Amazon’s antics in Europe are getting costly for the e-commerce giant. Italy’s top antitrust watchdog imposed an approximately 1.1 billion euro ($1.3 billion) fine on the firm for using its dominance to steer third-party sellers towards its Fulfillment by Amazon (FBA) service. The new fine comes five months after Luxembourg’s privacy regulator fined Amazon $887 million for breaching European GDPR protection laws.
The Italian Competition Authority (AGCM) alleges Amazon tied the use of FBA to exclusive benefits it deemed essential for gaining visibility and increasing sales on Amazon.it, describing the strategy as “abusive.”
Among those benefits, the most relevant is Amazon’s ever-popular Prime subscription delivery service that has more than 200 million members worldwide.
By giving this benefit to active Amazon.it sellers, logistics services offered by competing operators are detrimentally impacted, AGCM says.
An Amazon representative told Sourcing Journal that the company strongly disagrees with the AGCM decision, and that the Big Tech firm will appeal.
“The proposed fine and remedies are unjustified and disproportionate,” the Amazon spokesperson said. “More than half of all annual sales on Amazon in Italy come from SMBs, and their success is at the heart of our business model. Small and medium-sized businesses have multiple channels to sell their products both online and offline: Amazon is just one of those options. We constantly invest to support the growth of the 18,000 Italian SMBs that sell on Amazon, and we provide multiple tools to our sellers, including those who manage shipments themselves.”
The watchdog said that Amazon prevents third-party sellers from associating the Prime label with offers not managed with FBA. Without Prime, these sellers don’t gain many of the major incentives to selling on Amazon, such as participation in special events like Prime Day or its Black Friday and Cyber Monday promotions.
Amazon contends that FBA is a completely optional service, noting that the majority of third-party sellers opt not to use it.
Using FBA also increases the likelihood of a seller’s offer to be selected as the Featured Offer displayed in the company’s hallowed “Buy Box.” The Buy Box is reportedly a major point of contention in the U.K.’s Competition and Markets Authority (CMA) and its potential investigation, with the regulator also focusing on how Amazon decides which merchants appear in that digital real estate.
The coveted box gives select items the greatest visibility on a product detail page and enables shoppers to add it to their shopping cart in one click, therefore giving them an option to boost sales.
In addition, third-party sellers using FBA are not subject to the stringent performance indicators that Amazon applies to monitor the non-FBA sellers’ performance, which can ultimately lead to the suspension of non-compliant sellers’ account on Amazon.it.
With this in mind, AGCM alleges that the tech titan prevented competing e-commerce logistics providers from presenting themselves to online sellers as comparable service providers to FBA.
“Such a conduct widened the gap between Amazon’s market power and its competitors’ also in the delivery of e-commerce parcels,” the statement said. “As a result of the abuse, competing marketplaces have also been damaged: because of the cost of duplicating warehouses, sellers who adopt Amazon’s logistics are discouraged from offering their products on other online platforms, at least with a product range as wide as that on Amazon.it.”
This is similar to the accusations made by Washington D.C. attorney general Karl A. Racine, who levied an antitrust lawsuit of his own at Amazon earlier this year. In the case, which accuses the company of suppressing competition to agreements with certain sellers on the platform and artificially raising prices, Racine took aim at Amazon’s “Fair Pricing Policy.” The policy enables Amazon to sanction or remove third-party sellers from the marketplace altogether if they offer their products for lower prices or under better terms on a competing online platform. Sanctions include making sellers ineligible for the Buy Box and pausing the shipment option.
Nevertheless, Amazon’s rebuttal to AGCM’s allegation that it is harming competitors is focused on the overall e-commerce landscape and its share of retail in the country. E-commerce represents 10 percent of all retail sales in Italy, up from 9 percent in 2020, according to the B2C eCommerce Observatory of the Politecnico di Milano. And within the online channel, Amazon controls approximately 17 percent of sales, according to Italian Communication Authority (AGCOM).
The fine won’t be the only punishment levied by the Italian watchdog, with certain “behavioral measures” subject to review by a monitoring trustee.
In particular, Amazon would have to grant sales benefits and visibility on Amazon.it to all third-party sellers that can comply with fair and non-discriminatory standards for order fulfillment. These benefits would be in line with the level of service that Amazon intends to guarantee to Prime consumers.
The antitrust battle rages on for Amazon worldwide. While the U.S. hasn’t filed a federal lawsuit, the investigation into Big Tech is an ongoing affair, with a House Subcommittee introducing bills that could potentially split the e-commerce giant. A Reuters report in November said that Amazon may concede in a settlement with The European Commission ahead of any potential fines and mandates.
The European Commission said it had cooperated closely with AGCM on the Italy case, within the framework of the European Competition Network, to ensure consistency with its own two ongoing investigations into Amazon’s business practices.
And one battle might be most indicative of how could Amazon operate as a go-ahead business in the long term. Various Reuters reports this year cited internal Amazon documents indicating the company’s attempts to skirt e-commerce regulations in India, and give preferential treatment to certain sellers. The most recent report touched on Amazon’s alleged use of third-party data to create its own private-label products. The October report got U.S. politicians’ attention, notably 2020 presidential candidate Sen. Elizabeth Warren (D.-Mass), who called to break up the firm.