The reactions to the settlement from the legal community were mostly positive. Many believe that the enforcer went in the right direction because the settlement is global in its reach, and it is thought by some to be an important step to tackle Amazon’s anticompetitive conduct. But in view of Amazon’s internet gatekeeper position to access end customers (“shoppers”), it is unsurprising that the retail community has perceived the FCO’s discontinuation of the proceedings rather skeptically, considering it a “toothless tiger” rather than a “landmark settlement.” Merchant associations speak of an instance of “smallest possible adjustment,” and some industry insiders regard the concessions to be overly vague.
Core Concerns: Amazon’s T&Cs vis-à-vis Merchants
The FCO investigated whether a number of the general terms and conditions (“T&Cs”) primarily contained in the “Amazon Services Business Solutions Agreement” with merchants constitutes an abuse of market power under German antitrust law (Sec. 19 and 20 German Competition Act) and potentially also under EU law (Article 102 TFEU).
Potential Types of Abuse
The following terms and practices were at issue:
- liability provisions – the unilateral exclusion of liability to Amazon’s benefit, allegedly disadvantaging merchants –,
- a lack of transparency – the termination and blocking of merchants’ accounts due to non-transparent requirements imposed upon merchants (in 2018, Amazon blocked more than 250,000 seller accounts permanently and over 30,000 accounts temporarily) –,
- jurisdiction clauses – designating the court of jurisdiction exclusively in Luxembourg, where Amazon’s EU headquarters are located, in case of any dispute (with Luxembourg law applicable) –, and
- other issues – inter alia (i) the handling of product information and Amazon’s use of such information for its own purposes; (ii) withholding money of or delaying payments to merchants; and, (iii) rules on product reviews and returns –.
The FCO did not consider these T&Cs and practices individually. It rather analyzed whether based on an overall assessment, the T&Cs as a whole unduly restricted the merchants in their competitive activity on the Amazon Marketplace and, therefore, may constitute an exploitative or an exclusionary abuse.
Market Definition and Market Power
The prerequisite of a finding of abuse is a company’s “dominance” under Sec. 19 German Competition Act, or its relative market power under Sec. 20 German Competition Act. The latter is a special German concept to cover companies on which others rely even if the company is not dominant, and which requires a certain “dependency” that is a threshold below that of dominance. The FCO ascertained a “market for marketplace services for online sales of goods to consumers in Germany / Austria.” However, it did not adopt a final position on relevant market definition, and ultimately also left open the assessment of dominance or relative market power because of Amazon’s early cooperation in the proceedings. However, a similar market definition is being considered in the European Commission’s Amazon Marketplace investigation.
Terms of the “Settlement”
The FCO opened the case in late 2018 after it had received more than 100 complaints on various grounds. The German watchdog cooperated closely with the European Commission to avoid any overlap of the two investigations, both focusing on different aspects of Amazon’s conduct vis-à-vis merchants. The FCO also closely cooperated with other national antitrust authorities in Europe, in particular with the Austrian and Luxembourgish enforcers.
Amendments to the T&Cs and Business Practices
Only seven months after opening the investigation, the FCO closed the proceedings upon the informal settlement of 17 July 2019. On 16 August 2019, Amazon provided amended T&Cs. Although the jurisdiction of the FCO is limited to Germany, Amazon decided to amend the T&Cs for all of its 15 marketplaces worldwide.
A number of the amendments seem to merely anticipate changes that Amazon would have to implement anyway once the EU’s Regulation 2019/1150 on promoting fairness and transparency for business users of online intermediation services (the Platform-to-Business-Regulation, or “P2B-Regulation”) takes effect on 12 July 2020. The regulation’s aim is to create a fair, transparent and predictable business environment for smaller businesses and traders when using online platforms. Given that the P2B-Regulation lacks substantive legal provisions, its interplay with antitrust law is not yet clear. Recently re-elected European Union Commissioner for Competition Margrethe Vestager – who is now also responsible for the Union’s digital policy – has announced that we may see more of such targeted regulations in her second term.
Major amendments to Amazon’s T&Cs follow. 
Prior to the amendments, Amazon was virtually exempted from any liability towards merchants. This exclusion of liability is now limited and terms more narrowly defined. Liability of both Amazon and merchants for breaches of major contractual obligations is now aligned. In the FCO’s view, this amendment is also an alignment to the more general framework governing the laws of B2B relationships in Europe.
Termination and Blocking of Accounts:
Prior to the changes, according to the T&Cs, Amazon had a right to terminate and block merchants’ accounts without justification or prior notice, and – arguably – made excessive use of this “right.” Under the amendments, ordinary terminations will require 30 days’ notice. Extraordinary terminations for merchant breaches of contractual or legal obligations, and the blocking of merchants’ accounts, now require a notice and a statement of reasons. This mirrors Article 4(2) P2B-Regulation, which reads: “Where a provider of online intermediation services decides to terminate the provision of the whole of its online intermediation services to a given business user, it shall provide the business user concerned, at least 30 days prior to the termination taking effect, with a statement of reasons for that decision ….” This notice period does not apply, inter alia, where the provider of online intermediation services exercises a right of termination under an “imperative reason” or can demonstrate a “repeated infringement of the applicable terms and conditions” (Article 4(4) P2B-Regulation). However, a statement of reasons must nevertheless be provided without undue delay. Any such statement of reasons shall “contain a reference to the specific facts or circumstances, including contents of third-party notifications, that led to the decision of the provider of online intermediation services” (Article 4(5) P2B-Regulation).
