand, the German case lasted for
eight months, since November 2018. On the other, the Austrian proceedings were opened
in February 2019 and closed five months later. During such time, both authorities shared
information with each other, as well as with the Commission and other competition
authorities such as the Conseil de la Concurrence from Luxembourg, which had also
opened abuse proceedings against Amazon. 22
This paper has already listed the concerns and by what had been mentioned prior, should
have explained the issues with clarity. Now, we may use the same structure in order to
show how each concern was resolved.
•
Court of jurisdiction: Amazon changed its relevant contracts with sellers and
Luxembourg is not anymore the only exclusive court of jurisdiction. However,
Luxembourg law still applies because Amazon can justify so with objective
reasons, since the company needs to apply “the standard legal conditions to
sellers on all Amazon marketplaces in Europe”. 23
Gassler, p.564.
'Bundeskartellamt (n 10).
23
'Bundeskartellamt - Homepage - B2-88/18' (Bundeskartellamt.de, 2019)
<https://www.bundeskartellamt.de/SharedDocs/Entscheidung/EN/Fallberichte/Missbrau
chsaufsicht/2019/B2-88-18.html?nn=3591568> accessed 18 April 2021.
21
22
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•
Lack of transparency: Amazon accepted to make its terms of business more
accessible to sellers, as well as it promised to notice sellers of any changes to the
conditions in contracts and programmes at least 15 days before those changes take
place. In addition, Amazon said it would count with a “contact person” to ensure
communication with sellers, and it “adhere to a comparable standard of email
communication in German-speaking countries”. 24
•
Amazon’s liability: Amazon limited its own exclusion of liability and “the
exemption obligations of sellers will be more narrowly defined (…)”.
25
As a
result, Amazon should be then as liable as other sellers “for intent or gross
negligence and for any breach of major contractual obligations”.
26
In addition,
the company promised to pay more attention to European minimum standards for
Business to Business.
•
Rights of use of product information: Amazon limited “the transfer of rights
will be limited to the duration of the (original or derived) property rights of the
seller”.
•
Return policy: in this case, sellers are still unable to “recover damages from
customer”. However, sellers using the Fulfilment by Amazon service can now
demand the customer to return the product and also “object to Amazon’s
reimbursement within 30 days”. 27 In regard to Amazon’s custom-friendly return
and reimbursements policy, it has not changed at all since it is considered to be
beneficial in order to attract customers.
•
Specific obligation for sellers and confidentiality: Amazon is no longer keeping
up with this practice.
•
Amazon’s right to extinct contracts and block accounts: from now on, Amazon
has to tell sellers about the termination 30 days before such termination takes
place. In case of legal infringements by a seller, which refers to extraordinary
termination and leads to having the account blocked, Amazon must tell the seller
Amazon ändert weltweit seine Geschäftsbedingungen für Händler auf seinen Markt
plätzen – Bundeskartellamt stellt Missbrauchsverfahren ein [2019] Bundeskartellamt
(Bundeskartellamt).
25
Bundeskartellamt stellt Missbrauchsverfahren ein.
26
Bundeskartellamt (n 25).
27
Bundeskartellamt (n25).
24
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The Amazon Marketplace investigation in the EU and in Austria/Germany
and explain the reasons why this decision is being adopted, unless it is the case of
fraudulent sellers.
•
Parity requirement: Amazon eliminated this requirement, but it can “impose
quality requirement as regards the presentation on its marketplace”.
28
As a
result, there should be effective competition on Amazon’s marketplace.
•
Product reviews and ratings: now the Vine rating programme is available to
“sellers that own a brand or representatives of brand name owners”. 29 Amazon
also promised to “launch its Early review programme in Europe for new
products”, 30 in which they could register these new products and customers will
be asked about them once they have made their purchase.
•
Exclusion from selling: Amazon ensured that it would not keep up with any
discriminatory practice, so that it would guarantee communication with sellers
and transparency.
•
Estimated delivery times: this is one of the issues which stills open. On the one
hand, Amazon claims that the high estimated delivery times are due to the fact
that other factors apart from distance, such as weather conditions, should be taken
into account.
