Yesterday online retail giant Amazon agreed to settle an antitrust case with the European Commission. The company agreed to change its questionable business practices for which Amazon could have been fined up to 10% of their annual revenue, or $47 billion, reports CNBC. As an alternative, the EU could impose a periodic penalty of 5% per day of daily revenue for each day of non-compliance. Of biggest concern to EU regulators was that Amazon served as both a merchant and a competitor to third-party sellers on their online platform.

In November 2020, the European Commission issued a statement of objections that alleged Amazon systematically used non-public business data from third-party sellers to boost their own sales. In a separate investigation, the EU had concerns that Amazon unfairly gave special treatment to sellers who used Amazon’s Prime membership program or Amazon delivery and logistics services.

“Today’s decision sets new rules for how Amazon operates its business in Europe. Amazon can no longer abuse its dual role and will have to change several business practices. They cover the use of data, the selection of sellers in the Buy Box and the conditions of access to the Amazon Prime Program. Competing independent retailers and carriers as well as consumers will benefit from these changes opening up new opportunities and choice,” said Margrethe Vestager, executive vice president in charge of competition policy, in a December 19 news release.

Amazon’s commitments

To settle the antitrust allegations regarding the use of non-public business data to benefit their own operations, Amazon committed to:

• Not to use non-public data related to independent seller activity for its retail business
• Not to use such data for the purposes of selling branded goods or private label products

To address concerns about Amazon’s handling of the Buy Box, Amazon agreed to:

• Treat all sellers equally when ranking offers for the selection of the Buy Box winner
• Display a second competing offer to the Buy Box winner if there is a second offer from a different seller that is sufficiently different in terms of price or delivery. Both offers will have the same descriptions and provide the same purchasing experience for the customer.
• Improve the presentation of the second Buy Box to make it more prominent and to include a review tool if the presentation wasn’t attracting enough consumer attention
• Increase the “powers of the monitoring trustee” by introducing further notification requirements

To settle antitrust allegations about Prime, Amazon committed to:

• Set non-discriminatory conditions and criteria for the qualification of independent sellers and offers to Prime
• Allow Prime sellers to “freely choose” any carrier for logistics and delivery services and they may negotiate terms directly with their chosen carrier
• Not use information obtained through Prime about terms or performance of third-party carriers for the purposes of its own logistics services
• Increase the “transparency and early information flows” to sellers and carriers about their commitments and their new rights
• Create a way for independent carriers to reach out directly to Amazon customers to provide equivalent delivery service
• Improve carrier data protection
• Develop a centralized complaint system for sellers and carriers if they believe Amazon is not honoring their commitments
• Increase the duration of the commitments of the Prime and second competing Buy Box offer from five years to seven years

Amazon’s commitments extend across all of Amazon’s current and future markets throughout the European Economic Area, except for Italy which is the topic of an antitrust investigation in that country.

Amazon’s statement

In a statement to CNBC, a spokesperson for Amazon said, “While we continue to disagree with several of the preliminary conclusions the European Commission has made, we have engaged constructively to ensure that we can continue to serve customers across Europe and support the 225,000 European small- and medium-sized businesses selling through our stores.”

Insider Take

This is a very interesting development for the online mega-retailer. While Amazon’s statement says they disagree with the EU’s findings, the fact that they brought concessions and commitments to the table is significant. Perhaps the risk and the potential penalty were too high for Amazon to engage in a long battle. This is a precursor to some of the types of litigation and settlements we will see in the coming years as the EU enforces its new Digital Markets Act. The DMA hopes to keep huge companies like Amazon from using their dominant market position to squeeze out the little guys.