The European Commission (EC) ended the year 2022 by making significant progress in its pending antitrust investigations against two of the largest digital platforms.
On December 20, 2022, it accepted the commitments offered by Amazon in two investigations into the tech company’s alleged use of nonpublic marketplace seller data and the selection process to grant access to its Buy Box and Prime programs.
In parallel, on December 19, 2022, the EC escalated its investigation into Meta, sending a charge sheet (so-called Statement of Objections) to the company for allegedly tying online classified ads service (Facebook Marketplace) with its personal social network (Facebook).
For context, both Amazon and Meta are expected to be designated as “gatekeepers” under the EU’s new regulatory tool, the Digital Markets Act (DMA). The DMA’s requirements draw heavily on the EC’s abuse of dominance cases and the EC’s investigations concern certain alleged conduct that is now also covered by the DMA. The DMA will apply to platforms offering Core Platform Services (CPS) that have been designated as gatekeepers by the EC due to their significant impact on the internal market, their strong intermediary position, and their expected entrenched and durable position in the market. Gatekeepers will have to comply with a number of far-reaching and stringent obligations related to, among others, interoperability between platforms, data combination, data access by business users, and self-preferencing (see Wilson Sonsini Alert).
Background
On July 17, 2019, the EC opened an investigation into Amazon’s alleged use of nonpublic data from independent sellers active on its marketplace. On November 10, 2020, the EC sent a charge sheet to Amazon, preliminarily finding it dominant on the French and German markets for the provision of online marketplace services to third-party sellers. The EC alleged that Amazon’s reliance upon marketplace sellers’ nonpublic business data to calibrate its own competing retail offers and strategic business decisions was anticompetitive.1 On the same day, the EC sent a second charge sheet to Amazon, alleging that the company engaged in preferential treatment of its own retail offers and those of marketplace sellers that use Amazon's logistics and delivery services when selecting the winner of its “Buy Box” placement and the ability to offer products to Prime users.
In June 2021, the EC launched an investigation against Meta to assess whether it i) ties its online classified ads service "Facebook Marketplace" to its social network “Facebook,” and ii) used advertising data gathered from advertisers in order to compete against them in markets where Meta is active, such as classified ads.
Amazon’s Commitments
Amazon reached a final settlement with the EC on December 20, 2022. To address the EC’s concerns in both investigations, Amazon offered an initial set of commitments in July 2022:
- To address the data use concern, Amazon committed not to use nonpublic data relating to, or derived from, the independent sellers' activities on its marketplace, for its retail business or for the purposes of selling branded goods as well as its private label products.
- To address the Buy Box concern, Amazon committed to treat all sellers equally when it comes to access to the Buy Box and to introduce a second Buy Box that will pick offers that are differentiated on price or delivery.
- To address the Prime concerns, Amazon committed to set nondiscriminatory conditions and criteria for the sellers’ access to Prime, to allow Prime sellers to freely choose any carrier and negotiate terms directly with the one of their choice, and to not use any information obtained through Prime about the terms and performance of third-party carriers, for its own logistics services.
Based on some negative market feedback on the draft commitments, the EC sought additional concessions from Amazon. Its amended commitments included i) improving the presentation of the second competing Buy Box offer by making it more prominent and adding a review mechanism in case the presentation did not attract adequate consumer attention, and ii) improving carrier data protection from use by Amazon’s competing logistics services.2 The term of the commitments was also extended from five years to seven. The settlement sees Amazon escape a fine and any formal finding of illegality in return for changing its conduct and ends the probe less than three years after it was launched.
By settling this probe, Amazon appears to have brought certain of its practices into compliance with key data-related and self-preferencing provisions of the DMA, which will require gatekeeper compliance from March 2024.3 However, while Amazon’s data commitments and commitment to treat all sellers equally when it comes to access to the Buy Box are in line with the DMA,4 Amazon’s introduction of a second Buy Box (displaying an alternative offer that is differentiated based on price or delivery time) and its offer related to Prime access go beyond the DMA’s requirements. The commitments must be applied within six months and will thus be active in advance of the DMA’s requirements kicking in against Amazon in March 2024. However, Amazon will still have to go through the standard gatekeeper designation and reporting compliance processes with respect to all of its CPSs.
Meta Probe Ongoing
Meta, for its part, has not offered any commitments yet with respect to the EC’s probe of its marketplace and data practices. It remains to be seen whether Meta will take the same early compliance approach as Amazon, or challenge the EC.
Wilson Sonsini’s Takeaways
The EC’s recent actions shows its intention to progress and resolve ongoing antitrust cases in the digital sector before the DMA’s obligations kick in in March 2024. By doing so, the EC may be able to claim having brought speedier relief to markets while also attenuating some of the uncertainties that stem from the fact that the DMA will apply in parallel with general EU antitrust rules and other national-level enforcement efforts.5
This is relevant to the other pending EC investigations in the digital sector involving some of the largest digital platforms, where it can be expected that the EC will seek to find resolution to them by way of commitments or prohibition decision before March 2024.
For more information, please contact Jindrich Kloub, or any other member of the firm’s antitrust practice.
[1]The investigation covered the European Economic Area with the exception of Italy, as the Italian regulator already had an active probe open into similar issues on the Italian market.
[2]The other adjustments included i) increasing the transparency and early information flows to sellers and carriers about the comments and their newly acquired rights, enabling, among others, early switching of sellers to independent carriers, ii) laying out the means for independent carriers to directly contact their Amazon customers, in line with data-protection rules, enabling them to provide equivalent delivery services to those offered by Amazon, iii) increasing the powers of the monitoring trustee by introducing further notification obligations, and iv) introducing a centralized complaint mechanism, open to all sellers and carriers in case of suspected noncompliance with the commitments.
[5]For instance, the German Bundeskartellamt is currently investigating Amazon’s price-control mechanisms and brand gating deals under Germany’s new rules on digital platforms. The firm appealed its designation to the country’s Federal Court of Justice, but the Bundeskartellamt notes that the rules are “preliminarily enforceable” in the meantime.
