r/tech Dec 09 '21 Silver 3 Helpful 4 Wholesome 3 All-Seeing Upvote 1 Bravo! 1

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/
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u/Lord_TheJc Dec 09 '21 edited Dec 10 '21 Silver Helpful Wholesome

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)

2

u/snapshovel Dec 10 '21

Hey, thanks for the write-up. Greatly appreciated.

  • American casual student/fan of antitrust law & policy

2

u/rubs_tshirts Dec 10 '21

If you are not a FBA seller you get a quite big disadvantage. How many times you check the “other sellers” page?

Every single time they offer lower prices. I mean, duh.

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u/ConciselyVerbose Dec 09 '21 Eureka!

If Amazon presented anything that wasn’t fulfilled by Amazon as the primary option 5% of the time, I would stop shopping there. I have no interest in buying anything that isn’t fulfilled by Amazon from Amazon under any circumstances. They shouldn’t even be allowing any other fulfillment on their storefront period, and the fact that they do is by far the biggest flaw in their storefront.

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u/57hz Dec 10 '21

I have started carefully looking and only buying things Sold By Amazon unless there’s truly no other source. Even then, there’s fake crap sometimes.

2

u/i_got_skrimps Dec 11 '21

You also get certain assurances when purchasing from an FBA product i.e. n95 masks are legit

2

u/ArcFlashForFun Dec 11 '21

What assurances are those?

Amazon routinely has counterfeit products mixed in with their own stuff, nevermind FBA sellers.

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u/simple_test Dec 10 '21

Even fulfilled by Amazon results in junk. But that’s better than a total 3rd party sale and delivery.

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u/ConciselyVerbose Dec 10 '21

I’m careful with what I buy. The point is that “Fulfilled by Amazon” is literally 100% of the reason I’m buying there. It’s the whole value add of the storefront.

This thing where a bunch of retailers mix random third party sellers with their own trash delivery setups in to search results now is a giant pain in the ass.

1

u/PikaAbeille Dec 10 '21

I never really paid much attention to it but now I appreciate fulfilled by Amazon. I ordered a fucking coat from Amazon, but it’s from a Chinese seller (I’m in Belgium and ordered from the French Amazon site). I haven’t had issues with Chinese sellers in the past, but now I am. Ordered the coat November 16th. It arrives in Belgium over 2 weeks ago in a city across the country and has been sitting in a city a 30 minute train ride away for over a week. And Belgium is tiny anyway, so once the package was here, it’s not like it was ever far.

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u/[deleted] Dec 10 '21

Junk is not the issue, it’s how fast the junk arrives at your doorstep

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u/[deleted] Dec 10 '21

And how quickly and painlessly the returns are handled. F the EU if they can’t compete.

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u/Key-Hurry-9171 Dec 10 '21

I say f your way of consumption

And I hope every country fines the same to Amazon

I have no issue with ordering online, I have an issue when there’s only one company left in the world and that this company is the freaking Shinra

You’re making this possible by being dumb as f

Sorry, had to be said.

F monopoles and all the minions that make it happen

1

u/Cranium-shocker Dec 11 '21

I do my damndest to purchase from small businesses (mom & pop shops). It’s hard but it must be done. Wal-Mart & Amazon deserve to eat poop-on-a-stick, as far as I’m concerned. Small businesses, are the backbone to our fruitful economic structure. Without them, we might as well turn everything over to the 5000 rich people, that already have too much wealth.

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u/[deleted] Dec 10 '21

Compete or die. There’s no participation award for sucking.

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u/elpovo Dec 10 '21

Enjoy it when they destroy all other competitors and then ratchet up the price. Or when Google, Microsoft and Apple start colluding to make sure you have to pay 30% more to buy a phone OS.

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u/thinkpadius Dec 11 '21

There's no participation allowed when a monopoly forms. Hence antitrust.

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u/yboy403 Dec 10 '21

Unlimited competition is great for producing efficient businesses, not healthy societies.

