Amazon buy box unpacked as £900 million claim to be brought against it
Published on 7th Nov 2022
Amazon will face increasing scrutiny following a collective action over its Buy Box practices
The Buy Box refers to a box that appears on product listings on Amazon and features the price and shipping from a single seller at a time, selected by Amazon's algorithm, as well as the “Add to Cart” button. Amazon's use of the Buy Box, which accounts for more than 80% of Amazon's sales, is already under regulatory scrutiny in the EU and UK, but it now faces an action seeking damages of approximately £900 million on behalf of UK consumers who have made purchases through Amazon's platform since October 2016.
It is reported that the collective legal action will be filed in the United Kingdom's Competition Appeal Tribunal, with consumer rights advocate, Julie Hunter, as class representative and will claim that the Buy Box uses a self-preferencing algorithm which ensures that it almost always features goods sold directly by Amazon or sellers that use Amazon's order fulfilment services. It is alleged that the exclusion of independent sellers from the Buy Box obscures the full range of options available to consumers, including products offered on cheaper or better terms.
Increased scrutiny on Amazon
The European Commission has preliminarily found that Amazon's rules and criteria for its Buy Box unduly favour its own retail business alongside those that use Amazon's logistics and delivery services. This, it considers, may harm various groups including other marketplace sellers and consumers who may not get the best deals. The European Commission is currently considering the commitments offered by Amazon, designed to address its competition concerns.
The Competition and Markets Authority (CMA) launched its own investigation into Amazon's suspected anti-competitive practices on 5 July 2022. This investigation will cover three key areas, including how Amazon sets its criteria for allocation of suppliers to be preferred in the Buy Box.
The increasing scrutiny on Amazon extends beyond its Buy Box practices. Most recently, following Amazon's announcement that it intends to launch its own price comparison website, the Financial Conduct Authority's (FCA) Competition Division launched a discussion paper and consultation concerning the impact on competition associated with the entry and expansion of Big Tech (including Amazon) in retail financial services. The FCA has expressed particular competition concerns with Big Tech firms' ability to embed themselves as gatekeepers with their data advantages, ecosystems and access to large user bases in the context of insurance. On this basis, the FCA is likely to be particularly concerned with Amazon's entry into the insurance market.
Digital markets regulation
The £900 million claim is only the latest in a string of competition law action taken against Amazon. Beyond investigations into its Buy Box practices, we have also seen regulatory investigations into its use of marketplace seller data, its favouring of its own logistics services and its practices around offering products to Amazon Prime users. Much of this scrutiny is designed to inform new regulation of digital market "gatekeepers".
As previously reported, the European Union's Digital Markets Act came into force on 1 November 2022. This is followed by a six-month period before the rules begin to apply (on 2 May 2023). Those designated as gatekeepers, which will include Amazon, will be subject to rules that set out obligations and prohibited behaviours. Prohibited behaviours include self-preferencing, in treating products offered by the gatekeeper more favourably than similar products offered by third parties on the gatekeeper's platform.
Similarly, the United Kingdom has set up the Digital Markets Unit (DMU). The DMU will designate those powerful digital firms, such as Amazon, with "Strategic Market Status". Those firms will be subject to legally enforceable rules and obligations to ensure that they cannot abuse their dominant positions. The DMU is awaiting legislation to equip it with statutory powers and Parliament's Business, Energy and Industrial Strategy Committee has put pressure on the UK government to publish the draft bill before the end of November 2022, to ensure there is sufficient opportunity for the bill to be sufficiently scrutinised.
Osborne Clarke comment
This action is an important reminder that companies that are suspected of breaching competition law are liable not only to regulatory investigations but also to private enforcement by companies and individuals. Given the regulatory focus on Amazon and digital markets at the moment, we may see an uptick in litigation in this sector.