France accuses Amazon of abusing dominant market position

The French are going to war with Amazon over how much influence the eCommerce giant has over market conditions.

The balance between consumer protection and capitalist freedoms Western economies are built on is a difficult one to find. The quest to remain competitive, offering prices which are attractive to the consumer, can sometimes see giants of industry abuse the small fish, which is want the DGCCRF France’s consumer fraud watchdog, is claiming.

The Directorate General of Competition, Consumer Affairs and Fraud Control (DGCCRF) has been conducting a two-year investigation into the activities of the internet giant which has led to the lawsuit. Believing Amazon is largely abusing its dominant position, the Commercial Court of Paris is seeking a €10 million fine to keep the giant in check.

“The platform imposes unbalanced relations to its vendors,” DGCCRF official Loic Tanguy is quoted as telling Le Parisien.

While details are relatively thin on the ground for the moment, it would appear the DGCCRF believes Amazon is using its dominant position in the eCommerce space, to unfairly negotiate (or dictate) terms in its supply chain. For the most part, most people would lean towards lighter touch regulation, encouraging commercial innovation and competition, but a wary eye needs to be kept on whether organizations are getting too powerful.

Amazon could be considered one of the founders of the digital economy, boasting the world’s most popular eCommerce platform, as well as the most successful IaaS business, but you have to wonder when the rules need to change. When a company gets to a certain size, there could be cause to create a new rule book, as there is opportunity to distort market conditions. Some might argue Amazon is powerful enough for this to happen.

According to Le Parisien, Amazon is able to dictate terms to more than 10,000 French businesses which use the platform, which ‘push them to bankruptcy’. There are various different examples, from Amazon imposing shorter delivery times overnight, delays in verifications, poor customer service to requiring sellers to have more frequent check-ups.

The DGCCRF also believes Amazon can rollout contract amendments whenever it chooses, while there is a constant threat of suspending contracts, keeping the sellers under permanent pressure. Amazon has also completely removed itself from any liability, which is common practise on eCommerce platforms, though the dictation of its own brand promises on the sellers gives Amazon considerable control. It can demand the highest standards of suppliers, without feeling any repercussions should these standards not be met.

It is worth noting Amazon has not commented to date, and such claims might well be exaggerated by frustrated sellers, but it would not be the first time a giant is making profits from squeezing the supply chain. Retailers and supermarkets have been doing it for years, though the difference is the scale of regulation; rules in physical retail spaces have been around for decades, whereas the internet is still largely the wild west.

This is a case which needs to be handled very carefully though. The internet giants are facing a huge amount of scrutiny from competition watchdogs around the world, but any decisions need to be made with the future in mind. Precedents will be set and the economic freedoms of the internet need to be preserved. The heavy hand of the government needs to ensure it does create a mess of red-tape and bureaucracy, which would potential damage the fortunes of small businesses more than the intended targets.

Do not expect this case to be resolved in the near future, as Amazon will likely fight this one to the bitter death. €10 million is not a huge amount of money to the internet Goliath, but should a precedent be set in France, the ripples could quickly gather momentum. If other governments start to head down the same route, those €10 million fines will start to add up and it will prove to be a very awkward situation.