July 24, 2024
UK Retailers Sue Amazon Over Buy Box Program

Retailers in the UK have launched the “biggest collective action ever launched by UK retailers” over Amazon’s Buy Box program.

According to the British Independent Retailers Association (Bira), Amazon unfairly used data it had access to in order to launch products that competed with top sellers. Because Amazon could launch those products cheaper, and promote them via Buy Box, it effectively allowed the e-commerce giant to squeeze out third-party retailers in best-selling categories.

Such commercially valuable and confidential information helps Amazon decide whether to enter a new product segment based on its earnings and sales potential, which elements of the product to copy, how to price an item, and which consumers to target. That information in combination with the Buy Box, meant Amazon knew it could successfully enter and take away profits from UK retailers.

The retailers, many of whom are small independent UK businesses, were unaware that Amazon was illegally using their data to benefit its own retail operation. Amazon was already charging them a non-negotiable 30% commission on every product sold on the site. By misusing their proprietary data to bring to market rival products that are sold cheaper, Amazon is effectively pushing many of the UK’s independent retailers out of the market. The consequences of Amazon’s abusive conduct has been to inflate its profits and harm the UK retail sector, especially the smaller independent retailers who are struggling at a time of difficult economic circumstances.

Amazon has already ran into significant regulatory scrutiny for the exact behavior the lawsuit is targeting. Consumer rights advocate Julie Hunter launched a similar lawsuit in the UK on behalf of retailers in 2022, and the country’s Competition and Markets Authority (CMA) opened its own probe into the company’s practices in the same year. The company faced a similar probe in the EU in 2022 over using non-public business data from retailers to fine-tune its own decisions.

In July 2019, the Commission opened a formal investigation into Amazon’s use of non-public data of its marketplace sellers. On 10 November 2020, the Commission adopted a Statement of Objections in which it preliminarily found Amazon dominant on the French and German markets, for the provision of online marketplace services to third-party sellers. It also found that that Amazon’s reliance on marketplace sellers’ non-public business data to calibrate its retail decisions, distorted fair competition on its platform and prevented effective competition.

In parallel, on 10 November 2020, the Commission opened a second investigation to assess whether the criteria that Amazon sets to select the winner of the Buy Box and to enable sellers to offer products under its Prime Programme, lead to preferential treatment of Amazon’s retail business or of the sellers that use Amazon’s logistics and delivery services.

In both the EU and UK probes, Amazon made changes to its program to avoid further action, a point that could help the plaintiffs in the current case prove that Amazon’s behavior, dating back to 2015, was illegal.

To make matters worse for retailers, not using Amazon is no longer an option because of the company’s dominant market position.

“One might ask why would an independent retailer use Amazon if it is so damaging to their business,” said Andrew Goodacre, CEO of Bira. “In reality, we have seen a significant shift in consumer buying behaviour and, if small business want to sell online, Amazon is the dominant marketplace in the UK. As a result, for small retailers with limited resources, Amazon is the marketplace to start online trading. Whilst the retailers knew about the large commissions charged by Amazon, they did not know about the added risk of their trading data being used by Amazon to take sales away from them.

“The British public has a strong relationship with its local, independent retailers and ensuring they are not put out of business by Amazon’s illegal actions is a key driving force behind this collective action. The filing of the claim today is the first step towards retailers obtaining compensation for what Amazon has done. I am confident that the CAT will authorise the claim to go forward, and I look forward to the opportunity to present the case on behalf of UK retailers. This is a watershed moment for UK retailers, but especially for small independent retailers in this country.”