The main concern was to find out if Amazon had had an abusive conduct because of its
dominant position in the marketplace, which was neglected due to Amazon appearing
keen on cooperating with national authorities since the beginning. Additionally, some
concerns raised by Austrian and Germany authorities could have been solved afterwards
due to the adoption of a new Online Platform Regulation since July 2020.
31
For
instance, Amazon’s right to extinct contracts and block accounts should have been
stopped anyway, hence why Amazon implemented the changes mentioned previously for
all its marketplaces.
Bundeskartellamt (n 25).
Bundeskartellamt (n 25).
30
Bundeskartellamt (n 25).
31
Gassler, p.563-570.
28
29
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3. The European Amazon Marketplace cases
As it has already been mentioned, there are six Amazon’s marketplaces in Europe and 27
countries participate in them.
32
As a result, European Amazon’s marketplaces stand out
for their potential customer base, which refers to how frequently customers buy from a
company. Hence, European Amazon’s marketplace are attractive for sellers, especially
for small ones because Amazon’s marketplaces may be the only opportunity they have to
enter the online business.
The Commission announced a preliminary investigation in September 2018, before the
German and the Austrian authorities had started their proceedings due to all the
complaints they had received from sellers on Amazon. A few months later, Margrethe
Vestager, who is an European Commissioner for Competition since 2014, announced that
the Commission was going to analyse a sample of 80 million of transactions and 100
million of products from European marketplaces. 33
On November 10th 2020, Vestager announced that they had reached a preliminary
conclusion which proved that Amazon had abused its dominant position as a marketplace
provider in Amazon.de and Amazon.fr., since it could have been using sensitive data big
scale to compete against small retailers”. 34 Thus, according to the Commission, Amazon
uses data from seller’s transactions to calibrate product offerings and prioritize top sellers.
Apparently, Amazon is only listing a small portion of all the products offered on its
platform in order to focus on selling the most demanded products. It seems that the
company has been able to adjust its offerings because it has been able to rely on nonpublic data from sellers’ transactions. As a result, Amazon has been avoiding normal
'About Amazon' (US About Amazon, 2021)
<https://www.aboutamazon.com/> accessed 13 April 2021.
33
'Statement By Executive Vice-President Vestager On Statement Of Objections To
Amazon For The Use Of Non-Public Independent Seller Data And Second Investigation
Into Its E-Commerce Business Practices' (European Commission - European
Commission, 2020)
<https://ec.europa.eu/commission/presscorner/detail/en/STATEMENT_20_2082>
accessed 17 April 2021.
34
Margrethe Vestager (Twitter, 2020)
<https://twitter.com/vestager/status/1326127321363963906> accessed 11 April 2021.
32
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The Amazon Marketplace investigation in the EU and in Austria/Germany
risks of retail competition, so it may also be said that it has taken advantage of its market
dominance. 35
Amazon has already expressed that it disagrees with the Commission’s assumptions,
especially because its retail sales represent less than 1% of the global market. Actually,
the company has stated that there is no other company as worried as itself about small
retailers, as the company allows more than 150.000 European small companies to sell on
its marketplace.
36
Overall, Amazon considers itself to be helping retailers to increase
their revenues and employ more people.
On the other hand, the Commission has opened a second investigation in regard to
Amazon Buy Box, since Amazon may be putting pressure on retailers in order to force
them use Amazon Prime program as well as their logistics services. The Commission has
already sent the Statement of Objections to Amazon, which does not prejudge the
outcome of the two cases.
37
Therefore, now it is time for Amazon to present its
allegations.
a. Legal issues – why two cases
To begin with, the European Commission is the one that carried out a preliminary
investigation against Amazon, since it is an institution that represent and defends the
interest of the European Union. 38 Consequently, besides its other tasks, the Commission
also supervises compliance with Union law. In this sense, two investigations have been
conducted against Amazon: one focused on whether or not the company has been using
non-public business data of sellers from their marketplaces in its own benefit (AT.40462),
and another in regard to Amazon’s Buy Box and how the winner is decided, as well as to
the Prime label (AT.40703). Thus, in contrast to the investigations of Germany and
Austria, Commission’s investigations refer to data issues instead of contract ones.
