Amazon Faces UK Investigation For Suspected Anti-competitive Practices

The UK’s Competition and Markets Authority (CMA) has opened an official investigation into Amazon over concerns about its business practices.

Indeed, the UK regulator announced it would investigation Amazon “over concerns that practices affecting sellers on its UK Marketplace may be anti-competitive and could result in a worse deal for customers.”

The CMA probe comes after Amazon is facing two ongoing investigation of its business practices by the European Commission.

CMA investigation

Then in December Italy’s antitrust watchdog levelled a punishing 1.13 billion euros ($1.28 billion) fine against the e-commerce giant, alleging that it had harmed competing operators in the e-commerce logistics service.

The EU Commission meanwhile said it had cooperated closely with the Italian competition authority on the case, within the framework of the European Competition Network, to ensure consistency with its two own ongoing investigations into Amazon’s business practices.

Amazon strongly disagreed and has appealed the Italian fine.

Now the CMA on Wednesday announced its own probe into the matter, as the EU probe does not cover ongoing issues affecting the UK now that it has left the European Union.

The CMA pointed out that 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.

The CMA said that 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.

Distorting competition?

The Competition and Markets Authority’s (CMA) investigation will consider whether Amazon has a dominant position in the UK and whether it is abusing that position and distorting competition by giving an unfair advantage to its own retail business or sellers that use its services, compared to other third-party sellers on the Amazon UK Marketplace.

The CMA said that its investigation will focus on 3 main areas:

• 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.
• How Amazon sets criteria for allocation of suppliers to be the preferred/first choice in the ‘Buy Box’. The Buy Box is displayed prominently on Amazon’s product pages and provides customers with one-click options to ‘Buy Now’ or ‘Add to Basket’ in relation to items from a specific seller.
• How Amazon sets the eligibility criteria for selling under the Prime label. Offers under the Prime label are eligible for certain benefits, such as free and fast delivery, that are only available to Prime users under Amazon’s Prime loyalty programme.

“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,” said Sarah Cardell, General Counsel at the CMA.

“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,” said Cardell.

“Thousands of UK businesses use Amazon to sell their products and it is important they are able to operate in a competitive market,” said 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,” Cardell concluded.

“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,” an Amazon spokesperson told CNBC.

The spokesperson also reportedly said more than 50 percent of all products sold on Amazon are from small businesses and sales from its merchant partners “continue to grow faster than Amazon’s retail sales.”

Other investigations

The CMA said it has not reached any conclusions at this stage as to whether or not competition law has been infringed, and that it “will seek to liaise with the European Commission as its own investigation in the UK progresses.”

The CMA pointed out that it also has an open investigation into Amazon and Google (that began in June 2021), under consumer protection laws, over concerns that they have not been doing enough to combat fake reviews on their sites.

The CMA has not reached any conclusions at this stage as to whether or not consumer laws have been infringed.

In May this year Amazon said it had taken legal action against four companies for allegedly selling fake reviews on its websites internationally.