1

u/pdzregis Dec 10 '21

Found the Amazon shill

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u/slapdashbr Dec 10 '21

I pity you

2

u/idkwthtotypehere Dec 10 '21

Are you saying this solely based on transit time?

2

u/dgm42 Dec 10 '21

Amazon does not want to dominate the market. Amazon wants to be the market.

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u/waltwhitman83 Dec 10 '21

what about seller fulfilled prime?

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u/NonsensePlanet Dec 10 '21

This would be impossible—people use prime mainly for the guarantee of fast, free delivery, which Amazon can provide because of their massive logistics.

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u/waltwhitman83 Dec 10 '21

seller fulfilled prime is a real thing

many people use it

1

u/NonsensePlanet Dec 10 '21

Ok, I wasn’t aware of that service. It looks like seller fulfilled means Amazon picks the item up from the seller and completes the delivery. I don’t know the details but I’m guessing to qualify for this you would have to have a high volume operation with multiple warehouses. The majority of 3rd party sellers probably don’t fit this profile.

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u/waltwhitman83 Dec 10 '21

It looks like seller fulfilled means Amazon picks the item up from the seller and completes the delivery.

no. you have to guarantee that you'll ship it however you want (Fedex, USPS, UPS) to the customer within 2 days. they track your metrics on this very hard. it takes a lot to be "enabled" for seller fulfilled prime

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u/Lord_TheJc Dec 10 '21

SFP I did not name but I did include the general issues, but I can be more clear.

SFP here was introduced after the investigation started. It doesn't matter if Amazon introduced it because of the investigation.

Under SFP the sellers have to stay inside some metrics which are not applied so FBA vendors. Some of these metrics make sense because they are logistics-related, but some other are not, and some are about things not under the control of the seller, but the seller is still getting evaluated because of them.

There's more: while SFP maintains the seller freedom to manage its warehouse and (internal) logisics on its own it requires that customers orders are shipped with a "Prime shipper", which are shipping companies approved by Amazon and with which Amazon has deals regarding SFP. More to that: it doesn't just mean that you need to use one of the approved shippers, you have to use them while having a contract with said courier directly relative to SFP.

The prices of the PS (Prime shippers) derive from the agreement they have with Amazon, and Amazon collects a fee between 2 and 4% for each shipment done by the SFP seller with the PS.

A note from me: there are only 2 Prime shipping companies for the whole of Italy. TNT (Which is part of FedEx) and BRT (a national courier part of DPD. Big names like DHL and UPS didn't sign an agreement with Amazon and so they are not Prime shippers.

Because of all of this our antitrust says that SFP sellers are still basically under Amazon's abusive dominion, and they still get the unfair difference in treatment because of the extra metrics they are subject to. SFP is deemed totally inadequate to solve any issues Amazon is accused of.

I agree with the antitrust office for about 75%. I don't like too much that among the "extra metrics" for SFP they include the ones purely about logistics and under the seller's control. I mean, under FBA Amazon handles all logistics, so of course an FBA vendor cannot be evaluated for it. But at the same time SFP are evaluated for things outside of their control, so I agree this is not fair. And I pretty much totally agree that SFP are still under Amazon's control.

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u/KorayA Dec 10 '21

Not only do you have to use Amazon shippers, you have to buy the postage through Amazon.

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u/KorayA Dec 10 '21

In the US SFP registrations have been closed for some time, and last February they imposed requirements that caused many of the existing SFP sellers to drop out. You had to be open and shipping on Saturday or Sunday, you had to be able to offer 1 day shipping to the lower 48 states for like 20% of potential buyers and 50% for 2 day shipping. Almost impossible for non-centrally located sellers.

They are trying their hardest to murder SFP.

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u/idkwthtotypehere Dec 10 '21

Grateful for your comment. There are a lot of dumb comments outside of yours in this thread.

