Dominant dual role: Cartel Office tightens supervision of Amazon
Amazon.com Inc. (Amazon) is now the third company after Meta (Facebook) and Alphabet (Google) to be subject to extended abuse control pursuant to Art. 19a (1) GWB (German Act against Restraints of Competition). This means that the Cartel Office can now more swiftly bar the digital group from pursuing practices that threaten competition.
Like Meta and Alphabet, Amazon as a so-called “GAFA” company now also falls under the new provision of extended abuse control pursuant to Art. 19a (1) GWB. This was decided by the German Federal Cartel Office on July 5, 2022. The provision enables the authority to take stricter action against the conduct of large digital groups.
Consequences for Amazon and measures the Cartel Office can now impose
Under the new Art. 19a GWB, the Federal Cartel Office can bar companies with an outstanding importance for competition across markets from pursuing practices that jeopardize competition earlier and more effectively. At the first stage, the authority must determine a company’s outstanding cross-market importance. At the second stage, it can then sanction individual practices.
For example, under the special abuse control provisions of Art. 19a (2) GWB, the Federal Cartel Office can prohibit Amazon from favoring its own services over those of competitors (No. 1), from hindering other companies’ business activities on procurement or sales markets when using Amazon’s services (No. 2) or from directly or indirectly hindering competitors on a market (No. 3). The current Cartel Office decision at first instance is valid for an initial period of five years.
Amazon's key position as central e-commerce platform is crucial
With sales revenues of around 400 billion euros, Amazon is one of the world's top-selling companies. In Germany, more than every second euro in online retail is spent on amazon.de. This is supplemented by Amazon’s activities in digital content, including movies, series or music, in the so-called Prime subscription and services in areas such as logistics, advertising and payment processing for companies (especially third-party retailers). With Amazon Web Services (AWS), Amazon is also one of the market leaders in cloud computing, thereby generating a large part of its group profits.
With a revenue-based market share of more than 70 percent, Amazon dominates the market. This allows Amazon to control other companies’ access to sales and procurement markets and to play out its dual role as a retailer and marketplace, a so-called hybrid structure. The approximately 200 million users are kept in the strongly integrated ecosystem by the broad product portfolio – in particular by the comprehensive Prime subscription. In addition, there are considerable resources such as competition-relevant data and strong financial power.
Amazon remains under observation
The German Federal Cartel Office can now more easily take action against Amazon’s possible anti-competitive practices. It is not yet clear against which practices and with which measures the Federal Cartel Office is going to take action. However, in view of parallel proceedings under the regular abuse control regime, this could particularly affect pricing mechanisms on the Amazon marketplace and agreements with brand manufacturers such as Apple. In 2018, there were already proceedings against Amazon’s terms and conditions and conduct towards third parties.
The Federal Cartel Office’s corresponding notification is available here.