INTRODUCTION
For a company churning out a humongous revenue of $96.15 billion[1] in the third quarter (Q3) of 2020, making humble claims of owning barely a unit of the market percentage only strengthens the possibility of wrongdoing. Amazon, the biggest and the most expensive member of the Big Tech,[2] has now been booked under anti-competitive charges by the European Union. “Our” most valuable brand has been accused of two malpractices, first, being breach of confidentiality by using non-public business transactional data of third party retailers allowed to sell on their platform, to gain leverage to dominate the market by using it abusively[3], and the second charge being of making exclusive dealings with third-party vendors regarding their entry in the “Buy-Box” and access to prime membership holders based on the unethical criteria of who is opting to use the delivery logistics from Amazon, instead of their own.[4]
Maintaining a competitive economy is one of the basic responsibilities of the European Union according to Article 3(3) of the Treaty on the European Union (TEU)[5]. Along with this, Article 102 of the Treaty on the Functioning of the European Union (TFEU)[6] talks about Abuse of Dominance. It empowers the European Union to ensure fair competition and adjudicate upon the matters involving defaulters.
Before moving forward we need to define Abuse and Dominance separately. Abuse can be defined from the 1979 case of Hoffmann-La Roche v Commission[7], where, in paragraph 91, the judge clearly defines abuse as the application of a pre-existing dominance in the market, to influence the status quo with respect to healthy competition, and tilt it in one’s own favour. But then, how does one define market dominance? In another case from the year 1988, named Eurofix-Bauco v Hilti[8] it is defined as the power of a company to act independently of either competitors or customers. According to Section 5 of Article 102[9], it can also be enumerated as the strength of a brand, with respect to its competitors, which can be aced by controlling a large proportion of people in a particular market.
AMAZON: THE ANTI-COMPETITIVE GAME-PLAN
Firstly, it is imperative to clearly understand the specific mechanism involved in the working of this Jeff Bezos venture, because of which the allegations are levied. Amazon, in its functioning, plays a dual role,[10] i.e., it serves as a market-place for people who own businesses, and it also sells various products in that market-place. Whenever any transaction occurs via Amazon’s medium, the respective data for it is stored, which is later run through algorithms and analyzed to study consumer preferences of various products. The problem arises here because, by processing this data, it becomes aware of what the consumer wants, and hence produces those exact goods from its in-house production, and that too in some cases, with predatory low prices. Hence, by bypassing the risk of trial-and-error, it pin-points its products to maximize sales[11]. Margrethe Vestager, the Vice President of the European Commission, said that Amazon placed its in-house products in fewer than 10 percent of the categories available. On the contrary, it churned out about 50 percent of the revenues from that proportion[12]. She also added that platforms like Amazon benefit from significant power because they are gatekeepers through which sellers operate[13].
This is a violation under paragraph 17 of The European Commission’s Guidance on Article 102 of TFEU[14] which talks about unfair economic advantages that a dominant firm enjoys, which impedes the customer’s diversity of choice. In this case, the data serves as the object of unfair leverage because it is obtained illegally and used unethically. Similar cases include United Brands v Commission[15] and Michelin v Commission[16] where superior technology serves as a mark of dominance. In the case of Amazon, superior technologies include its data-processing algorithms and its vast e-marketplace which has access to millions of consumers. Amazon uses this technology to harvest data about sales, which is illegal in nature since this data is not present in the public realm and is rather private to the seller. It uses this data to determine consumer preferences which it later uses for unethical and anti-competitive motives. This makes the entire process of harvesting and processing the data violative of the TFEU[17] and hence, an abuse of dominance. This may further lead to predatory pricing practices since the chances of it getting successful sales and revenue increase manifold. Due to this very practice, sellers have often raised concerns that when a particular product does well on the website, the company creates its own version, sells it at a lower price[18].
