Abuse of dominance by a two-sided platform in display!!

The Italian Competition Authority (ICA) on 9th December 2021 imposed a fine of 1.1 billion euros on Amazon for abusing its dominant position by tying its online sale services with delivery/logistic services on sellers listed on Amazon platform.

Before we delve any further, it is important to understand that in this digital age, it is crucial for the sellers to list on one or the other online platforms in order to tap into the vast online consumers for increasing their sales.

Amazon is one company which provides an online market platform that connects sellers and consumers for exchange of goods and services. In a way, Amazon operates a two-sided platform, on one side of the platform there are sellers who wish to sell their products to online consumers and on the other side of the platform, there are online consumers who wish to purchase goods and services from online sellers.

Undoubtedly, Amazon has a very large online consumer base on its platform which allows it to exercise strong bargaining power on the online sellers who wish to tap into such online consumers listed on Amazon Platform.

In the recent case concluded by ICA, it was found that Amazon tied its delivery services on the sellers who wished to list themselves on the Amazon Platform for availing online sale services provided by Amazon.

Amazon made it mandatory for the sellers listed on its platform to avail its delivery services so as to get access to exclusive benefits which were essential for the sellers to gain visibility and increase sales.

Sellers who availed delivery services from third party logistic companies were treated differently from those who agreed to take both online sale and delivery services from Amazon.

For instance, sellers who did not avail delivery services from Amazon were prevented from participating in the well-known special events promoted by Amazon - such as Black Friday, Cyber Monday, Prime Day - which increases the likelihood of a seller’s offer to be selected as the Featured Offer displayed in the Buy Box.

In addition, sellers using delivery services of Amazon were not subject to stringent performance indicators that Amazon applied to monitor those sellers who did not avail delivery services from Amazon. The performance indicators were used by Amazon to suspend the account of non-compliant sellers’ on its platform.

Further, tying of online sale services with delivery services also had adverse effect on the competing logistic companies. Sellers could not avail delivery services from third party logistic companies as doing so will mean that sellers listed on Amazon platform will not be granted access to essential services important for gaining visibility on the platform. Since, the seller could not take delivery services from third party logistic companies, Amazon successfully foreclosed entry of logistic companies in the delivery services market.

In order to immediately restore competitive conditions in the relevant market, the ICA imposed behavioral measures on Amazon which will be subject to review by a monitoring trustee.

In particular, Amazon will now have to grant sales benefits and visibility on its platform to all sellers which are able to comply with fair and non-discriminatory standards for the fulfilment of their orders, in line with the level of service that Amazon intends to guarantee to Prime consumers.

This is a perfect case which illustrates that how a two-side dominant platform can use anti-competitive business strategies such as 'tying arrangement' to foreclose competition and gain market power in related multi-sided markets.