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Archive for November 10th, 2020

The Commission sends Amazon an SO: the rise of common carrier antitrust

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Amazon for Tablets: Appstore for Android

As most of you will have seen already, the Commission has sent Amazon a Statement of Objections concerning the use of third party sellers’ data. According to the press release, the authority has come to the preliminary conclusion that this practice amounts to a breach of Article 102 TFEU.

In addition, the Commission has decided to open an investigation concerning the conditions under which third-party retailers gain access to some advantages (namely the so-called ‘buy box’ and Amazon Prime customers).

The two cases are variations on the theme of self-preferencing. In the case of the former, Amazon’s own retail arm would have a competitive advantage. In the case of the latter, third parties using Amazon’s ancillary services would gain an edge over rivals.

These investigations signal the rise of common carrier antitrust. It is an approach to the enforcement of Article 102 TFEU (and EU competition law more generally) that represents, in several key respects, a break from past practice.

The distinctive features of common carrier antitrust are twofold.

  • First, the idea that there is something improper, or inherently anticompetitive, in self-preferencing.
  • Second, the setting of a low threshold of anticompetitive effects, which would be straightforward to establish in virtually every instance.

Is access to non-public data an expression of competition on the merits?

In its statement of objections, the Commission expresses its preliminary view that Amazon’s use of third-party sellers’ data amounts to an abuse of a dominant position.

The data, which is not publicly available, relates to issues such as ‘the number of ordered and shipped units of products, the sellers’ revenues on the marketplace, the number of visits to sellers’ offers, data relating to shipping, to sellers’ past performance, and other consumer claims on products, including the activated guarantees‘.

The essence of the Commission’s argument is that, by using this data, Amazon would be exploiting its dual role as (i) a marketplace providing services to third-party sellers and (ii) an online retailer.

In particular, the data would give its retail arm a competitive advantage that it would be able to use against rivals.

The press release is remarkable in that it suggests that there is something inherenly anticompetitive in this practice. From this perspective, the use of non-public data from rivals would be an ‘improper’ way of competing. More precisely, the Commission claims that the practice allows Amazon to ‘avoid the normal risks of retail competition‘.

This wording, which is (most intriguingly) vaguely inspired from the definition of concerted practice, signals a new approach to the enforcement of Article 102 TFEU for a number of reasons.

First (and most obviously) it is at least plausible that Amazon’s use of this data improves the conditions of competition (in the marketplace and/or on adjacent markets).

This is so, in particular, if Amazon uses this strategy to challenge the position of well-established players. Why would a practice that is capable of placing competitive pressure on incumbents be an ‘improper’ way of competing?

Second, it is unclear what would turn Amazon’s conduct into an ‘improper’ method. Finding business opportunities by replicating what others are doing well is as old as doing business. Absent a breach of intellectual property, it looks like a most natural expression of competition on the merits.

What is more, it is a commonplace practice in the retail sector (these are long-standing complaints against supermarkets, including the use of non-public data).

What is distinctive, or unique, about Amazon’s behaviour, against this background? Is it the scale? Is it the fact that Amazon is more effective in the gathering and use of third-party data? These questions seem key to making sense of the case.

Finally, one should not forget that all firms (not only Amazon) exploit their advantages. There is nothing inherently anticompetitive in doing so. On the contrary.

In fact, the whole purpose of competition law has never been to create a level playing field in which firms compete with the exact same forces and assets. The point of competition law is instead to ensure that firms retain the ability and incentive to make the most of what they have.

Against this background, the question that comes to mind is whether it is possible to distinguish, in a meaningful way, between competitive advantages that can and cannot be exploited or between competitive advantages that are proper and improper.

What about anticompetitive effects?

The press release suggests that the use of non-public data would allow Amazon to ‘leverage its dominance in the market for the provision of marketplace services‘.

Remarkably, however, the press release is not explicit about the markets that would be affected by the practice. Insofar as Amazon’s conduct is capable of improving the conditions of competition and of injecting rivalry, one would expect the issue of anticompetitive effects to feature prominently as the crucial inquiry in the case.

The wording of the press release raises the question of how the analysis of anticompetitive effects will be conducted by the Commission. A second, related one, is whether the analysis will be relaxed relative to the case law.

More precisely: will the Commission equate a competitive advantage with anticompetitive effects? The case law suggests that this tendency is not unusual in competition authorities. This same case law makes clear that an advantage does not amount, in and of itself, to an anticompetitive effect.

In addition: will the threshold be set at the level of plausibility (as opposed to likelihood)? If so, the analysis of effects would become a mere formality (potentially abusive conduct is most of the time a plausible source of anticompetitive effects).

My impression is that common carrier antitrust tends to lead to a relaxation of this assessment. Under this sui generis approach to Article 102 TFEU, any distortions of competition that come from self-preferencing are deemed problematic, even when they intensify rivalry.

It will be fascinating to see whether this is indeed the path followed.

I very much look forward to your comments. If there was any doubt: I have nothing to disclose.

Written by Pablo Ibanez Colomo

10 November 2020 at 5:10 pm

Posted in Uncategorized