Amazon Offers to Change Marketplace Rules to Address UK Competition Concerns

Introduction

In a move to settle an open antitrust investigation in the UK, Amazon has proposed changes to its marketplace rules to ensure fair competition with third-party sellers and guarantee equal treatment for all products displayed in the ‘Buy Box’. The national competition watchdog, the Competition and Markets Authority (CMA), has opened a consultation on Amazon’s proposed commitments and expressed its preliminary view that the offer addresses its competition concerns.

Background: Antitrust Investigation into Amazon

The CMA had launched an investigation into certain aspects of Amazon’s UK business over a year ago. The investigation focused on Amazon’s use of marketplace seller data and its control of the ‘Buy Box’. The CMA’s concern was that Amazon’s access to sensitive data could give its retail business an unfair advantage over other sellers, and that the Buy Box featured selected sellers from Amazon’s retail business or its delivery services more prominently than third-party sellers. The CMA’s preliminary view was that Amazon’s proposals would level the playing field for third-party sellers.

Amazon’s Proposed Changes

Amazon has offered several commitments to address the CMA’s concerns:

• Limiting the use of data on marketplace sellers by Amazon’s retail business to prevent unfair advantages
• Guaranteeing equal treatment for all products displayed in the ‘Buy Box’
• Allowing third-party businesses to negotiate their own rates with independent providers of Prime delivery services

Benefits for Third-Party Sellers and Customers

If accepted, Amazon’s commitments would ensure fair competition and equal opportunities for third-party sellers on Amazon Marketplace:

• Level playing field: Third-party sellers would no longer be at a disadvantage compared to Amazon’s retail business
• Increased visibility: All products would have an equal chance of being featured in the Buy Box
• Better delivery rates: Third-party businesses could negotiate their own rates with independent providers of Prime delivery services
• Lower delivery costs: Customers could benefit from lower delivery costs when better rates are negotiated

Comparison with EU Settlement

In December, Amazon reached a settlement with the European Union (EU) over similar antitrust probes. While the proposed UK settlement shares similarities with the EU settlement, there are some differences:

• Second competing offer: The EU settlement requires Amazon to display a second competing offer from a different seller on price and/or delivery if one exists. The proposed UK settlement makes no mention of a second Buy Box.
• Duration of commitments: The EU settlement applies for seven years (for Prime and Buy Box) and five years (for other commitments). It’s unclear how long Amazon is proposing to maintain the UK commitments.

Monitoring Compliance

As part of the proposed UK settlement, Amazon would appoint an independent trustee who will monitor its compliance with the commitments. This arrangement is consistent with other CMA settlements on Big Tech commitments and ensures accountability. The CMA will have a direct say in the appointment of the monitoring trustee, ensuring the necessary skills and expertise for the job.

Conclusion: Enhancing Fair Competition and Customer Benefits

Amazon’s proposed changes to its marketplace rules aim to address the CMA’s concerns and promote fair competition. If accepted and implemented effectively, these commitments would level the playing field for third-party sellers, increase visibility for all products, and provide better delivery options for customers. The CMA is currently consulting on Amazon’s proposals and will make a decision after the consultation period ends on September 1.

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Additional Piece: The Importance of Fair Competition in Digital Marketplaces

In recent years, digital marketplaces like Amazon have revolutionized the way people shop and do business. These platforms offer a wide range of products and services from various sellers, providing convenience and choice to customers. However, the dominance of certain platforms has raised concerns about fair competition and the impact on smaller businesses.

The Power of Data in Digital Marketplaces

One of the key issues in the Amazon antitrust investigation was the company’s access to sensitive data on marketplace sellers. This data includes information on sales performance, pricing, and inventory levels. With such data, Amazon can make informed decisions on which products to sell, how to manage stock levels, and at what prices. This gives Amazon a significant advantage over other sellers who do not have access to such information.

By limiting Amazon’s use of third-party seller data, the proposed changes aim to level the playing field and ensure fair competition. All sellers should have equal opportunities to succeed based on the quality and competitiveness of their products, rather than being disadvantaged by an imbalance of information.

The Impact of the ‘Buy Box’ on Seller Visibility

The ‘Buy Box’ is a coveted feature on Amazon’s marketplace listings that prominently displays a seller’s offer. Sellers featured in the Buy Box have a higher chance of making sales as they receive greater visibility and credibility. However, concerns were raised that Amazon’s retail business and sellers using Amazon’s delivery services had a higher likelihood of being featured in the Buy Box, while third-party sellers were at a disadvantage.

By guaranteeing equal treatment for all products in the Buy Box, Amazon’s proposed changes aim to provide a fairer platform for all sellers to compete. This means that sellers who offer competitive prices and excellent service will have an equal chance of being featured, regardless of their relationship with Amazon. Such a change reinforces the principles of fair competition and creates a more level playing field.

Empowering Third-Party Businesses with Negotiation Power

Another significant change proposed by Amazon is allowing third-party businesses to negotiate their own rates with independent providers of Prime delivery services. Currently, Amazon controls the pricing and terms of delivery services, which can put third-party sellers at a disadvantage. By giving sellers the ability to negotiate their rates, Amazon aims to foster more competitive and flexible delivery options.