THE DUBIOUS DELIVERY
The second charge on Amazon is based on the concept of tying and exclusion, wherein those retailers, who opt to use Amazon logistics get an unfair advantage over those who don’t, which includes access to customers with prime membership and a higher frequency of its occurrence in the “Buy Box” policy of Amazon, which is basically working on the fundamental principle of showing goods similar to what the buyer bought. Both tying and exclusion are violative of Article 102(d) and 102(c) of TFEU[19]. Tying is considered to be an illegal arrangement where, in order to buy one product, the consumer must also purchase another product that exists in a separate market. This forces the consumer to spend more than what he originally intended to. In the present instance, the seller of the good acts temporarily as a customer to Amazon. This happens when the seller has a choice to spend his/her resources on the delivery support provided by Amazon, or use his/her in-house logistics, in order to deliver the product to the final consumer. Herein, the customer is coerced to use the logistics provided by Amazon and pay for the same, if he wants unimpaired market access. It is important to note here that initially, the seller only wanted to have access to the e-marketplace owned by Amazon and not its logistical support. Exclusion or exclusive agreements, when elaborated, means engaging with two or more parties in a dissimilar manner for equivalent transactions, which leads to them suffering unfair losses. In this case, the ones who opted for Amazon’s logistical support were treated differently in terms of marketplace access and prime membership room, when they both initially were to be given the same thing in the same proportion.[20]
Similar occurrences have taken place in two cases, in Microsoft[21] and Intel[22]. In the former case, Microsoft had to pay a €497.2 million fine because of tying of a media player with its operating software. In the latter case, a hefty fine of €1.06 billion was imposed on Intel for illegally practicing exclusion, which included offering rebates and discounts to certain select customers in return for their loyalty.
RELIEVING THE ARSENAL: WHY THE DEFENCES WON’T WORK
As per the judgment given in the case of Tetra Pak II[23], the burden of proof is on the one in the dominating position. But, a different verdict in another case resulted in setting up of a dichotomy for cases under the ambit of abuse of dominance. The Konkurrensverket v TeliaSonera[24] judgment says that Article 102 does not give any explicit methodology for trying a case, and rather gives strong emphasis on trying every case as a unique one and solely on its merits. This results in ambiguity with respect to the procedure which increases the probability of arbitrariness, false positives and negatives, and similar such approaches.
The alleged party can use the Defence of Objective Justification[25] under section 3 of article 101 of TFEU[26], wherein the accused can be exempted from any liability if such abuse was done, in a proportional manner with respect to the problem, with one of the four motives namely, the realization of efficiency of the firm, indispensable nature of the task, and when the positive effects including efficiencies outweigh the negative effect on the competitive environment. This defence was listed in the case of Wanadoo de España v Telefónica[27]. It is evident that Amazon does not pass through even one of the four criterion, because this did not result in any increase of efficiency of Amazon, it was definitely dispensable since it was done with a malicious intent, and its positives only existed for them and not for others.
CONCLUSION
Recently a statement came from Amazon regarding the allegation saying that there are at present about 1.5 lakh European businesses selling goods and earning billions of Euros in revenues annually and that they have created hundreds of thousands of jobs[28]. The biggest problem with a statement like this is, that it does not prove that all the 1.5 lakh ventures were benefitted equally or rather proportionate to their capital size, and that many were not excluded to benefit a selected few. Big tech firms like Amazon, whose owners are worth more than many individual countries, carry on their shoulders the responsibility to make the market fair, competitive and egalitarian with respect to opportunities. Instances of unethical competition like this not only destroy the goodwill of the companies involved, it betrays the trust of those hardworking people who are labouring in and owning such small scale businesses collaborating with Amazon. These businesses have made Amazon what it is now. A part to be played by the watchdogs here in the likes of the European Union, is quicker investigation and stricter enforcement of the code since the number of precedents of such cases seem to be increasing and that does not come through as a very ideal position to be in.
This article has been authored by Rakshit Sharma, First year student, Rajiv Gandhi National University of Law (RGNUL), Patiala.