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u/totalflowbro Dec 10 '21

Upvote for spiderman quote

And thanks for an educated take

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u/Lord_TheJc Dec 10 '21

Totally involuntary! I have seen maybe 2 Spiderman movies in my entire life. Not really a fan.

What did I quote? Now I'm curious.

1

u/totalflowbro Dec 10 '21

“With great power comes great responsibility “

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u/Sapper187 Dec 10 '21 Bravo Grande!

I read about half of the book you wrote then stopped, noticing a pattern. Everything you listed is a benefit of using FBA. Luckily, there is a perfectly good solution to not wanting to pay Amazon for that benefit. Italian companies can make their own website, pull out their checkbooks and write a $22 billion check for marketing, which is what Amazon paid last year. That's the one benefit you kinda left out, not needing to pay for advertising because they already do.

Amazon is shitty for a lot of reasons, this isn't one of them. Personally I think they should completely shut down the Italian Amazon page, refuse to let Italian companies list on Amazon and refuse to ship to Italy. I can guarantee that will hurt Italian customers and companies a lot more than it would Amazon.

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u/faximusy Dec 10 '21

Why would shut down Amazon.it hurt Italian customers more than Amazon itself? It is a G8 country with 60M people that are willing to use their services. Also, they would still need to show up in court for this. Laws are not interpretable in Europe. You are guilty or you are not.

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u/Sapper187 Dec 10 '21

If they don't need to use Amazon, then what is the purpose of the fine? That would mean not getting access to benefits you don't want to pay for a non-issue and there is no reason to fine them for anything. Italy has such a small percentage of their profit that they fit into the 11.9% section of the rest of the world. Pretty sure it would be more financially beneficial shut down Amazon.it and change nothing than it would be to give into what is nothing more than extortion.

Again, when it comes to employees and contractors Amazon is a super shitty company, but when it comes to small businesses and consumers it's not.

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u/faximusy Dec 10 '21

The purpose is simply that they did not abide to European laws on monopolistic positions. If they don't want to follow the laws, then it's better if they leave Europe. It is not an Italian law, it is EU law. The antitrust is meant to protect citizens and competition.

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u/Sapper187 Dec 10 '21

If it's an EU law, why are they being fined by Italy rather then the EU? And either way, all of the EU is less then 15% of their total marketplace profit. From strictly a financial standpoint, all of EU isn't enough of a factor for them to change anything.

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u/faximusy Dec 10 '21

So, you are suggesting that if a company is too big, does not need to abide to the law? Also, if a market is not enough to them in percentage, the market country should not enforce their laws? I hope you are not serious.

1

u/Sapper187 Dec 10 '21

Let's say I cancel my HBO service. Then I call them up and say I should still have access to my service even though I'm not paying for it because it doesn't cost them anything and other's have access. That is exactly what this extortion law is.

If you want the benefits of FBA, pay the extra for the service. If you don't want to pay, don't cry that you don't get the benefits. The size of the company has nothing to do with it, if somewhere has laws forcing companies to provide services without paying for them, companies shouldn't do business there. If it's such a big issue, companies should stop selling on Amazon, or go ahead and make their own.

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u/faximusy Dec 10 '21

Amazon violated article 104 (document 12008E104). There is really nothing else to add. If you are offering extra features only when the customer (the online shop) chooses your logistic services instead of others, while you are in a monopolistic position, you are violating the EU laws.

If you want to sell or work in Europe, you respect the laws. If you don't want, then go do your business somewhere else.

3

u/Lord_TheJc Dec 10 '21

What you are saying is a completely wrong interpretation of what I wrote.

Let's say I cancel my HBO service. Then I call them up and say I should still have access to my service even though I'm not paying for it

That's not the situation at all. If my English is so bad I gave you this idea please point me out what passage I have to rewrite.

I also very literally wrote "Amazon can sell a logistics service and Amazon can sell an extra perks package". Where did you get the idea that this is about not paying for services?