This change benefits both sellers and customers. Third-party businesses can secure better deals on delivery services, which can translate into lower costs for customers. Customers will also have more options and potentially faster or more affordable delivery, as independent providers may offer unique services that differ from Amazon’s in-house delivery system.

Summary:

Amazon has offered to make significant changes to its marketplace rules in the UK to address competition concerns raised by the Competition and Markets Authority. The proposed changes include limiting Amazon’s use of third-party seller data, guaranteeing equal treatment for all products in the Buy Box, and enabling third-party businesses to negotiate their rates with independent providers of Prime delivery services. These changes aim to level the playing field for sellers, increase visibility for all products, and provide better delivery options for customers. The CMA is currently consulting on Amazon’s proposals, with a decision expected after September 1.

In a move seeking to settle an open antitrust investigation in the UK, Amazon has offered to limit its use of data on marketplace sellers so its retail business cannot gain an unfair advantage over other sellers and provide a guarantee of equal treatment for all products displayed in the ‘Buy Box’ that appears on listings on its ecommerce marketplace, the national competition watchdog said today.

The ecommerce giant has also offered to allow third-party businesses using its marketplace to sell physical goods to negotiate their own rates directly with independent providers of Prime delivery services.

The Competition and Markets Authority (CMA) opened an investigation into aspects of Amazon’s UK business just over a year ago. It’s not taken the step of issuing a formal statement of objections — so, if accepted, Amazon’s commitments could avoid the company being subject to a longer and deeper probe.

On Prime, the UK regulator has been looking into how Amazon sets the eligibility criteria for selling under the Prime label loyalty program — and it suggests the changes proposed by Amazon now will enable customers to benefit from lower delivery costs where better rates are negotiated.

On marketplace seller data, the CMA’s concern is that Amazon’s access to commercially sensitive data relating to third-party sellers could give its retail business an unfair advantage by helping it decide which products to sell; how to manage stock levels; set prices; and make other important commercial decisions.

A blanket commitment by Amazon not to use third party data to gain an unfair advantage is intended to resolve that worry.

While Amazon’s control of the Buy Box — which is of course prime (ha!) real estate for sellers on the marketplace, given its prominent featuring of selected sellers into product listings — has triggered concerned products offered by third-party sellers are less likely to appear than similar offers from either Amazon’s own retail business or third-party sellers that use its delivery services. Hence, again, its promise of equal treatment to resolve the concern.

The CMA has now opened a consulting on Amazon’s proposed commitments, ahead of taking a decision on whether to accept them. But it said its “preliminary view” is the offer from Amazon addresses its competition concerns. (The consultation runs until September 1.)

In a statement, Ann Pope, senior director for enforcement at the regulator, added:

Amazon’s commitments to the CMA will help ensure that third-party sellers on Amazon Marketplace can compete on a level-playing field against Amazon’s own retail business and, ultimately, mean that customers in the UK get a better deal. The CMA took this action after it heard concerns that Amazon was using its strength in the market to gain an advantage over thousands of businesses which use Amazon Marketplace to reach customers.

In December, Amazon reached a settlement with the European Union over similar antitrust probes also focused on its use of marketplace seller data, the Buy Box and Prime. The commitments Amazon is offering to the UK regulator look similar to those already accepted by the EU — although there does appear to be some differences and/or nuance. Not least because the EU pushed back on a first offer from Amazon after criticism it was weak.

For example, under the EU settlement Amazon not only agreed to treat all sellers equally for the Buy Box ranking but also to display a second competing offer from a different seller if one exists that is sufficiently differentiated from the first one on price and/or delivery. Whereas the settlement proposed to the CMA makes no mention of displaying a second Buy Box.

The commitments Amazon offered the EU also apply for seven years (for Prime and Buy Box); and five years (for all other commitments). Whereas it’s not clear how long Amazon is proposing to maintain the UK commitments. (We’ve asked the CMA for more on that.)

One aspect that’s shared between the (proposed) UK settlement and what the EU already accepted from Amazon is a requirement that ot appoints an independent trustee who will monitor its compliance with commitments. (“Under supervision of the Commission, an independent trustee will be in charge of monitoring the implementation and compliance with the commitments,” the bloc said in December when it settled the probes.)

Monitoring trustees have been a feature of other CMA settlements on Big Tech commitments. Such as in the case of Google’s commitments about how it would go about deprecating support for tracking cookies and developing and implementing its alternative “Privacy Sandbox” adtech stack.

“The CMA will have a direct say in this appointment, ensuring they have the necessary skills and expertise for the job,” the UK regulator said in the case of Amazon’s commitment to being monitored.

Clearly, what are rather broad-brush pledges from Amazon to the UK regulator at this stage — such as not to use third party seller data to give itself an advantage; and to give equal treatment to all sellers when it comes to being featured in the Buy Box — will need to be verified to ensure the ecommerce giant is living up to its word. So, if the CMA does accept Amazon’s offer a lot will rest on the quality of the monitoring trustee.