THE RELEVANT MARKETS
Following the well-established case law on “tying” conduct, the AGCM identified two relevant markets in the case at hand.
First, the ICA singled out the Italian market for e-commerce intermediation services via “horizontal” (i.e., generalist) marketplaces, where Amazon is deemed to hold a (super) dominant position. The ICA has conducted a remarkable full-fledged analysis of the factual circumstances needed to identify the primary relevant market, illustrating its multi-faceted nature and the related details to assess Amazon’s dominance over the market (e.g., by considering multi-homing and direct/indirect network effects). The ICA pointed out that the relevant market encompasses a set of intermediation services offered by an internet marketplace to third-party sellers to reach consumers with their own commercial offers and that allow transactions and ancillary services to be conducted, while it excluded from this market other e-commerce activities (direct e-commerce, B2B e-commerce, and the like; non-transactional comparison shopping websites; “vertical” specialized marketplaces for certain categories of products or for promotional campaigns; and so on). Geographically speaking, the ICA also drew a distinction between “international” and merely “national” marketplace service providers, though it is not entirely clear to what extent this distinction may lead to separate relevant markets. Even though this is not expressly mentioned by the ICA in its decision, its findings seem to indicate that competition between marketplaces available in the local language and targeting national demand characteristics is considered national in nature, though a chain may be formed with relevant markets in neighboring countries, as well as with EU-wide competition between international marketplaces.
The AGCM defined the second relevant market as the market for e-commerce logistics services in Italy. This is the first case in which the ICA has carved out this specific market, which allegedly differs from the product market of traditional logistics services offered to retailers that operate offline. Amazon operates in this market through FBA, which is a global network of warehouses and delivery services. This network of warehouses and delivery services may be used by Sellers, in exchange for payment of “pay per use” fees, to store their products and fulfill orders made on the Platform by their customers—while also managing the processing of returns and related customer service. Although FBA is not mandatory for Sellers to operate in the Amazon ecosystem, the company tied it with advantages Sellers can obtain only by purchasing FBA – as explained further below.
The ICA argued that e-commerce logistics services differ from the traditional ones – which form a separate market – as the former are specifically designed for Business-to-Consumer commercial relationships, whereas the latter tailor their offerings for Business-to-Business transactions. Moreover, according to the ICA other factors differentiate e-commerce logistics services from traditional ones, namely vertical integration of the services with marketplace and direct sales; the extent of cooperation agreements between e-commerce logistics services providers and other complementary service providers; and the demand for specific logistics services for e-commerce by online retailers—which require one or more logistics “modules” depending on size and business model.
Accordingly, the ICA concluded that FBA fundamentally differs from the logistics services offered by competitors in that it provides “one-stop-shop” service that is vertically integrated with the marketplace services Amazon offers on the Platform. Moreover, another peculiarity of FBA is that it is “captive”, i.e. exclusively dedicated to the fulfillment of Sellers’ orders on Amazon.it and cannot be used for different channels or marketplaces.
As evidence of the unique nature of e-commerce logistics services, the ICA pointed out that the value of Sellers’ orders handled by Amazon through FBA compared to the total volume of transactions on Amazon.it drastically increased in recent years, ballooning from 20 to 30% in 2014 to 50 to 60% in 2019, and reaching 80 to 90% by December of the same year.
According to the ICA, Amazon violated Article 102 TFEU by unduly leveraging its dominant position in the market for marketplace services to strengthen its position in the adjacent market of e-commerce logistics services, where it offers FBA services. Specifically, the abusive conduct—according to the AGCM—consists of Amazon’s unjustified tying of FBA to a set of exclusive advantages for Sellers on Amazon.it, a strategy that Amazon—again, according to the ICA—carried out with an anticompetitive, exclusionary strategy toward competing marketplaces.
The authority found that the advantages at issue are strictly conditioned by the use of FBA and cannot be obtained otherwise.
The most relevant advantage for Sellers is the Prime label, which facilitates access to the most loyal and high-spending consumer members of Amazon.it (the annual volume of purchases of Prime members is 100 to 200% higher than that of non-Prime members). In addition, the Prime label allows Sellers to participate in popular special events promoted by Amazon as the Black Friday, the Prime Day, and the Cyber Monday sales – which the ICA found to be “essential for gaining visibility and increase sales on Amazon.it”. Sellers that use FBA are not subject to the Amazon evaluation process, designed to monitor the level and quality of Sellers’ offers on the Platform—and which can lead to the exclusion of a retailer from Amazon.it if its score falls below a certain threshold (for example, too many negative comments related to a retailer’s delivery services). Finally, using FBA also increases the likelihood that a Seller’s offer will be selected as a “Featured Offer” displayed in the Buy Box that users see at the top of their queries (collectively, the “Benefits”).
It is worth noting that, in addition to “tying”, this anti-competitive conduct has been defined by the ICA as “self-preferencing,” with explicit reference to the definition provided in the European Commission’s Google Shopping decision (and upheld by the General Court a few weeks earlier). Crucial to the finding of “self-preferencing” as abusive under Article 102 is the ICA’s consideration that the improved performance of vendors affiliated with FBA falls outside of “competition based on merit”, but is rather the consequence of Amazon’s ability to discriminate against sellers on the mere basis of whether they purchase its own e-commerce logistics services.
Contrary to Amazon’s arguments, the ICA held that there are no commercial or technical reasons that make it necessary to tie FBA participation to the Benefits, nor can the conduct be justified by the pro-competitive efficiencies it may generate. On the contrary, such conduct was found to be detrimental to competition in the e-commerce logistics services market, as the AGCM declared it harmful to rival logistics operators, thereby widening the gap between Amazon and its competitors. The ICA also found that this strategy unduly favored revenues generated by Amazon with FBA and its growing share of the relevant market—which are allegedly not based on the quality and price of the logistics services, but mainly on the Benefits offered on Amazon.it.
It is worth noting that, although the abusive conduct was defined as “tying” and in principle it should only affect the market for the tied product/service (i.e., e-commerce logistics services), the ICA found that it also has the effect of damaging competition in the market for marketplace services (i.e., the market of the tying product/service), where Amazon is deemed dominant. According to the ICA, because of the cost of duplicating warehouses and logistics services and the high cost of FBA, Sellers who adopt FBA are discouraged from offering their products on other online marketplaces (multi-homing), even with a product range as wide as the one on Amazon.it.
REMEDIES IMPOSED BY THE ICA
Notably, in addition to the fine, AGCM has also imposed a behavioral measure—which will be overseen by a monitoring trustee—under which Amazon will have to allow FRAND (Fair, Reasonable and Non-Discriminatory) access to sales and visibility benefits on the Platform to all third-party sellers complying with FRAND standards set by Amazon for the fulfillment of their orders. Amazon is required to define and publish such standards and access terms within one year of the decision.
Amazon has stated that it strongly disagrees with the decision and will appeal it, and it claims that the proposed fine and remedies are unjustified and disproportionate.
 For more information on the beginning of the AGCM investigation, please refer to our previous article: https://portolano.it/en/newsletter/portolano-cavallo-inform-digital-ip/the-italian-competition-authoritys-investigation-into-amazon-for-abuse-of-its-dominance-involving-internet-marketplaces-and-e-commerce-logistic-services.
 The Italian version of the decision can be found at the following link: https://www.agcm.it/dotcmsdoc/allegati-news/A528_chiusura%20istruttoria.pdf.
 European Commission, June 27, 2017, Case – AT.39740, Google Search (Shopping)
 Judgment of the General Court of 10 November 2021, in Case T-612/17.