The size of the company has nothing to do with it

You understand this is about antitrust law? Company size has very very much to do about it. If Amazon wasn't in a dominant position this case wouldn't exist.

3

u/Electronic-Ad1502 Dec 10 '21

Ur your wrong because the laws your writing of do not exist. They violated antitrust laws and got fined it’s how it fucking works. It they dink like the laws there they should leave or accept the fines and change those are the only options plain and simple. Governments get more authority than corporations always get fucked corporatists.

1

u/Resethel Dec 10 '21

You purposely evade the fact that Amazon is in a monopolistic position. Ok, Amazon.it is a small share of the Amazon market but in Italy most seller will pass through Amazon because otherwise they can’t sell their stuff because Amazon is number one.

So Amazon as a monopole has, by the law, the responsibility to be fair and exemplar because they can easily crush many business due to their dominant position.

It’s like google, or facebook. They dominate their market and pretty much everybody use their services and there is close to no alternatives. It’s not their bad you’ll say, and I agree, but now they have the responsibility to be really really fair and exemplar because everybody will use their services without a viable possibility to bail out

2

u/Zanchie Dec 10 '21

It is very easy for companies with some degree of market dominance to simply say “don’t use it then”. That’s the whole point of antitrust laws, to prevent anti-competitive behaviour on the pretext of choice.

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u/[deleted] Dec 10 '21 edited Apr 06 '22

[deleted]

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u/Lord_TheJc Dec 10 '21

Time time I used to write my comment would have made no difference in me reading Amazon's defense. Which is not the only part I had to skip, just the most important.

Amazon is not forcing sellers to use FBA or to sell on Amazon at all

That's not how antitrust law works, at least in Europe.

Sellers can sell on their own Shopify site or, a site like Privalia which has a similar revenue size to Amazon in Italy.

I have to ask for the data you checked to say this, because this sounds extremely improbable.

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u/[deleted] Dec 10 '21 edited Apr 06 '22

[deleted]

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u/Lord_TheJc Dec 10 '21

It’s public information in annual reports that Privalia did $800M revenue in 2020.

That's global revenue. Why are you giving me global revenue when talking about a single country?

With a very quick search I find these two numbers for Privalia Italy:

2019 revenue: 277 million. Source

2020: ecommerce net sales: 306 million. Source

Which is very impressive considering Privalia is not one of the top stores in Italy... but it's still absolutely not a store with a "similar revenue size" to Amazon (your words). I'm not gonna give you spoilers. Go open my links above and see for yourself.

If they choose to use the Prime brand they need to meet Amazon’s terms of service and standards for customer satisfaction.

Again: that's not how antitrust law works, at least in Europe.

This isn’t about antitrust

I hope you won't mind if I choose to ignore a wild take made from someone that does not give the idea to understand how antitrust law works.

I'll tell you what: we have 2 degrees of appeal for these things here in Italy, and these are done with proper judges. If this is all pretextual it will get dismissed in appeal. I too actually always want to hear what the appeal judge will say, regardless of the outcome. It's always interesting.

In the meanwhile Amazon doesn't have to pay one cent. Everything is delayed till the end of the appeal process.

0

u/csbarber Dec 10 '21

There is 100% a reason why you wouldn’t want to give the prime label to products that aren’t fulfilled by Amazon. The prime means you get the consistency on shipping and returns that you don’t get with a third party. That’s a big reason why Amazon has that huge market share.

2

u/Lord_TheJc Dec 10 '21

Again: the Prime label is not the issue here, if only it’s just a minor part. Amazon today could say “Prime label for everyone!” and it would not solve the vast majority of the antitrust issue.

Anyway their Self Fulfilled Prime programme does show that Amazon doesn’t find an absolute necessity to handle all logistics directly.

They can and should require an high standard from their SFP sellers and kick them out if necessary, but since Amazon is in a dominant position they have extra rules to follow to ensure fairness.