Amazon holds a dominant position in the Italian market for intermediation services on marketplaces, on which it has leveraged i) to encourage the adoption of its own logistics service – Fulfilment by Amazon (FBA) – by sellers active on Amazon.it, at the expense of logistics services offered by competitors, as well as ii) to strengthen its own dominant position.
The two-year survey revealed that – based on indicators used to appreciate a firm’s market power in two-sided markets, such as marketplaces that connect sellers and consumers – Amazon’s market share in 2019 was up to 5 times that of its closest competitor, and this discrepancy has been increasing significantly over the past four years.
Specifically, in 2019 Amazon made more than 75% of total marketplace revenue from providing brokerage services to third-party sellers.
In the same year, more than 70% of the total value of third-party sellers’ product sales on marketplaces in Italy occurred on Amazon.it.
Amazon is also the unrivaled leader in terms of popularity among customers and vendors.
From 2016 to 2019:
– the number of monthly consumer visits to Amazon.it skyrocketed from about 80 million to more than 220 million (eBay.it visits increased from 40 million to 50 million within the same period);
– the number of monthly consumers who visited Amazon.it doubled from – on average – 12 to 24 million, while in 2019 alone eBay.it reached the level of Amazon.it in 2016.
– finally, in 2019 the number of consumers who made at least one purchase on Amazon.it during the year rose to well over 10 million (an increase of 60% in relation to 2016) in the face of a decline of over a fifth experienced by eBay.it during the same period.
Amazon’s market power is, therefore, undisputed with respect to all market players: the company enjoys significant independence in defining its own conduct regarding competitors (marketplaces), customers (retailers) and, ultimately, consumers.
Nor is Amazon’s dominant position contestable by competing players in the medium term: network effects (the importance and value of Amazon.it grows as the number of consumers and sellers using the platform increases), brand recognition, and consumer loyalty programs (Prime is the world’s best-known consumer loyalty program, with more than 7 million members in Italy) constitute significant barriers to entry and expansion by new entrants, making it impossible for a new marketplace to attract enough sellers and consumers in a limited period of time to constitute an effective alternative to Amazon.
Amazon has tied access to several exclusive benefits, essential for gaining visibility and increasing sales on Amazon.it, to the use of FBA.
Amazon prevents third-party sellers from associating the Prime label with offers not managed with FBA.
The survey found that these benefits are critical to the success of sellers on Amazon.it Among these benefits, the most important is the Prime label, which makes it easier to sell to the most loyal consumers and high rollers who are members of Amazon’s loyalty program (more than 7 million):
– while in 2012 a Prime member’s annual spending on Amazon.it was about a third more than a non-Prime member, in 2019 a Prime member spent – on average – more than 500 euros, twice as much as a non-Prime member.
– more than 70% of Prime members’ spending goes to Prime products.
In short, in 2019 for every €100 spent on Amazon.it, more than €70 was spent by Prime members; more than €60 involved Prime products; more than half of which were sold by third-party sellers.
At the top, the label Prime:
– allows sellers to participate in the well-known special events promoted by Amazon, such as Black Friday, Cyber Monday, Prime Day, i) which attract – on average – 30% more visitors than on a “normal” day of the same month, with peaks of more than 60% on Black Fridays; ii) in which the number of active consumers (buying at least one product) is three times higher than the monthly daily average.
– increases the likelihood of winning the Buy Box: in 2019, Buy Box Featured Deals accounted for more than two-thirds of the total sales made by third-party sellers on Amazon.it, of which more than 60% were Prime products (thus managed with FBA).
In addition, third-party sellers using FBA are not subject to the rigorous performance indicators that Amazon uses to monitor the performance of non-FBA sellers, which can also lead to the suspension of the account of non-compliant sellers on Amazon.it.
Ultimately, the Authority found that the Seller Fulfilled Prime program-recently introduced by Amazon on Amazon.it for sellers who wish to obtain the Prime label without using Amazon’s logistics service-is not an effective alternative to FBA, given the pervasive role Amazon continues to play in the intermediation between sellers and logistics operators, which relates to setting rates and delivery terms.
In the Authority’s view, the obligation – imposed by Amazon on sellers who request Prime while using equally efficient third-party logistics services – to use Amazon itself as an intermediary to negotiate with such operators, equals a restriction of competition.
EFFECTS
In doing so, Amazon has harmed, first and foremost, competing e-commerce logistics operators by preventing them from presenting themselves to online sellers as service providers of comparable quality to Amazon’s FBA and thus able to ensure high visibility on Amazon.it.
Therefore, such conduct widened the gap between Amazon’s market power and that of its competitors even in e-commerce parcel delivery, where all market players end up being Amazon’s suppliers.
As a result of the abuse, competing marketplaces have also been harmed: because of the costs of duplicating warehouses, sellers who adopt Amazon’s logistics are discouraged from offering their products on other online platforms, at least with as wide a product range as on Amazon.it.
Amazon’s abusive strategy – which resembles the so-called self-preferencing, that is, preferential treatment reserved for its own services even when those of competitors may be just as efficient – has allowed Amazon to:
– increase the percentage of third-party seller transactions handled with FBA from less than 30% at the beginning of 2016 to more than 80% at the end of 2019.
– deliver more than 150 million e-commerce packages in 2019, or more than 60% of the total packages generated by online sales in Italy, up from just over 20% in 2016; in addition, more than 60% of the e-commerce packages handled by Amazon in 2019 were delivered using the Company’s own distribution network, through commercial agreements with local carriers (so-called Delivery Service Providers);
– consolidating its dominant position in the Italian market of brokerage services on marketplaces on which Amazon’s 2019 share exceeded 70%.
Such enormous growth brings with it concrete risks of monopolization and, rather than being based on efficiencies, exploits the possibility – not replicable for other operators – of subordinating the visibility of third-party sellers on Amazon.it (through the Prime label) to the use of FBA, Amazon’s logistics service.
INJUNCTION, SANCTIONS AND REMEDIES
The Authority deemed Amazon’s abusive strategy to be particularly acute and, considering its severity, duration, effects already produced and the size of the Group, decided to impose a penalty of 1.1 billion euros.
Furthermore, in order to immediately restore competitive conditions in the relevant markets, the Authority has imposed behavioral measures on Amazon that will be subject to review by a monitoring trustee.
Specifically, Amazon will have to grant sales benefits and visibility on Amazon.it to all third-party sellers who are able to meet fair and non-discriminatory standards for order fulfillment, in accordance with the level of service Amazon intends to provide to Prime consumers.
Amazon shall define and publish such standards and, beginning one year from the date of the decision, refrain from negotiating – on behalf of sellers – rates and other contractual terms related to the logistics of sellers’ orders on Amazon.it with competing carriers and/or logistics operators, outside of FBA.
Amazon
A. Companies that have offered services in the field of logistics for e-commerce
B. Companies that have offered marketplace services for online sales of goods and services
C. Third-party sellers who have used the Amazon marketplace to sell their products
Italy
2016 - 2021
Alessio Serra