Once again, it is taken into account the dual role that Amazon plays as a retailer and as
a provider of marketplaces. As a result, the company can access to non-public data of
European Commission, n (14).
Amazon Rechaza La Acusación De Bruselas De Abuso De Posición Dominante [2020]
Expansión.
37
European Commission, n (14).
38
Consolidated Version of the Treaty on the European Union [2016] OJ C202/47 (TFEU),
art 17.
35
36
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The Amazon Marketplace investigation in the EU and in Austria/Germany
third-parties who use its platform to sell and it may have been using such information in
order to best adapt its business strategy to what is has been demanded in the market. This
use of non-public data could have prevented Amazon from several normal markets risks
and so reduce market competition, which may have been key to Amazon’s dominant
position in the market. 39
On the other hand, there is a second antitrust investigation regarding Amazon’s Buy Box
and Prime label. The Buy Box is literally a white box that appears on a product page and
allows customers to add products to their shopping carts. The problem is that different
sellers may have to compete when selling similar products, so they compete to win this
Buy Box and have their products directly added to customers’ carts. In order to win,
sellers need to meet certain requirements, such as order defect rate, experience on the
Amazon selling platform and status as a professional seller, so to name a few. In case
various sellers meet these requirements, Amazon compares them considering pricing,
availability, fulfilment options and customer service. 40
Both investigations focus on the possible breach of Article 102 of the TFEU, which
reflects the prohibition of abuse of a dominant (market) position. It was also taken
into consideration by both German and Austrian authorities, although they mainly
focused on national regulations. Article 102 defines the elements of what could have been
considered as an abuse, such as “imposing unfair trading conditions” or “applying
dissimilar conditions to equivalent transactions (…)”, 41 listing one condition of several.
The objective of Article 102 is to protect market competition, hence, it attempts to
maintain effective competence and also eliminate any possible obstacles to single market
integration. It defines the term abuse as an exploitative conduct of one or more companies
'The Amazon Investigation: A Prime Example Of Contemporary Antitrust'
(Chillin'Competition, 2020)
<https://chillingcompetition.com/2019/07/19/the-amazon-investigation-a-primeexample-of-contemporary-antitrust/> accessed 14 April 2021.
40
'The Buy Box | How It Works | Why It Is Important | Buy Box Experts' (Amazon Sales
Consultant: Content & Brand Management)
<https://www.buyboxexperts.com/blog/book/the-buy-box/> accessed 14 April 2021.
41
Consolidated Version of the Treaty on the Functioning of the European Union [2016]
OJ C202/47 (TFEU), art 102.
39
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which have a dominant position and cause damage to certain market participants. In
addition, there are two types of abuse depending on the effects it produces:
•
If it affects competition, it is an abuse with anti-competitive effects.
•
If it has no effect on competition but directly affects consumers, it is exploitative
abuse. 42
According to the doctrine and community competition law, the conduct should be
analysed on a case-by-case basis, considering the effects that it produces in the market
and how the two primary objectives or Article 102 could be damaged (effective
competition and integration). As we can see in its Guide, the Commission has proposed
the application of the hypothetical competitor or monopolist test, as well as it
recommends considering consolidated jurisprudence. 43
The hypothetical monopolist test is a way to determine if a company has a significant
market power. In this case, it would consist of having Amazon acting as a hypothetical
monopolist and analysing the reaction of consumers when there is a positive, small and
non-transitory variation in the prices of their goods. In case that small increase in prices
favours the company, there are no other products that could substitute the demand covered
by this company, so that there is a single market covered by it. 44
The Commission also considers the Article 101 TFEU in contrast to what national
authorities did. This article prohibits agreements that “have the object or effect of
preventing, restricting or distorting competition”. 45 The fact that it is said “by object or
effect” goes to show that these are alternative and non-cumulative conditions, so it is
only necessary for one or the other to concur. Furthermore, the Court of Justice of the
European Union (CJEU) established that in order to determine what is the object of an
agreement one needs to take into account the economic context in each specific situation.
