Amazon faces investigation over practices that 'could result in worse deal for customers'

Amazon faces an investigation. Credit: PA

Amazon is being investigated over practices that may result in a “worse deal” for customers, an industry watchdog has announced.

The Competition and Markets Authority (CMA) says it will consider whether Amazon has a dominant position in the UK and whether it is “abusing that position and distorting competition.”

The investigation will look into the possibility Amazon has been using data to give an unfair advantage to its own retail business or sellers that use its services – compared to other third-party sellers on its UK Marketplace.

These moves would weaken competition.

It follows a current European Commission probe looking into similar concerns, which does not cover ongoing issues affecting the UK now that it has left the European Union, the CMA said.

According to the CMA, the investigation will focus on three main areas:

  • How Amazon collects and uses third-party seller data, including whether this gives Amazon an unfair advantage in relation to business decisions made by its retail arm;

  • How Amazon sets criteria for allocation of suppliers to be the preferred or first choice in the ‘Buy Box’. The Buy Box is displayed prominently on Amazon’s product pages and provides customers with one-click options to ‘Buy Now’ or ‘Add to Basket’ in relation to items from a specific seller;

  • How Amazon sets the eligibility criteria for selling under the Prime label. Offers under the Prime label are eligible for certain benefits, such as free and fast delivery, which are only available to Prime users under Amazon’s Prime loyalty programme.

How does this work?

Some products on Amazon’s Marketplace are supplied through its own retail business, however, a large proportion are supplied by third-party sellers.

Amazon provides services to these sellers, including those that are essential to make sales, such as matching sellers with consumers.

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It also offers optional services that wrack up additional fees, such as Amazon’s ‘Fulfilment by Amazon’ service. This handles some aspects of the sales process, including storage, packaging, and delivery.

Millions of people across the UK rely on Amazon’s services for fast delivery “at the click of a button", Sarah Cardell, General Counsel at the CMA, said.

“This is an important area so it’s right that we carefully investigate whether Amazon is using third-party data to give an unfair boost to its own retail business and whether it favours sellers who use its logistics and delivery services – both of which could weaken competition," she said.

“Thousands of UK businesses use Amazon to sell their products and it is important they are able to operate in a competitive market.

“Any loss of competition is a loss to consumers and could lead to them paying more for products, being offered lower quality items or having less choice.

“A formal investigation will allow us to consider this matter properly.”

What does Amazon say?

In response, an Amazon spokesperson said: “We will work closely with the CMA during their investigation, although we believe we’ve always worked hard to help small businesses selling on Amazon to succeed, which is in both their and our best interests.

“We remain proud of the continued support we provide to businesses of all sizes across the UK. More than 50% of all products sold on Amazon are from small businesses, and sales from our selling partners continue to grow faster than Amazon’s retail sales.

“There are now more than 65,000 small and medium-sized businesses in the UK that sell on Amazon, supporting more than 175,000 jobs across the country.”