Amazon is under investigation by the UK’s Competition and Markets Authority (CMA) over concerns that the company is giving an unfair advantage to its own retail business and sellers over third-party merchants on its marketplace.
The CMA said in a statement on Wednesday that it is looking into the U.S. e-commerce giant’s practices affecting sellers on its UK Marketplace which “may be anti-competitive and could result in a worse deal for customers.”
Some of the products on Amazon’s Marketplace are supplied through its own retail business. However, a large proportion are supplied by third-party sellers. Amazon provides services to these sellers, including those that are essential to make sales, such as matching sellers with consumers. It also offers optional services that incur additional fees, such as Amazon’s ‘Fulfilment by Amazon’ service. This handles some aspects of the sales process, including storage, packaging, and delivery.
According to the CMA, its investigation will consider whether Amazon has a dominant position in the UK and whether it is abusing that position and distorting competition.
The CMA’s investigation will focus on three main areas. The first is how Amazon collects and uses third-party seller data, including whether this gives Amazon an unfair advantage in relation to business decisions made by its retail arm.
The second focuses on how Amazon sets criteria for allocation of suppliers to be the preferred/first choice in the “Buy Box,” which is displayed prominently on the retailer’s product pages and provides customers with one-click options to “Buy Now” or “Add to Basket.”
The third and final area focuses on how Amazon sets the eligibility criteria for selling under the Prime label, the company’s paid subscription service which offers free and fast delivery.
“Millions of people across the UK rely on Amazon’s services for fast delivery of all types of products at the click of a button,” Sarah Cardell, general counsel at the CMA, said in a statement. “This is an important area so it’s right that we carefully investigate whether Amazon is using third-party data to give an unfair boost to its own retail business and whether it favours sellers who use its logistics and delivery services – both of which could weaken competition.”
“Thousands of UK businesses use Amazon to sell their products and it is important they are able to operate in a competitive market,” added Cardell. “Any loss of competition is a loss to consumers and could lead to them paying more for products, being offered lower quality items or having less choice. A formal investigation will allow us to consider this matter properly.”
In a statement sent to FN on Wednesday, an Amazon spokesperson said: “We will work closely with the CMA during their investigation, although we believe we’ve always worked hard to help small businesses selling on Amazon to succeed, which is in both their and our best interests. We remain proud of the continued support we provide to businesses of all sizes across the UK. More than 50% of all products sold on Amazon are from small businesses, and sales from our selling partners continue to grow faster than Amazon’s retail sales. There are now more than 65,000 small and medium-sized business in the UK that sell on Amazon, supporting more than 175,000 jobs across the country.”
This new investigation follows a current European Commission probe looking into similar concerns, which does not cover ongoing issues affecting the UK now that it has left the European Union. According to a statement from the CMA, the European Commission has previously opened 2 investigations covering the same areas. The British antitrust regulator said it will seek to liaise with the European Commission as its own investigation in the UK progresses.
Alongside this case, the CMA also has an open investigation into Amazon and Google, under consumer protection laws, over concerns that they have not been doing enough to combat fake reviews on their sites. The CMA said it has not reached any conclusions at this stage as to whether or not consumer laws have been infringed.
Brands like Patagonia and Birkenstock have also taken issue with Amazon in the past. In 2019, the California outdoors brand filed a lawsuit against an Amazon seller named Kimberly McHugh, whose shop, Our Little Corner, carries Patagonia-brand jackets, sweaters and hats alongside products from labels including Clarks, Columbia and Fila.
In the complaint, Patagonia claimed that the shop infringed on its trademarks and copyrights and used “several tactics to portray itself as an authorized Patagonia dealer,” when, in fact, none of the brand’s authorized retailers or dealers are permitted to sell on e-commerce marketplaces such as Amazon. Further, because of these stipulations, “such sales cause authorized dealers to breach their contracts and agreements with Patagonia,” it claims.
Similarly, Birkenstock has been embroiled in an ongoing dispute with the online e-commerce company since at least 2016, when it announced that it was pulling its products from the site and would no longer authorize any vendors to sell on the marketplace.