Unpacking the CMA's latest 'big tech' intervention

The CMA alleged that Amazon was taking unfair advantage of commercially sensitive data it received from third party sellers to give its own ‘Amazon Retail’ products an edge over the competition. This included using third party seller data to inform Amazon Retail’s decisions in relation to issues such as which products to sell, managing stock levels for those products and setting prices.

Amazon has agreed to keep non-public data it receives from Marketplace sellers separate from its retail arm.

This is designed to ensure that the decisions Amazon Retail makes in terms of which products to stock and how they are priced is determined independently – thereby enabling third party sellers (in theory at least) to compete fairly with Amazon Retail’s own products.

While several sellers may compete to sell the same products on Amazon, over 75% of sales on the Amazon UK Marketplace are made via the ‘Buy Box’. This refers to the section on the right side of an Amazon product detail page where customers can add a product to their cart with a highly visible box that says, “Buy Now” or “Add to Cart”. Only one seller gets the benefit of this, with the winner determined by complex algorithms which are designed to reward the seller that scores highly on a range of features including price, fulfilment and seller rating. This is commonly referred to by sellers as “winning the Buy Box”.

Consumers can still choose to purchase from other sellers who are not in the Buy Box, but only if they actively scroll down and choose to click through to one of the other sellers.

The CMA alleged that Amazon’s algorithm for determining the Buy Box winner was self-preferential and discriminatory. Specifically, the CMA found that products being offered by third-party sellers were less likely to appear in the Buy Box than similar offers from either (i) Amazon Retail or (ii) third-party sellers that use Amazon’s delivery services.

According to the CMA’s data, in cases where Amazon Retail and third-party seller offers were both eligible to win the Buy Box on a product page in 2021, an offer by Amazon Retail was selected in more than 80% of cases.

Amazon have promised to apply objectively verifiable, non-discriminatory conditions and criteria to determine which offer (either from Amazon Retail or third-party sellers) will feature in the Buy Box. In particular it will not use Prime-eligibility or Prime labelling as relevant criteria for selecting the Buy Box winner.

Amazon UK Marketplace currently offers sellers various fulfilment options. This includes Amazon’s own ‘Fulfilment by Amazon’ shipment service and ‘Seller Fulfilled Prime’ (SFP), which gives sellers more control over fulfilment.

However, the CMA was concerned that third-party sellers that sell via SFP fulfilment are unable to independently negotiate the terms and rates offered by Amazon’s designated SFP carriers (which includes Evri and DPD). SFP sellers can only negotiate fulfilment terms directly with Royal Mail.

In practice this meant SFP sellers were often forced to accept pre-negotiated rates and commercial terms agreed between Amazon and the relevant SFP carrier.

The CMA believes this distorted competition by preventing SFP sellers from negotiating cheaper rates, which had the potential to result in higher delivery costs for consumers.

Amazon will now allow the use of independently negotiated rates between SFP carriers and sellers, provided the carrier has connected with Amazon’s systems in the appropriate manner.

Amazon will also make reasonable means available to enable interested SFP carriers to connect with Amazon’s systems, and will not use any information obtained for the purposes of Amazon’s own fulfilment operations or commercial negotiations regarding fulfilment services.

Customers who purchase digital display advertising on Facebook are required to sign-up to Meta’s standard terms and conditions, which permits Meta to use data acquired from advertisers to inform the development and improvement of Meta’s own products.

The data Meta obtains from Facebook digital display advertisers includes information about the activity of the advertiser’s customers and the products they purchased. The CMA was concerned that this included information supplied by Facebook Marketplace’s direct competitors, namely other providers of ‘online classified advertising’ (OCA) services. Other providers of OCA services include similar peer-to-peer marketplaces such as eBay, Etsy and Gumtree, as well as more specialist providers such as Auto Trader, Motors.co.uk, Rightmove and Zoopla.

It was the CMA’s case that Meta used data provided by rival OCA providers who purchased digital display advertising on Facebook to develop, improve and operate the Facebook Marketplace in ways which it would not otherwise have been able to do (thereby giving Facebook Marketplace an unfair advantage over other its competitors).

Meta has agreed to implement technical systems to prevent the use of OCA competitor advertising data in the operation of Facebook Marketplace and the development, improvement, product design, layout and functionality of Facebook Marketplace.

This technical solution will apply for digital display advertisers who have voluntarily opted out of their advertising data being used, or who have been automatically opted out by Meta (and who have not objected to this).

The CMA’s concerns in relation to Meta’s ability to exploit data obtained from Facebook’s digital advertising customers were not limited to misuse via Facebook Marketplace.

The CMA’s concern (more generally) was that Facebook’s standard terms and conditions allow Meta to collect and use advertising data for purposes beyond what is necessary to provide digital advertising. This included the use of data that isn’t in the public domain to develop new competing Meta products, or to improve its existing products and services. The CMA pointed out that digital advertisers have little or no ability to negotiate these terms given the strength of Meta’s market position in digital display advertising. While not expressly stated in the Commitments decision, it is presumably implied that those advertisers may (in theory at least) have been able to charge for that data in normal market conditions.

Meta agreed to use all reasonable endeavours to ensure that employees working on product development refrain from using data it receives by virtue of providing digital display advertising (and its business tool service) to develop or improve Meta’s products in competition with specific products or services offered by advertisers.

Meta will also include a clear public statement in its Code of Conduct, which is a published statement of Meta’s expectations of how Meta (and all its employees) act and make decisions, that such data derived from advertisers should not be used in the development and improvement of its products in competition with those advertisers.