[1] Don Davis, Amazon’s profits nearly triple in Q3 as North America sales soar 39%, Oct 29, 2020, available at https://www.digitalcommerce360.com/article/amazon-sales/.
[2] Katie Jones, The Big Five: Largest Acquisitions by Tech Company, October 11, 2019, available at https://www.visualcapitalist.com/the-big-five-largest-acquisitions-by-tech-company/.
[3] Mark Scott & Simon Van Dorpe, EU charges Amazon with misusing data, opens new probe over Buy Box, November 10, 2020, available at https://www.politico.eu/article/amazon-antitrust-europe-margrethe-vestager/.
[4] Id.
[5] The Treaty on European Union, 1992, OJ C 326, 26.10.2012, p. 13–390 (GA).
[6] The Treaty on the Functioning of the European Union, 25 March 1957, OJ C 115, 9.5.2008, p. 89–89.
[7] Hoff mann- La Roche v Commission, 85/76 [1979] ECR 461, [1979] 3 CMLR 211.
[8] Eurofix-Bauco v Hilti, OJ [1988] L 65/19, [1989] 4 CMLR 677.
[9] The Treaty on the Functioning of the European Union, 25 March 1957, OJ C 115, 9.5.2008, p. 89–89.
[10] Ians, EU accuses Amazon of antitrust violation over marketplace data, November 11 2020, available at https://telanganatoday.com/eu-accuses-amazon-of-antitrust-violation-over-marketplace-data.
[11] Gadgets 360, Amazon Faces EU Antitrust Charges Over Misuse of Data from Vendors, November 11 2020, available at https://gadgets.ndtv.com/internet/news/amazon-antitrust-charge-case-eu-european-union-vendor-data-manipulation-product-launch-margrethe-vestager-2323628.
[12] SCOTT, supra note3.
[13] McCann FitzGerald, What the Tech is Going on with Digital Markets and Antitrust/Competition Law?, November 27 2020, available at https://www.lexology.com/library/detail.aspx?g=705d1259-791b-40af-838a-edc4f4b0c964.
[14] The European Commission’s Guidance on Article 102, 2009, OJ C 45, 24.2.2009, p. 7–20.
[15] United Brands v Commission, Case 27/76 [1978] ECR 207, [1978] 1 CMLR 429, paras 69–81, 85–90.
[16] Michelin v Commission, Case 322/81 [1983] ECR 3461, [1985] 1 CMLR 282.
[17] The Treaty on the Functioning of the European Union, 25 March 1957, OJ C 115, 9.5.2008, p. 89–89.
[18] Karen Weise, Prime Power: How Amazon Squeezes the Businesses Behind Its Store, Dec 20 2019, available at https://www.nytimes.com/2019/12/19/technology/amazon-sellers.html.
[19] The Treaty on the Functioning of the European Union, 25 March 1957, OJ C 115, 9.5.2008, p. 89–89.
[20] RICHARD WHISH & DAVID BAILEY, COMPETITION LAW 211-212 (1993).
[21] Microsoft Corp. v Commission of the European Communities, T-201/04, ECLI:EU:T:2007:289.
[22] Intel Corp. v European Commission, C-413/14 P, ECLI:EU:C:2017:632.
[23] Tetra Pak International v Commission [1996] ECR I- 5951, [1997] 4 CMLR 662.
[24] The Konkurrensverket v TeliaSonera, C- 52/09 [2011] ECR I- 000, [2011] 4 CMLR 982.
[25] WHISH, supra note. 18.
[26] The Treaty on the Functioning of the European Union, 25 March 1957, OJ C 115, 9.5.2008, p. 89–89.
[27] Wanadoo de España v Telefónica, T- 336/07.
[28] Natasha Lomas, Europe lays out antitrust case against Amazon’s use of big data, November 10, 2020, available at https://techcrunch.com/2020/11/10/europe-lays-out-antitrust-case-against-amazons-use-of-big-data/.
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