Amazon Averts Multibillion-Dollar Penalty with EU Antitrust Agreement

On Tuesday, Amazon agreed to make some major alterations to its operations in Europe in order to resolve antitrust probes that could have resulted in a hefty penalty for the online retail giant.

On Tuesday, the European Commission, the executive branch of the European Union, declared that Amazon had made a number of promises to address claims that the company was exploiting data from independent vendors for its own benefit.

The regulatory body had voiced worries about Amazon's dual purpose as both a marketplace and a rival to vendors selling on its website. Amazon, on the other hand, claims it is a supporter of small businesses in the area.

In November 2020, the Commission released a statement of objections to Amazon, accusing them of utilizing confidential business data from independent sellers to give their own retail business an advantage.

The European Commission has also launched a second inquiry into allegations that Amazon's criteria for selecting featured merchants in its "buy box" tool and allowing vendors to offer products to Prime members gave an advantage to Amazon's retail business or sellers utilizing its own delivery services.

On Tuesday, the Commission reported that Amazon had promised to alter some of its practices. One of the promises was to discontinue the use of confidential data on independent vendors for its retail business or for selling branded items and private label products.

The business also consented to show a second purchase box when there is a second offer that is distinct from the initial in terms of cost or delivery, and to permit Prime vendors to pick any carrier for their logistics or delivery services.

The modifications are only applicable to the European Economic Area. In Italy, Amazon has come to a distinct legal agreement with the nation's competition regulator concerning the buy box and Prime. Amazon will have until June 2023 to put the changes into effect, and they will remain in place for a period of five to seven years.

Margrethe Vestager, the European Union's competition commissioner, declared in a speech on Tuesday that the ruling made today establishes the regulations that Amazon must abide by in the future, instead of Amazon dictating the rules for all participants on its platform.

The implementation of these regulations will provide independent retailers, carriers, and European customers with more options and freedom of choice.

If the company had been convicted, it could have been subject to a fine of up to 10% of its total yearly earnings. For Amazon, a company that earned $469.81 billion in 2021, this could have resulted in a record-breaking $47 billion fine.

The European Union could still impose a fine on Amazon that is equivalent to 10% of its yearly revenue if it fails to adhere to the commitments. Additionally, a periodic penalty of 5% of daily turnover for each day of non-compliance may be imposed.

Amazon expressed their satisfaction in a statement, noting that they had successfully addressed the European Commission's issues and resolved the matters.

Amazon has expressed disagreement with some of the European Commission's initial findings, yet they have still taken part in constructive dialogue in order to remain able to serve customers in Europe and to support the 225,000 small and medium sized businesses that use their stores. This was stated by an Amazon spokesperson in an email to CNBC.

The EU has achieved a subtle success with the implementation of the Digital Markets Act. This legislation, which was put into effect last month, is intended to stop large tech companies from taking advantage of their dominant market position to hurt smaller competitors.

The Digital Millennium Copyright Act is already having a major impact on some businesses. Apple, for instance, is reportedly making alterations to their system to allow users to download apps from the internet, instead of the App Store, in order to comply with the DMA.