EU Launches Formal Investigation into Amazon Third-party Data Use

EU Launches Formal Investigation into Amazon Third-party Data Use

The European Commission has opened a formal antitrust investigation to assess whether Amazon’s use of sensitive data from independent resellers who sell on its Marketplace platform is in breach of EU competition rules.

Last September, the Commission began an initial inquiry into how Amazon uses third-party Marketplace data, but this has now been expanded to a formal investigation after it said that, based on its preliminary fact-finding, “Amazon appears to use competitively sensitive information about marketplace sellers, their products and transactions on the marketplace”.

Commissioner Margrethe Vestager, in charge of competition policy, said: “European consumers are increasingly shopping online. E-commerce has boosted retail competition and brought more choice and better prices. We need to ensure that large online platforms don’t eliminate these benefits through anti-competitive behavior. I have therefore decided to take a very close look at Amazon’s business practices and its dual role as marketplace and retailer, to assess its compliance with EU competition rules.”

As part of its in-depth investigation the Commission will look into:

  • The standard agreements between Amazon and Marketplace sellers, which allow Amazon’s retail business to analyse and use third-party seller data. In particular, the Commission will focus on whether and how the use of accumulated marketplace seller data by Amazon as a retailer affects competition.
  • The role of data in the selection of the winners of the ‘Buy Box’ and the impact of Amazon’s potential use of competitively sensitive marketplace seller information on that selection. Winning the ‘Buy Box’ seems key for marketplace sellers, said the Commission, as a vast majority of transactions are done through it.

In a statement, Amazon said it would “cooperate fully with the European Commission and continue working hard to support businesses of all sizes and help them grow”.

No time frame has been given for the completion of the investigation.

The news of the EU Commission’s probe came on the same day that the German antitrust authority announced that it had reached an agreement with Amazon over changes to the terms of business for third-party Marketplace sellers in Europe.

Amazon will now make changes to its Business Services Agreement for sellers active on its Marketplace platform in Germany, the UK, France, Spain and Italy. Here is a rundown of the main changes:

Liability provisions:
There will now be a limitation in Amazon’s exclusion of liability in favor of the sellers. The terms will also be more narrowly defined. In future, Amazon will be liable to the same extent as sellers for intent or gross negligence for any breach of major contractual obligations.

Termination and blocking of accounts:
Until now, Amazon has had an unlimited right to immediately terminate and block sellers’ accounts without justification. Going forward, an ‘ordinary’ termination of an account will require a 30 days’ notice. In the case of an ‘extraordinary’ termination (based on the alleged legal infringements by a seller) and the blocking of a seller’s account, Amazon is now obliged to inform the seller and provide reasons for such measures.

Court of jurisdiction:
Until now, Luxembourg was specified as the only court of jurisdiction in the European terms of business. The exclusivity of Luxemburg as the only court of jurisdiction is now removed from the terms of business for all European marketplaces. Under certain conditions, domestic courts can be the competent court of jurisdiction in future.

Returns and reimbursements:
Nothing will change for customers. However, sellers – who have had to unilaterally bear the costs and other consequences of a decision by Amazon to reimburse the customer – can now object and are entitled to compensation from Amazon if the return is deemed to be unjustified.

Product information and rights of use:
Until now, sellers have had to grant Amazon extensive rights to use their own product content. Sellers also had a parity requirement, meaning they had to provide Amazon Marketplace with product content at least as good as that available in other sales channels.  Now, Amazon’s rights of use will be limited to certain purposes and the parity requirement will no longer apply.

Confidentiality:
Previously, sellers were only allowed to make public statements about their business relations with Amazon with Amazon’s written prior approval. This clause will now be significantly reduced.

Product reviews and seller ratings:
The investigation found that Amazon’s Vine rating system favored products sold directly by Amazon. Amazon now make Vine available to those marketplace sellers that own a brand name or are representatives of brand name owners. It will also launch its ‘Early Reviewer’ review program in Europe.

Amazon is also facing increased scrutiny in the US.

Yesterday, it was one of a number of large tech companies that received a grilling from the House Judiciary Committee’s antitrust panel over alleged abuses of power. Amazon faced allegations that it uses data collected from its third-party sellers to gain a competitive advantage. While the panel does not have jurisdiction to levy fines or impose changes, the hearing demonstrates the heightening interest of US lawmakers in the influence exerted by the likes of Amazon. — (OPI)