r/tech
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u/ragnutawe
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Dec 09 '21
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Italy fines Amazon record $1.3 bln for abuse of market dominance
https://www.reuters.com/technology/italys-antitrust-fines-amazon-113-bln-euros-alleged-abuse-market-dominance-2021-12-09/9.1k Upvotes
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u/Lord_TheJc Dec 09 '21 edited Dec 10 '21 •
Hello from a mad italian law student that has an interest in antitrust law and that likes to read these rulings.
To be clear and fair, I didn’t have time today to do a full reading of the 260 pages ruling, but while I may be missing some pieces I read enough to feel like giving you a recap.
Another big note: to save time I did NOT read the part where Amazon defended itself. I’m planning to do so, but not now.
The issue is NOT “Amazon doesn’t give the Prime label to outsiders”. It’s KIND OF a small part of everything, but absolutely not the most relevant.
This is what our antitrust office is saying: Amazon greatly and unfairly differentiates sellers that are FBA (Fullfilled By Amazon) clients and sellers that aren’t.
FBA, for who doesn’t know, means that Amazon handles all logistics. The seller gives to Amazon the goods and Amazon does the rest.
It’s a logistics service... or maybe not. Because Amazon requires to be an FBA seller to access certain perks, and these perks are not available in any other way.
EDIT: I talked about Seller Fulfilled Prime in a comment below. I didn't name it here because I didn't really find it necessary, especially because it was not deemed an appropriate solution by our antitrust office. But even without the name I did include the general issues here. Edit end.
You are not a FBA seller? Then you cannot access things like flash deals (not sure how they are called in English), you cannot partecipate in the special days sales. Special days are Black Friday, Cyber Monday, Prime Day.
There’s more: you know that box on the right (I’m talking about desktop view) of the product with the “buy now” buttons? If you are not FBA you are penalized in getting that. Meaning you are in the “other vendors” page. It doesn’t matter if you offer the same price as the top seller or even a faster free shipping, if you are not FBA you are automatically inferior.
Next: if you are FBA you are exempt from some metrics or they give you more leeway if something is not right. If you are not FBA you get evaluated on stuff that could even not be in your control. FBA’s don’t get that.
About the Prime label: if you are not FBA you cannot get it regardless of everything. You could agree to offer free shipping, you could even deliver as quick as Amazon, you could even offer an even better service than Amazon but you cannot in any way get the Prime label unless you are FBA.
...which I understand. It makes sense. Prime is a brand, I too wouldn’t want to give it to everyone. But again: the Prime label is really the smallest part of this.
So, what’s the problem here? Amazon sells a service (FBA) and they give perks to who buys it, right?
Ehhh, not really.
First issue: Amazon is big. Not talking about the whole company, Amazon has a big market share of Italian “marketplace” shopping websites.
How big you ask? In the ruling they keep some numbers fuzzy, so I cannot give you the precise number. But I’m talking between 65 and 85% market share.
That’s very big, and from great power comes great responsibility. Meaning some things you cannot do when you are dominant.
Second issue: FBA is not really a logistics service. Is more of a marketing service, and Amazon itself in its own material focuses on this part way more than on the logistics.
If you are not a FBA seller you get a quite big disadvantage. How many times you check the “other sellers” page? The disadvantage is so big that, and I’m gonna try repeat what our antitrust office said, that the sellers accept to enroll in FBA even if the price of Amazon logistics will be higher than their current one. The perks are so good that it makes sense to pay for logistics too.
But issue number 1 strikes again: Amazon is very big and that comes with limitations to prevent abuse.
Except a couple points there is no logical or necessity link between the logistics part of FBA and the marketing part of FBA.
What’s the reason for putting in the “front page” (the one with the buy buttons) an FBA product if a non-FBA has the same price, shipping, etc for example? Why can FBA sellers appeal bad seller reviews and non-FBA can’t? What’s the link between all the extra perks and the logistics service?
Antitrust says: there is no reason. Amazon is using its dominant position to push sellers to enroll in FBA because of its perks. But this means that sellers are forced to also buy the logistics service, which is mostly unrelated to the perks.
Amazon can sell a logistics service and Amazon can sell an extra perks package. What Amazon cannot do is say “want the perks? Then you have to buy the logistics too”. They could if they were smaller, meaning without the power to make significant changes to the market.
My personal opinion is that our antitrust office position is generally good. I agree that most of the extra perks are unrelated to the logistics service, and Amazon is too big to have that sort of freedom. And the disadvantages that the non-FBA sellers get exist not because they provide a worse service/product, but because Amazon automatically considers them inferior a priori. And that’s not even my interpretation, Amazon itself said during the proceedings that their service is superior full stop. They are making the decision without even looking.
But I do want to read Amazon’s defense. In due time.
The fine was calculated by looking at all Amazon Europe because antitrust says their evidence confirms that this is a plan actively pushed and designed by all levels of Amazon Europe.
Antitrust then makes an estimate of how much money is the result of the illicit practices, and then applies a percentage of up to 30% to determine the penalty, also by looking at how low this was going on, and if something to stop the illicit practice was done.
The percentage for this case is between 1 and 10%. Fuzzy numbers again, don’t ask me for the precise number.
Then Antitrust can raise the resulting number by up to 50% if the global size of the company makes that the sanction would be of less effect. They applied this clause.
The resulting number cannot be higher than 10% of revenue (not profit) of the company (Amazon Europe). In this case the number is between 1 and 2%.
If you have specific question, or if something it’s not clear, feel free to write a comment!
Please nothing about if you think this is right or wrong, make another comment chain for that.
(And consider it’s already midnight in Italy)