Antitrust Law and Merger Control22.07.2019Cologne Newsletter
Federal Cartel Office requests Amazon to change its business terms and conditions
Amazon has announced that it will be changing its business terms and conditions for retailers operating on its online marketplace worldwide. In return, the German Federal Cartel Office (FCO) [Bundeskartellamt] will close its proceedings for abuse of a dominant market position.
Allegations against the "gatekeeper" Amazon
The background to the proceedings was the FCO's concern that Amazon might be taking advantage of its “dual position” as the largest online retailer in Germany and marketplace operator to obstruct other retailers on Amazon-Marketplace by means of abusive business terms and conditions and conduct. Retailers using Amazon-Marketplace regularly rely on the high reach of Amazon-Marketplace. It is estimated that currently more than 40% of German online trade is conducted via Amazon-Marketplace. Amazon controls access to this marketplace and thus acts as a kind of "gatekeeper".
The main criticisms were of provisions to the detriment of retailers on liability, ratings/reviews, the termination and blocking of retailers’ accounts, returns and refunds, jurisdiction and choice of law clauses.
Improvements promised to retailers
Amazon will now be changing its business terms and conditions to the benefit of the retailers as well as details of its marketplace operations.
- Liability provisions: To date, Amazon has granted itself a very extensive disclaimer. In the future, Amazon will also be liable for intent and gross negligence as well as for typical damages in the event of violations of essential contractual obligations. The obligation of the retailers to indemnify Amazon against any claims of third parties is also going to be made more restrictive. In the future, Amazon will be subject to increased obligations to prove an indemnification claim. Additionally, indemnification claims are also going to be introduced in favour of retailers.
- Termination and blocking: The previously existing unlimited rights to terminate and block retailers as well as Amazon’s ability to immediately block accounts without stating any reason will be limited. In case of ordinary terminations, a notice period of 30 days will apply in future. In case of risks and infringements of rights, extraordinary termination and blocking will remain possible, but will from now on be linked to an obligation to notify and justify the action. The forthcoming provisions of the European Regulation on promoting Fairness and Transparency for Business Users of Online Intermediary Services ("Platform-to-Business Regulation") will make these provisions applicable to all platforms in the EU Member States in the future (probably in the spring of 2020).
- Jurisdiction: To date, retailers have only been able to file complaints against Amazon in Luxembourg. In the FCO’s opinion, retailers were in this case prevented from judicially asserting their rights against Amazon without disadvantages. The exclusive place of jurisdiction in Luxembourg is therefore being abolished for all European Amazon-Marketplaces. The jurisdiction of domestic courts can now be established pursuant to general provisions. However, the mandatory application of Luxembourg law remains unchanged. In the FCO's view, a uniform choice of law for all retailers on the European market is objectively justified. In addition, a subsequent change in the applicable law would be problematic for ongoing contractual relationships and would not be conducive to creating legal certainty.
- Returns and refunds: I In future retailers will be able to lodge an objection and, if necessary, assert a compensation claim against Amazon in the case of return and refund decisions made by Amazon vis-à-vis the customers. This serves to prevent Amazon's extraordinarily customer-friendly returns policy from being implemented exclusively at the retailers’ expense. To date, Amazon has had the sole decision-making authority over returns of goods shipped through Amazon. Even with recognizably unjustified or even abusive returns, retailers have had to bear all the consequences.
- Public statements/transparency: Changes in confidentiality obligations and transparency should improve the position of retailers. In the future, the retailers’ obligation to obtain Amazon’s prior written consent before making any public statements on their business relationship with Amazon will no longer be upheld. In order to ensure greater transparency, the business terms and conditions are to be easier to find in future and changes are to be announced 15 days in advance. Furthermore, the retailers’ possibilities of communicating with Amazon are going to be improved.
- Sellers’ reviews and product reviews: In contrast, the FCO initially refrained from changing the provisions on sellers’ reviews and product reviews. The FCO justified this step with reference to the ongoing sector investigation "user reviews" (see: press release) and the EU Commission’s ongoing investigations on Amazon. Many retailers accuse the company of favouring its direct business over other retailers by means of their handling of sellers’ reviews. The accusation is based on the fact that Amazon Retail, unlike the independent retailers, does not obtain sellers’ reviews.
EU Commission simultaneously initiates proceedings against Amazon
Despite the suspension of the proceedings, Amazon is not off the hook yet. At the same time as the FCO closed its proceedings, the EU Commission opened formal proceedings against Amazon. This investigation concerns Amazon’s collection and use of the retailers’ transaction data. The Commission intends to investigate to what extent Amazon uses sensitive competitive data about its retailers and their products collected through the marketplace and in doing so violates EU competition rules.