Jurisdiction and Applicable Law:
Prior to the amendments, only the courts in Luxembourg had jurisdiction for disputes between Amazon and merchants. Therefore, it was rather difficult and costly, in particular for smaller merchants, even to just attempt seeking legal redress. Luxembourg’s exclusive jurisdiction is now removed from the T&Cs. However, Luxembourg law still exclusively governs the business relations. The FCO accepted Amazon’s argument that a consistent legal framework for all its European activities is beneficial.
General Lack of Transparency:
It will now be easier for merchants to identify, access, and trace the applicable rules and regulations that apply to their relations with Amazon. Any changes will be announced with 15 days’ notice.
Akin to the termination and blocking amendments noted above, this “amendment” purely anticipates what is also stipulated in the P2B-Regulation. Its Article 3(2), subparagraphs 1 and 2, provide: “Providers of online intermediation services shall notify, on a durable medium, to the business users concerned any proposed changes of their terms and conditions. The proposed changes shall not be implemented before the expiry of a notice period which is reasonable and proportionate to the nature and extent of the envisaged changes and to their consequences for the business user concerned. That notice period shall be at least 15 days from the date on which the provider of online intermediation services notifies the business users concerned about the proposed changes. Providers of online intermediation services shall grant longer notice periods when this is necessary to allow business users to make technical or commercial adaptations to comply with the changes.”
Other amendments relate, inter alia, to the rules governing returns and reimbursements, product information and rights of use, confidentiality, product reviews (in particular access to a subset of Amazon’s customer review system) and merchant ratings.
Legal Nature of the Settlement
The FCO can close proceedings in a number of different ways, some of which include a formal decision while others are merely informal administrative action.
Here, as a result of Amazon’s early cooperation, and its voluntary removal of the competitive concerns that had been expressed, the FCO did not issue a formal decision. In response to Amazon’s pledge to change the critical clauses in the T&Cs, the FCO simply closed the investigation conditional upon the merchant platform complying with the self-administered changes in conduct and pending an ongoing monitoring of such compliance.
By the very nature of such a settlement, Amazon’s “commitment” to refrain from similar measures is not legally binding. In the event that Amazon does not comply, the FCO may take up the case again and continue its investigation, thus “holding the sword of Damocles over Amazon’s head” even without any formal commitments declared binding by decision as foreseen in Section 32b German Competition Act.
Similar Strategy vis-à-vis Amazon in Previous FCO Investigations
The FCO adopted the same strategy it adopted in the Amazon Marketplace T&Cs case in two previous investigations into Amazon’s business practices.
In 2012, the FCO opened proceedings into price parity clauses employed by Amazon for the sale of consumer goods on the Amazon Marketplace. Such clauses prevented merchants from offering their goods elsewhere online at a lower price. In August 2013, Amazon announced to abandon such clauses from T&Cs on an EU-wide basis, and the FCO terminated its proceedings shortly thereafter without any formal decision.
Likewise, in January 2017, the FCO closed its administrative proceedings against Audible.com – a subsidiary of Amazon – with regard to an agreement with Apple involving audiobooks. The investigation focused on the exclusive purchase of digital audiobooks by Apple from Audible for sale in Apple’s iTunes Store, and the obligation of Audible not to supply digital music platforms other than iTunes. Amazon deleted the exclusivity agreement and the FCO there too closed the case without any formal decision.
The FCO’s Approach: Showing the Way Forward for Effective Antitrust Enforcement?
It is no surprise that the FCO has taken a leading role in investigating Amazon’s business practices. With net sales of almost $20 billion in 2018, Germany is Amazon’s second largest market after the US. The Amazon Marketplace is by far the largest online marketplace in Germany, with only a few competitors such as eBay. More than 300,000 merchants are active on the German amazon.de platform, accounting for 55-60 percent of Amazon’s overall sales. Thus, it is not surprising that Andreas Mundt, President of the FCO, declared, when the settlement was announced: “With our proceedings we have obtained far-reaching improvements for sellers active on Amazon marketplaces worldwide.”
Conclusion and Outlook
The July 2019 Amazon settlement may be considered a “win” by both sides. Amazon did not commit to anything hindering its ability to engage in interbrand competition, and the FCO may consider the settlement to be a milestone in the international “enforcement race” among the enforcement authorities. However, as noted above, the FCO’s case may be more hype than substance, with rather limited effects, raising new problems in terms of lack of guidance and deterrence effect. The FCO now must closely monitor Amazon’s future conduct. Not only must it ensure that Amazon does not resort to the prior conduct, but it also must ascertain whether Amazon engages in any conduct having the same or equivalent object or effect.
Still pending is the EU investigation of Amazon’s use of the merchant’s data for leveraging or favoring of its own retail program vis-à-vis said merchant customers that has previously been covered by this Bulletin. The European Commission’s probe relates to the conflict of interest deriving from the hybrid nature of Amazon’s platform and, in particular, Amazon’s collection and use of third-party transaction data. On the same day the FCO closed its case, the European Commission announced the opening of formal antitrust investigations into the platform’s dual role. The Commission will notably have a close look at standard agreements between Amazon and merchants, which allow Amazon’s retail business to analyze and use third-party merchant data.