Amazon Agrees to Change Some Business Practices in E.U. Settlement
Amazon has agreed to a settlement with European Union regulators that will force the company to make significant changes to its business practices but also allows the e-commerce giant to avoid a drawn out legal fight and billions of dollars of potential fines, according to three people with knowledge of the deal.
The settlement, expected to be announced on Dec. 20, will end two antitrust investigations in Europe. The deal will require Amazon to give makers of rival products equal access to valuable real estate on its website, said the people, who would speak only anonymously before the official announcement. The company will also be barred from using nonpublic information it gathers about independent merchants to inform Amazon’s own product offerings, among other changes.
The deal represents a sign of progress for European regulators, even though Amazon faces no financial penalty. Regulators have spent years trying, with mixed success, to force the world’s largest technology companies to change business practices that they believe thwart competition, undermine data privacy safeguards and allow illicit online content.
The agreement may foreshadow changes at Apple, Google and Meta, which are also facing E.U. antitrust investigations and are racing to comply with new European laws that target the tech sector and take effect by 2024. The result could be changes to everyday digital tools, including app stores, online advertising methods and the policies for policing toxic content on social media.
The Amazon deal, first reported by the Financial Times, tracks closely with a draft settlement announced by the European Commission in July, the people said. It will last five years and applies only to Amazon’s operations in the European Union, though the company could choose to adopt some of the changes outside the region. The deal helps Amazon avoid a fine of up to 10 percent of its global revenue, which was about $470 billion last year.
A spokeswoman for the European Commission declined to comment. Amazon referred to an earlier statement that it has “engaged constructively with the Commission to address their concerns and preserve our ability to serve European customers.”
The effectiveness of the Amazon settlement and new laws will come down to enforcement, said Agustin Reyna, director of legal and economic affairs at European Consumer Organization, a group that urged regulators to investigate Amazon’s practices. Otherwise, the companies will be able to maintain their dominance for many years to come, he said.
“We should not lose sight of the bigger picture,” he said, “because Amazon enjoys significant market power.”
As part of the agreement, Amazon pledged to give merchants equal access to valuable space known as the “Buy Box” — the two prominent buttons on a product’s listing that prompts customers to “Buy Now” or “Add to Cart.” Amazon has also vowed to create a second offer box if there’s sufficient difference in price or time of delivery.
Placement inside the Buy Box is a major driver of sales for companies that sell on Amazon, but if Amazon sees a product for sale at a lower price on another site, it will remove those two buttons and replace them with less enticing language and designs, which can sharply curtail sales.
“A price is considered uncompetitive even if it is just one cent above reputable retailers outside of Amazon,” Varun Soni, who leads Amazon’s seller pricing team, explained at a conference in October.
Amazon, led since last year by Andy Jassy, who replaced Jeff Bezos as chief executive, has previously argued that its Buy Box policies helped consumers by keeping prices low and delivery times short. But its design has been a source of antitrust scrutiny.
In September, the California attorney general sued Amazon, arguing that sellers often raise their prices on other websites to match the price on Amazon and keep their placement in the Buy Box, to the detriment of consumers.
The California complaint argued that it costs third-party sellers more to sell items on Amazon, so they can’t afford to cut prices on the site. Merchants would rather charge more on other sites to get the Buy Box back than risk cutting off sales on Amazon, by far the largest online retailer, the suit says.
In the E.U. settlement, Amazon also agreed to stop using nonpublic data about merchants that it competes with. Independent merchants who rely on Amazon to reach customers have long complained that the company uses information about sales terms, revenue and inventory to make decisions about what products to create, sell and promote, like its line of Amazon Basics products.
In another victory for independent merchants, sellers would also be able to participate in Amazon’s Prime program, its popular membership service, without using the company’s logistics business. That change will give sellers the option of teaming up with other providers to handle inventory and shipments.
Margrethe Vestager, the European Commission’s top antitrust and digital policy official, is expected to intensify scrutiny of the largest tech platforms. In March, policymakers reached an agreement on a new law, the Digital Markets Act, to stop the largest tech firms from designing their services and using their financial strength to box in users and squash competitors.
The law is focused on so-called “gatekeeper” platforms — services like Amazon shopping, Google search engine and Apple’s App Store that are so large that they have become economies unto themselves, where any policy changes can affect the scores of businesses and users who depend on them. Regulators have been especially focused on gatekeeper companies that offer services that compete with businesses that need its platform to reach customers, like Apple Music versus Spotify.
Another law, the Digital Services Act, puts more pressure on social media companies to clean up toxic content on their platforms.