Moritz Lorenz, An Introduction To EU Competition Law (1st edn, MPG Books Group
2013).
43
Antitrust Manual Of Procedures (European Commission 2019)
<https://ec.europa.eu/competition/antitrust/antitrust_manproc_11_2019_en.pdf>
accessed 14 April 2021.
44
'Hypothetical Monopolist Test' (Thomson Reuters Practical Law, 2021)
<https://uk.practicallaw.thomsonreuters.com/7-594-3746?transitionType= Default&
contextData=(sc.Default)&firstPage=true> accessed 14 April 2021.
45
Consolidated Version of the Treaty on the Functioning of the European Union [2016]
OJ C202/47 (TFEU), art 101.
42
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If the agreement does not reveal sufficient degree of harm, its effects must be assessed.
46
The restriction by object is according to its natural detriment to free competition, so
there is no need to prove actual concurrent damage. Therefore, this concept functions as
a presumption, in order to guarantee procedural economy when applying Article 101
TFEU. However, it is possible to refute this presumption by applying Article 101.3 TFEU.
In this sense, in contrast to Article 101.1, whose application must be proven by the one
who suggests than an agreement should be prohibited, the burden of proof to demonstrate
that the requirements of Article 101.3 are met falls on the one that claims that the
agreement is lawful.
The CJEU has also reiterated that in order to consider an agreement as restrictive because
of its object, it must reveal a sufficient degree of harm to competition. In addition, it is
enough if the agreement has the potential to have a negative impact on competition (TMobile 2009 y Allianz Hungária 2013). 47 48
b. How could these cases be resolved?
To begin with, it is important to bear in mind that there are no deadlines when it comes
to ending antitrust investigations, hence why these investigations are still open. If the
Commission notices that an individual (including companies) is not applying or is going
against an EU rule, it can control such behaviour through direct sanctioning procedures
against offenders.
The investigation regarding to Amazon using non-public information of third-party
sellers is a continuation of the investigation which started in 2019. It is focused on a
conduct contrary to Article 102 TFEU of leveraging the dominant market position over
other retailers. Additionally, there is a second line of investigation that concerns
Case C-56/65, Judgement of the Court of 30 June 1966, ECLI:EU:C:1966:38, para 33.
Case C-8/08, T-Mobile Netherlands BV, KPN Mobile NV, Orange Nederland NV y
Vodafone Libertel NV contra Raad van bestuur van de Nederlandse
Mededingingsautoriteit. 2009, para 28.
48
Case C-32/11, Allianz Hungária Biztosító Zrt. and Others v Gazdasági Versenyhivatal.
Request for a preliminary ruling from the Magyar Köztársaság Legfelsőbb Bírósága.
2013.
46
47
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preferential treatment by Amazon in favour of its own retail offers and Prime sellers, as
well as how the Buy Box is working.
On the one hand, it does appear very counter-intuitive that Amazon has a dominant
position. As a retailer, it has to compete against countless operators and as Amazon has
already mentioned, its retail sales represent less than 1% of the global market, which is
way lower than the quotas required according to the Article 102 TFEU: quotas of at least
40% in a relevant market according to settled jurisprudence.
49
However, this may be
completely different in regard to electronic platform services, but even in that case it
seems difficult to prove the existence of a monopoly or dominant position.
On the other hand, it is hard to determine what harm is caused by Amazon to consumers
or the market. As long as Amazon is capable of introducing competition that improves
the prices or quality of other sellers or satisfies the market demand, there should not be
any problems.
The proceeding could end with a declaration of illegality of Amazon’s conduct, which
would probably result in financial penalties that can reach 10% of the company’s
worldwide turnover. However, another solution could be a negotiated solution based on
commitments like guaranteed neutrality when using non-public data of sellers or using
neutral criteria to choose the winner of the Buy Box. Yet Amazon may not want this
friendly solution and prefers to fight until the end despite of the possible hefty sanctions,
since the accusations could go against the essence of the company’s business model as it
occurred in the case of Google. 50
Perhaps it would be possible to divide Amazon into separately owned businesses or
simply introduce functional and accounting separation according to market regulations.
