Newsflash: Federal Cartel Office initiates abuse proceedings against Amazon
Cologne, 3rd December 2018
The investigation focuses on Amazon’s business terms and conditions and its conduct towards dealers on the German marketplace amazon.de.
Cause for the cartel authority’s investigation, according to the German Federal Cartel Office [Bundeskartellamt] are numerous complaints from dealers concerning Amazon’s business practice. A particularly delicate legal issue is the double role played by the online giant: within the scope of its vendor model it operates as an independent dealer itself whilst additionally offering other dealers their own sales channel via its “marketplace”. Moreover, having currently over 300 million active accounts worldwide, Amazon is one of the largest online marketplaces and, particularly in Germany, holds an exceptional market position in online trading. This coverage, (especially for smaller) dealers and manufacturers, is often the decisive criterion for their choosing Amazon as a distribution channel.
The Federal Cartel Office is now examining in detail whether Amazon, as the “gatekeeper” of Germany’s widest-reaching online marketplace, has abused its market power. In particular its use of unilateral business terms and conditions to the detriment of the dealers, such as, for example, the blocking of dealer accounts, retention of payments and delayed disbursements or clauses for granting rights to dealers’ product material, are considered as critical by the Federal Cartel Office. Such conditions could favour Amazon in its role as an independent dealer, whilst the other dealers could be restricted in their entrepreneurial freedom.
From a legal point of view, there are two starting points: should the Federal Cartel Office be able to prove that Amazon holds a dominant market position, its use of unilateral business terms and conditions detrimental to the dealers could constitute a prohibited abuse of conditions. However, the Federal Cartel Office could also come to the conclusion that the dealers/manufacturers are dependent upon Amazon to such an extent that there are no adequate and reasonable alternatives. The (often difficult) proof of a dominant market position is not required in such case since enterprises with a strong market position are also prohibited from unfairly hindering small and medium-sized dealers, consumers or competitors which are dependent upon it.
Should the investigation of the Federal Cartel Office show that Amazon is abusing its market power, in addition to prohibiting the abusive conduct, it can also impose a high fine on Amazon. Recently, in another case concerning a platform, the Federal Cartel Office prohibited on grounds of an abuse of dominance the ticket system provider CTS Eventim from using exclusivity clauses (the decision can be found HERE). CTS Eventim – like Amazon – also operates on a platform market in which it offers event organisers and booking offices ticket system services, whilst additionally also operating itself as an event organiser of rock/pop tours and festivals. The abuse proceedings against Facebook – likewise a beacon proceeding in the realm of online platforms – is still pending.
In the summer of this year the EU Commission had already initiated its own investigations against Amazon and sent dealers extensive questionnaires. Although the EU Commission has not yet instigated official proceedings against Amazon, it can be concluded from statements of the Federal Cartel Office that this could soon be the case. The EU Commission will be focusing on the collection and use of transaction data by Amazon to the detriment of the marketplace dealers, whilst the Federal Cartel Office will concentrate on the business terms and conditions and codes of practice of the German Amazon platform.
Google, Facebook and now Amazon as well – the list of prominent proceedings is constantly increasing. This conforms to the political objective of curbing the market power of large tech groups to the extent possible. New, further-reaching approaches are also already in discussion. One consideration is, within the scope of the next amendment, to lower the applicability threshold for German abuse control. The cartel authorities are to be able to intervene before a dominant position even exists. In this way, markets are to be prevented from “tipping” in favour of a single platform.
We will, of course, continue to keep you abreast of all developments.