(Bloomberg Opinion) -- As part of a settlement with Germany’s antitrust authorities, Amazon.com Inc. has agreed to change a number of its business practices. The move should serve as a model to other U.S. tech companies that prefer to pay fines to the European Union and challenge its antitrust rulings in the courts rather than alter their behavior to comply with local rules.
The Bundeskartellamt (BKA) started proceedings November after other companies that use Amazon’s marketplace to sell their wares complained about the clear conflict between the tech giant’s role as platform for them and its status as a big retailer itself.
Amazon has both the incentive and the means to put third-party sellers at a disadvantage. It can, for example, suspend them unexpectedly or withhold payments. In 2018, Amazon blocked 250,000 sellers permanently and another 30,000 temporarily from its German platform, mainly on suspicion of fraud and piracy; it didn’t have to prove the allegations or explain its decisions.
The BKA refused to deal with the sellers’ other complaints, which concerned Amazon’s use of their data to boost sales of its own products. The German agency left that to the EU, which opened its own investigation into Amazon on Wednesday, just as the BKA settlement was announced.
Amazon, though, has been surprisingly accommodating. Instead of demanding that any complaints against it be filed in Luxembourg, where its European arm is based, it has agreed to litigate in European sellers’ domestic courts. It has agreed to take on more responsibility if third-party sellers face unjustified product returns or other claims, such as copyright violations. It has guaranteed to give 30 days’ notice before terminating a merchant’s account. And it has dropped the requirement that sellers hand over to it product information and promotional material that is as good as what appears on their own websites. This last move is an important development for vendors that want to prioritize their own online stores over Amazon.
The tech giant will also open up its customer rating program, Vine, to third-party vendors. The system allows early reviewers to receive products free of charge. Sellers had complained that Amazon had prevented them from offering similar incentives while its own retail operation had been free to do so.
Taken individually, none of the changes are earth-shaking. Together, though, they create a much friendlier environment to businesses that generate up to 60 percent of the Amazon platform’s 17 billion euros ($19 billion) of annual sales in Germany, the company’s second biggest market after the U.S.
The BKA settlement also proves that a U.S. tech behemoth can take months to reach a broad agreement with a European regulator rather than endure years of investigation, a huge fine and a court fight with the EU. That is what Google has done in one antitrust case after another.
That Amazon cooperated with the BKA shows that it may also meet the EU halfway when it comes to the use of third-party sellers’ data to enhance its own retail operation. As my Bloomberg Opinion colleague Alex Webb pointed out, it doesn’t make much sense for Amazon to use its partners’ sales information to create private label products that compete with theirs. The tech company doesn’t need to get into an antitrust battle and expose itself to big fines to get more marketing data than it already receives from its enormous retail operation.
Amazon can certainly afford a more harmonious relationship with regulators and its partners; one may not be too hard to achieve, either. Sharing sales product data with outside sellers, for example, could be beneficial to Amazon itself given that third-party vendors generate more of the company’s sales globally than its own retail operation.
Being nice isn’t a bad business strategy, especially for a company as big as Amazon; it could beat acting like a bull in a china shop. Eventually, perhaps, we’ll see Amazon adhere to industry-wide wage agreements, as the German labor union Ver.di demanded when it organized a strike during Prime Week. That wouldn’t make the company unprofitable, but it would generate the kind of goodwill other U.S. tech firms in Europe appear to have squandered.
To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net
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Leonid Bershidsky is Bloomberg Opinion's Europe columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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