Amazon to make big business changes in EU settlement
According to the European Union’s executive Commission, Amazon has made major changes to its business practices to end European competition probes. These changes include giving customers more visible choices when buying products and, for Prime members, more delivery options.
The Commission said it accepted the legally binding commitments from Amazon to resolve two antitrust investigations. This deal allows the company to avoid a legal battle with the E.U.’s top antitrust watchdog that could have ended with potentially huge fines, worth up to 10% of annual worldwide revenue.
The agreement is another example of the EU taking action against Big Tech companies, coming just a day after the Commission accused Facebook of distorting competition in the classified ads business.
“Today’s decision is a victory for European consumers, who will now have more choice and competition when shopping on Amazon,” said Margrethe Vestager, the EU’s competition commissioner. “This agreement will set the rules that Amazon will need to play by in the future, and I’m confident that it will create a level playing field for all players on the platform.”
The agreement only applies to Amazon’s business practices in Europe and will last for seven years. Amazon will have to make the changes by June.
“We are happy to have come to an agreement with the European Commission that satisfies their concerns,” Amazon said in a prepared statement, adding that it still disagrees with some of the Commission’s preliminary conclusions.
Amazon had first offered concessions in July to resolve the two investigations. After the commission tested out those initial proposals and received feedback from various groups – including consumer groups, delivery companies, book publishers and academics – Amazon then improved upon its original offerings.
The company wanted to make sure that products from all sellers would have an equal chance of being seen in the “buy box”. The buy box is a very popular and visible spot on the website and app, and usually results in more sales. The buy box has two buttons that customers can click on: “buy now” or “add to basket”.
European customers will see a second buy box under the first one for the same product. However, this second box will have a different price or delivery offer.
Amazon has announced that it will be making it easier for merchants and couriers to access its Prime membership service. This means that Prime sellers who don’t use Amazon’s own logistics and delivery services will no longer be discriminated against, and Prime members will be able to freely choose any delivery service they want.
The company has also pledged to stop using “non-public data” from independent sellers on its platform to provide insights on how to compete against those merchants through its own sales of branded goods or “private label” products.
Amazon is making it easier for merchants and couriers to access its Prime membership service. It will stop discriminating against Prime sellers that don’t use its own logistics and delivery services and will let Prime members freely choose any delivery service. Currently, couriers can only deliver Prime parcels if they’re approved by Amazon.
The company has also pledged to stop using “non-public data” from independent sellers on its platform to provide insights on how to compete against those merchants through its own sales of branded goods or “private label” products.
According to Margrethe Vestager, Amazon uses data to make decisions about which products to launch, how much to sell them for, who their suppliers should be, and how to manage inventories. However, she also mentioned that the company has promised to stop using seller data – such as sales, revenue, shipments, transaction prices, performance, and consumer visits – to make these decisions. At the moment, Amazon is under similar scrutiny in both the United States and Great Britain.
In September, California’s Attorney General Rob Bonta took Amazon to court, claiming that the company had been hindering competition and raising prices for products by implementing policies that prevented third-party sellers and wholesale suppliers from offering lower prices elsewhere. According to Bonta, these contracts terms directly harmed other businesses’ abilities to compete in the market, effectively giving Amazon an unfair monopoly.
The company has a policy where it states that an item is to be considered competitively priced when it’s being offered at the same price, or lower, than what other retailers are displaying. This can cause a domino effect of other companies raising their prices as well. Some vendors who have to pay more in order to sell on Amazon lower their prices on other platforms outside of fear that they will lose their standing on Amazon, or even get suspended. However, this lawsuit claims that this shouldn’t be the case.
The new law will take effect by 2024 and is created to prevent big tech companies from having an unfair advantage over others in the market. This has been a problem in the past, with some companies using data collected from different sources to give themselves an edge. The fines for violating this law could be up to 10% of the company’s annual revenue, so it’s definitely something that they will want to avoid.
