Amazon Alter Business Practices To Avoid Possible $47bn European Fine

By | December 21, 2022

Online retail giant Amazon
AMZN
has avoided a $47bn fine after agreeing a fresh deal with European Union regulators to settle two long-standing competition inquiries.

Amazon has agreed to make substantial changes to its business practices, addressing concerns of holding an unfair advantage over third-party sellers.

The regulator had expressed concerns with Amazon’s dual role as both a marketplace and a competitor to merchants trading on its platform. Amazon, for its part, claimed it is an enabler of small businesses in Europe.

The changes apply only to the European Economic Area. In Italy, Amazon has agreed ‘separate leagle remedies’ with the country’s competition regulator relating to the Buy Box and Prime. Amazon will have until June 2023 to implement the changes and the deal will remain in place for five to seven years.

As part of the deal, Amazon has committed to treating marketplace sellers equally and to use “non-discriminatory conditions” when products are shown on the Buy Box element of its websites.

The section generates more than 90% of views on the marketplace and a similar volume of transactions.

Amazon will also create a second Buy Box for a rival product if its price and delivery vary greatly from the Amazon product displayed.

The amendments to its product listing will address the EU’s concerns that the box favors Amazon’s own retail operations.

Amazon Agrees But Disagrees

“While we continue to disagree with several of the preliminary conclusions the European Commission made, we have engaged constructively to ensure that we can continue to serve customers across Europe,” Amazon said in a statement.

The terms include allowing Prime sellers to choose their own delivery providers outside its pre-approved selection as well as not using their data for its own retail business.

Amazon confirmed: “Under the supervision of the Commission, an independent trustee will be in charge of monitoring the implementation and compliance with the commitments.”

If the company had been found guilty, it could have faced a fine worth up to 10% of its global annual revenues. For Amazon, a company that made $469.81 billion of revenue in 2021, that could have meant a record $47 billion penalty.

However, the EU still has the option to fine Amazon 10% of its total annual turnover if it breaches the commitments, or implement a periodic penalty of 5% per day of daily turnover for each day of non-compliance.

EU Investigates Amazon

In July 2019, the Commission opened a formal investigation into Amazon’s use of non-public data of its marketplace sellers. On November 10, 2020 the Commission adopted a Statement of Objections in which it preliminarily found Amazon dominant in the French and German markets for the provision of online marketplace services to third-party sellers.

It also found that Amazon’s reliance on marketplace sellers’ non-public business data to calibrate its retail decisions distorted fair competition on its platform and prevented effective competition.

In parallel, the Commission opened a second investigation to assess whether the criteria that Amazon sets to select the winner of the Buy Box and to enable sellers to offer products under its Prime Program, lead to preferential treatment of Amazon’s retail business or of the sellers that Use Amazon’s logistics and delivery services.

“Today’s decision sets the rules that Amazon will need to play by in the future instead of Amazon determining these rules for all players on its platform,” Margrethe Vestager, the EU’s competition chief, said in a speech Tuesday.

“With these new rules, competing independent retailers, carriers and European customers will have more opportunities and choice.”

At the beginning of the month, UK consumer electrical retailer Currys chief executive, Alex Baldock, rounded on Amazon for getting a “free ride” from UK retailers by using the country’s infrastructure while avoiding taxes.

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