Amazon expected to contest competition case in Germany

Alan Davis of Pinsent Masons, the law firm behind Out-Law.com, said the claim, made by the Bundeskartellamt, Germany's Federal Cartel Office (FCO), was at the heart of a broader case brought by the regulator against Amazon.

Last week, the FCO announced that it believed Amazon may have abused a dominant market position in Germany through its terms of business and practices towards sellers on the 'amazon.de' marketplace.

"The terms of business and related practices which might be considered abusive are liability provisions to the disadvantage of sellers, in combination with choice of law and jurisdiction clauses, rules on product reviews, the non-transparent termination and blocking of sellers’ accounts, withholding or delaying payment, clauses assigning rights to use the information material which a seller has to provide with regard to the products offered and terms of business on pan-European despatch," the FCO said.

"A criterion for the relevance of this conduct under competition law is that Amazon holds a dominant position or that the sellers are dependent on Amazon. There are indications of both, in particular on a possible market for marketplace services for online sales to consumers," it said.

The FCO said it would examine those indications in "closer detail". It said the case against Amazon was triggered by "numerous complaints" recently raised by online sellers.

"This case is based on an allegation that Amazon is abusing a dominant position by imposing unreasonable terms on sellers using its platform," Davis said. "It has acknowledged that it can only establish that Amazon is dominant if a possible market for marketplace services for online sales to consumers exists. It is likely that Amazon will strongly challenge any assertion that such a market exists and will argue that sellers are not dependent on Amazon for being able to sell their products online. In other words, they can sell their products on their own websites, via other platforms or indeed offline."

"If the Bundeskartellamt makes a finding that this constitutes a separate economic market, it would be the first time anywhere in the world that such a market existed and that Amazon was dominant, something that Amazon will obviously wish to avoid being established as a precedent," he said.

In a statement, Amazon said: "We do not comment on ongoing proceedings. However, we will cooperate fully with the Bundeskartellamt and continue working hard to support small and medium-sized businesses and help them grow."

Andreas Mundt, president of the FCO, said: "Amazon is the largest online retailer and operates by far the largest online marketplace in Germany. Many retailers and manufacturers depend on the reach of Amazon’s marketplace for their online sales."

"Amazon functions as a kind of 'gatekeeper' for customers. Its double role as the largest retailer and largest marketplace has the potential to hinder other sellers on its platform. Because of the many complaints we have received we will examine whether Amazon is abusing its market position to the detriment of sellers active on its marketplace. We will scrutinise its terms of business and practices towards sellers," Mundt said.

Amazon also faces scrutiny from the EU's main competition authority. In September, EU competition commissioner Margrethe Vestager revealed that the European Commission had sent out questionnaires to retailers as part of a probe into the company. The FCO said its proceedings "supplement" the Commission's and that "several hundred" German retailers had been sent the Commission's questionnaire.

Davis said: "The German investigation dovetails with the European Commission's preliminary investigation into Amazon's collection of data on the sales transactions by sellers on its platform and the way it uses this data to compete with those sellers. Similarly to the Bundeskartellamt case, it would be necessary for the Commission to establish Amazon’s dominance in an online market place."

Davis said Amazon will be encouraged by the Competition Commission of India’s recent announcement that Amazon and Flipkart are not dominant as online marketplace platforms in India.

The Competition Commission of India said that the "marketplace based e-commerce model is still a relatively nascent and evolving model of retail distribution in India and the Commission is cognisant of the technology-driven nature of this model" and that "any intervention in such markets needs to be carefully crafted lest it stifles innovation".