Amazon’s market power is enormous. Particularly in its core business, e-commerce, the company accounts for 60 percent of online sales in Germany. The Federal Cartel Office (Bundeskartellamt) is once again taking action against Amazon’s price control mechanisms and has banned them in order to protect competition on the platform. This is an important, though long-overdue step. More actions must follow to not only curb the abuse of market power, but also to fundamentally counter Amazon’s problematic dominant position in online retail.
The Federal Cartel Office’s decision and its significance
On February 5, the Federal Cartel Office prohibited Amazon from using price control mechanisms against third-party sellers on its platform. What exactly has the Bonn-based competition authority done?
Amazon uses control mechanisms for third-party sellers on its e-commerce platform. These mechanisms react when prices set by third-party sellers are considered too high. The consequence of such an assessment is reduced visibility or complete removal from the platform. This is a significant consequence on a platform that controls 60 percent of the market. The Cartel Office also notes that the price control mechanisms are based on “non-transparent rules and notifications.”
The result: Third-party sellers on Amazon are forced to offer prices that can be ruinous, often below production costs. Meanwhile, Amazon takes a significant share of the sales revenue through commissions, which are still owed by third-party sellers.
These price control mechanisms are now fundamentally prohibited, with exceptions only in cases of price gouging. This decision could significantly weaken Amazon’s excessive control over the e-commerce market. It is a remarkable action by the Federal Cartel Office, as it directly intervenes in the questionable business practices of the US tech giant.
In 2013, the Federal Cartel Office took its first action against Amazon’s interference in the pricing of sellers. At that time, price parity clauses forced third-party sellers to offer products on Amazon Marketplace at the same or a higher price than on other websites. However, Amazon continued to influence prices through other mechanisms—such as the now-banned practices. In May 2020, the Cartel Office launched a new abuse investigation, which has now been concluded after nearly six years. This allowed Amazon to continue its abusive business practices for an extended period.
Symbolic nature: Seizing 59 Million Euros
The Federal Cartel Office did not impose a traditional fine for the violation. Instead, it applied a different regulation, based on the 2023 amendment to the Act Against Restraints of Competition (GWB 11).
With this payment, the Bonn competition authority aims to seize the economic benefit Amazon gained through its anti-competitive behavior. The 59 million euros represent an initial sum, which could and should increase if Amazon continues its illegal practices.
For Amazon, the 59 million euros is still a small amount—something the company can easily afford, and it is unlikely to serve as a strong deterrent. We expect that the Federal Cartel Office will take further action if Amazon continues to use the price control mechanisms.
Relation to the Digital Markets Act (DMA)
The Federal Cartel Office has stated that its actions complement the EU’s Digital Markets Act (DMA), in close consultation with the Brussels-based competition authority, DG Competition. Amazon has been designated by the European Commission as a gatekeeper under the DMA and is subject to specific behavioral obligations due to its dominant market position.
The Federal Cartel Office views its role as providing supplementary oversight on the abuse of Amazon’s market power in conjunction with the European Commission. The price control mechanisms used by Amazon are not covered by the DMA, which is why the Federal Cartel Office is taking action through its own legal provisions, notably under the expanded abuse supervision (§ 19a GWB).
Amazon may challenge the Federal Cartel Office’s decision
The Federal Cartel Office’s decision is not yet final. Amazon has the option to appeal within one month. There is strong indication that Amazon will take this step. “We will appeal this unprecedented regulatory decision. In the meantime, we will continue to operate our store as usual,” stated Amazon Germany CEO Rocco Bräuniger in a response to the Cartel Office’s decision.
The problem remains – further measures needed
The action taken by the Federal Cartel Office is an important first step against Amazon’s market power. However, it is not enough to resolve the fundamental conflict of interest in Amazon’s business model. Amazon controls the marketplace on which approximately 60 percent of online retail in Germany takes place, while the company simultaneously acts as a seller on that same platform. The tendency to exploit this position to its own advantage over third parties is built into the business model.
We believe that structural measures are needed to address this issue, such as a potential breakup of the company. To achieve this, the Federal Cartel Office should initiate further, more comprehensive investigations. These could be conducted under the expanded abuse supervision (§ 19a GWB) or following an 18-month e-commerce sector inquiry (§ 32f GWB).
Further infos:
- The Bundeskartellamt’s decision on Amazon price control mechanisms.
- Legal opinion by LobbyControl on how to break up Amazon.
Photo: Álvaro Ibáñez; Lizenz: CC BY 2.0.