However, these structural solutions are not even being considered at the moment and their
implementation would raise numerous questions regarding proportionality, efficiency in
economic terms…as such, no one can tell what is coming next, but there is something
OECD [2020] Abuse of Dominance in Digital Markets p.19, abuse-of-dominance-indigital-markets-2020.pdf (oecd.org).
50
Google search (Shopping) (Case AT.39740) Commission Decision [2017] OJ C 9,
p.11-14.
49
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that is evidently clear: these investigations will be used as an argument by those who
advocate the regulation of the sector.
4. Conclusion
Amazon is one of the most powerful companies in the world, hence why we may ask
ourselves how it could have been possible for a company that started as a book seller to
reach such point. Is it Amazon engaging in antitrust and/or anticompetitive practices?
Amazon is both a retailer and a provider, which means that not only it provides other
sellers an online platform but also competes against them in the market. Companies
selling on Amazon need to register and pay a certain amount depending on a selling plan
they choose, as well as they pay other fees for other services offered by Amazon, such as
the premium account or advertising. Is Amazon favouring those who opt for additional
Amazon services or are Prime members?
The Austrian and the German cases referred to the same Amazon marketplace:
amazon.de. - although it is not clear the exact geographical scope of each. However,
Austrian third-party sellers and customers do not even represent 10% of sellers. On the
other hand, despite third-party sellers on this marketplace are more than 55% of the total
sales volume, only about 25% are actually from Germany. Thus, do both countries really
influence that much on Amazon’s performance?
Both investigations were opened after the Commission announced it was going to conduct
a preliminary investigation against Amazon, and they were in fact complementary.
However, Austrian and German proceedings were mostly contract-focused, since they
focused on possible issues in regard to general business terms, after all the complaints
they had been getting from sellers. As a result, the proceedings were soon closed despite
of some issues which are still present to date. The cases were solved by simply having
Amazon change or remove some of its business general terms and promising to
implement those changes within 30 days.
On the other hand, the Commission firstly announced a preliminary investigation in
September 2018, with which raised concerns about Amazon relying on non-public data
of third-party sellers in order to enforce its good market position. As a result, the
Commission announced last year that they have reached a preliminary conclusion which
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suggests Amazon has been truly abusing of its dominant position as a marketplace
provider by using such data.
Another investigation was opened regarding Amazon Buy Box and Prime label. In this
sense, the Commission is trying to find out if Amazon chooses the winner of the Buy Box
following discriminatory criteria – favouring itself and Prime members, so to name a few.
Since Amazon has already received the Statement of Objections, now it is time for the
company to refer its allegations.
Whereas the national cases mostly focused on national regulations, they also consider
some European rules, such as the Article 102 of the TFEU (for the exclusionary issues).
This was also taken into account by the Commission, since it refers to the prohibition of
abuse of a dominant market position. In this sense, in order to find out if Amazon has
breached this norm, we should apply the hypothetical competitor test to determine if
Amazon truly has abused of its market position. In addition, it would be necessary to
check if there is a balance between different parties’interest – Amazon and third-party
sellers - so that none of them is choosing unilaterally the terms of the contracts and
causing damage to the other(s).
If Amazon is found guilty of breaching Article 102 TFEU, its conduct may also be
considering to go against Article 101 TFEU. In this sense, Amazon would have
committed to agreements with the intention (object) of having an impact on competition
and favour itself and those who pay for Amazon additional services. It could also have
breached this article if, despite committing without such an objective, the agreements had
had such adverse effects. In this sense, in order to find out these issues, it would be
required to study the specific economic context as well as the specific situation.
Amazon could, however, plead Article 101.3 TFEU in order to prove that its agreements
are according to law and lead to economic benefits and technical progress, so that the
restrictions and the possible harm they cause appear to be essential and are justified.
However, Article 101.3 TFEU would never be taken into consideration if Amazon is truly
eliminating competition. On the other hand, the Commission would have to demonstrate
that the requirements for prohibiting an agreement are met.
