Law in the Internet Society
Competitive Relationship between Platformers and Third Parties Using the Platform -- By Risako Suzuki - 09 Dec 2021

1. Competitive Relationship between Amazon and Third-party Seller

Amazon's business style is unique. While selling a wide variety of products as a retailer, it also provides a digital platform for third-party sellers. On the Amazon website, the same product is often sold by Amazon and third-party sellers. As a result, a competitive relationship arises not only between Amazon and companies engaged in similar platform businesses (such as China's Alibaba) but also between Amazon and third-party sellers who sell products on Amazon.

2. Problems Caused by The Competitive Relationship between Amazon and Third-party Seller

There are many possible issues caused by the competitive relationship between Amazon and third sellers. For example:

(1) Price Parity Clause

Amazon has an overwhelming delivery network and speed, and can deliver many products very rapidly, sometimes the next day, and especially for fresh food, on the same day. In addition, the number of Amazon Prime members is immeasurable, as Amazon is developing a wide range of businesses other than the sale of goods, including but not limited to music distribution and video distribution.

From the perspective of utilizing such a great delivery network and getting a large number of prospective customers, it is clear that for many goods sellers, whether or not they can use Amazon will have a significant impact on their business and sales. For this reason, third-party sellers tend to accept terms that are disadvantageous to them when entering into agreements with Amazon.

One good example of this is the price parity clause. A third-party seller sometimes has its own retail website or hopes to use a digital platform other than Amazon. If a price parity clause is included in the agreement with a third-party seller, the third-party seller is prohibited to sell a product at a price more favorable on its own website or other platformer's websites than on Amazon's website. In Japan, the price parity clause is not allowed under antitrust law. The Japan Fair Trade Commission (JFTC) investigated the clause in 2017 as a possible violation of the antitrust law, and Amazon eventually promised to remove any price parity clause from all agreements with third-party sellers and not to include it in any agreement in the future.

The problem is that different countries have different antitrust regulations. There are two types of price parity clauses: "wide" price parity clause and "narrow" price parity clause. The "wide" clause prevents a seller from offering a better price on any other sales channels, while the "narrow" clause only prohibits better offers on the seller's own website, not on the other platformer's website. In the EU, there is a distinction between wide and narrow price parity clauses. In some countries, the wide price parity clause is prohibited and the narrow one is allowed. On the other hand, Japanese antitrust law does not distinguish the wide price parity clause from the narrow price parity clause and prohibits both of them as violations of the law. It is a big question why the legal regulations differ from country to country, i.e., the degree of protection for sellers differs from country to country, while business is becoming borderless.

(2) Collection of Information

Amazon is the largest retail website as well as the largest platform for third-party sellers, and also provides many other services. I believe that the strongest point of Amazon is the overwhelming ability to collect information. A retail website that treats specific kinds of products can gather information of customers' preference only relevant to such kind of products. However, Amazon treats a surprising number of and various products as not only a retailer but also a platformer (e.g. food, household articles, electric appliance, books, music, and medicine). Thus, it can gather information on a wide range of customers' preferences. In addition, Amazon may understand the conversation or life rhythm of customers via Alexa. By using such information and creating an algorithm, Amazon can suggest products customers may be interested in, which has boosted its business.

However, such algorism can be decided by Amazon on its own, and there is a possibility that Amazon will give priority to the products it sells as a retailer.

In addition to customer information, Amazon can collect information from many sellers, such as information regarding sales volume and sales price. Amazon can use such information to set conditions that favor its own retail sales.

In Japan, a new law was enacted in 2021. The law requires platformers to disclose to third-party sellers the content and the conditions of usage of information the platformers collect from the sellers. The law also provides that the platformers must disclose the main considerations for deciding the rank order of products suggested to customers. However, again, it is unreasonable to leave regulations to be determined on a country-by-country basis, while business becomes globalized and borderless.


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r3 - 26 Jan 2022 - 21:36:35 - RisakoSuzuki
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