The latest UK class action, brought by the retailers, seeks financial compensation for the company’s alleged historical practices. “The most obvious and principal effect is a loss of revenue and profits. Amazon is taking sales away from merchants, having been able to use competitor data to bring to market its own products,” claims Boris Bronfentrinker, partner at law firm Willkie Farr & Gallagher and counsel to the plaintiffs. “When companies acquire market power, they have to act with a certain responsibility. It’s not free and open to them to do what they want.”
But despite the numerous existing investigations and allegations that thread a similar line, the retailers face hurdles. Bronfentrinker claims the case is “nailed on,” because the commitments made to the EC and CMA amount effectively to an acknowledgement by Amazon that it violated competition law: “The smoking gun is their own admission that they are going to stop doing it,” he says. But in practice, says Kathryn McMahon, an associate professor of law at the University of Warwick, the retailers will have to build a case from scratch, because no formal violation by Amazon has yet been recorded. “The whole advantage in entering into the commitments is that there is not an admission,” she says.
Therefore, the retailers will first have to establish that Amazon is dominant in the UK market, something the company is likely to contest, says McMahon, and then prove that Amazon abused that position in a way that caused damage to sellers on its platform. “That’s the tricky point,” she says.
The case that Amazon abused its dominance is built atop a little-tested principle of competition law: self-preferencing. The idea is that large digital platforms should not be allowed to abuse their strength in a particular market—say, e-commerce—to advance other areas of their business at the expense of potential competitors. In 2017, the EU found Google had violated its antitrust law by engaging in self-preferencing—specifically, using its dominance in the advertising business to give prominent placement to its own shopping services. In May, the UK put in place new rules built to prevent damage caused by self-preferencing. But there is limited precedent around which the claimants in the Amazon case can build their argument. “Self-preferencing has been prominent as a theory of harm only in the past ten years,” says Niamh Dunne, associate professor of law at the London School of Economics. “It’s an area still somewhat up for grabs.”
In the absence of a wealth of legal precedent, the case will hinge to some degree on the interpretation of the difference between sensible business strategy and anticompetitive self-preferencing. It is not illegal in itself for Amazon to run an online marketplace, use it to sell its own products, and deliver the goods through its own logistics service, even though doing so might give it a competitive advantage. “One of the complications with self-preferencing is that vertically integrated organizations do it all the time. It can have negative effects for competitors, but it’s also such a natural thing for firms to do,” says Dunne. It may be open to Amazon, then, to argue that it has simply been following “the law of the jungle,” she says.
Before these kinds of arguments can play out, the retailers’ lawsuit must first be certified by the UK’s Competition Appeal Tribunal, which is not expected to reach a decision on whether the case can proceed until early next year.
The retailers are content to wait for their day in court. “If this class action reinforces the changes recommended by the European Commission and CMA, and companies like Amazon realize they cannot treat partners in this way, then we’ve achieved something,” says Goodacre. “[Amazon is] quite an avaricious company. I say that with a grudging admiration. But it comes at a cost to someone.”
Read the full article here