As it happened with the national proceedings, it looks as if it would be hard to have
Amazon found guilty. On the one hand, the company has shown from the beginning a
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conciliatory attitude, since it is aware of the possible negative impact these speculations
may be if confirmed. Therefore, it did not hesitate to implement the necessary changes in
order to satisfy German and Austrian authorities -or in case that was impossible by that
time - to commit to changing them as soon as possible. Even now in regards to the
Commissioner tweets Margrethe Vestager Amazon has shown what one may consider a
friendly attitude. Thus, it has already announced its intentions to cooperate with the
Commission in order to guarantee the latest reparations and is able to fully understand the
specific situation of the market and get to the right conclusions. Yet, does Amazon truly
want the Commission to find out what is really going on or instead, prefers to have them
reaching conclusions that do not go against itself?
It was much easier to Amazon to solve the issues regarding the national proceedings. Both
the Austrian and the German cases were contract-focused, and they were based on both
qualitative exploitative and exclusionary theories of harm. Therefore, most of the
qualitative concerns only required Amazon to change its business general terms.
Conversely, it was hard to prove that Amazon was really having an exclusionary conduct,
since “not every restriction of conduct generates foreclosure and foreclosure itself is not
a theory of harm”. 51
The main problem with theories of harm is that in order to support them there needs to be
a harmful conduct to competition, which is hard to prove when the issues are only focused
on damage to competitors and there seems to be no harm caused to consumers. In
addition, the company accused of abusing of its dominance position should actually have
incentives to restrict or eliminate competition, which is difficult to state according to
Amazon’s behaviours and its actual business data - its retail sales are less than 1% of the
global market and it provides an online platform for more than 150.000 European
retailers.
The Commission is likely to struggle to find ways to prove that Amazon is actually guilty
of abusing of its dominant market position. In fact, it is even difficult to state that Amazon
has a dominant position in the market, at least when it comes to its retailer services. But
Zenger, Hans and Walker, Mike, Theories of Harm in European Competition Law: A
Progress Report (February 22, 2012). TEN YEARS OF EFFECTS-BASED APPROACH
IN EU COMPETITION LAW, Jacques Bourgeois and Denis Waelbroeck, eds., pp. 185209, Bruylant, 2012, Available at SSRN: https://ssrn.com/abstract=2009296.
51
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even regarding Amazon as a provider, does it really have a dominant position or is it just
their competitors trying to damage Amazon’s image?
If Amazon it is finally found guilty because of the illegality of its conducts though, it
could possibly be required to pay a certain amount of money. As a result, the company’s
turnover may significantly decrease. In fact, such a loss could actually be referred to
Amazon’s worldwide turnover but even in that case, would such financial penalty damage
Amazon that much? If we bear in mind its high benefits of the previous years, it seems as
if it would hardly have an impact on the company, at least not on its financial resources.
The main concern would be then how Amazon’s image is damaged. Would we still buy
from a company that is restricting competition? And more importantly, do not we even
care about small companies, which already find struggles to compete with big ones such
as Amazon?
Although some people are not aware of the current situation of the markets from which
we get our products at all, recently we have started to care more about what is going on
in the markets. For instance, now we are more concerned about the need of sustainable
development. Therefore, if Amazon is found guilty, not only would its revenue decrease
because of the financial penalties, but also due to an actual decrease of the demand of
their products and services. Who could possibly benefit from that though?
It is true that there needs to be a certain level of competition in the market, and both
national and European institutions must apply the Law in order to guarantee so. However,
what if the consequences of applying the norms and punishing Amazon have a negative
impact on others? On the one hand, Amazon allows a lot of small business to sell on their
online platform, as well as it provides them with additional services. As a result, these
retailers get the chance to compete against other big companies, whereas otherwise they
could not even access the same markets. In addition, the more these retailers sell, the more
people they employ. In other words, Amazon may also contribute to increasing the level
of employment not only in Europe and national markets, but worldwide.
Perhaps that is the reason why the Commission’s investigations are still open, since no
one wants Amazon to be found guilty. However, it could also be that Amazon is truly
having a competitive behaviour and so there is nothing to be found. In any case, we will
have to wait a little bit longer until all these issues are solved, if no more will arise.
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