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Amazon must pay 4 Million Euros in France for Unfair Practices: Verdict Could Pave Way for US Decisions

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Most significant aspect is not the tiny fine, but the requirement that Amazon change it’s marketplace seller agreement on 7 of 11 practices that were deemed unfair

In a related development to our opinion piece published yesterday, the commercial court in Paris fined the giant US firm for clauses in it’s mandatory agreement for sellers that were found to be abusive and unfair.

In an exclusive story published (in French) by Next INpact the verdict was explained based on ongoing local coverage of the story.

In the article, which you can read in a google-generated translation provided below, it is noted that, similar to the US marketplace, in France approximately 60% of the income for Amazon’s online retail sales is generated by third-party sellers, using the Amazon Marketplace. Total sales are approximately 5 billion Euros per year.

Screen Shot of the Court Document (can be downloaded as PDF below

Of the 11 clauses that were scrutinized in the suit – 7 of them were deemed to be in violation of:

”Article L442-6 of the Commercial Code prohibits “to submit or attempt to subject a trading partner to obligations creating a significant imbalance in the rights and obligations of the parties”.

– Next Inpact reporting on the verdict in the commercial court of paris

Some examples of the offending clauses are summarized in the verdict, which will sound very familiar to US marketplace sellers:

“one of them allows Amazon to modify at any time, without notice, and in its absolute discretion the contract binding to sellers.

Result: either the seller resigns or he loses a significant share of turnover. A clause deemed “exorbitant of French law and contrary to all uses” concludes the decision.”

Nextinpact.com

“Another clause pinned, the one that allows Amazon to terminate a contract with immediate effect “for any reason and at any time by simple notification.

‘A contractual condition much too “general, discretionary and imprecise”, considers the court which notes the absence of notice and proportionality.”

“In the end, the court ruled that 7 of the 11 clauses pinned by Bercy were clearly unbalanced to the detriment of third-party sellers.“

nextinpact.com

With US anti-trust actions potentially moving forward at anytime, it is doubtful that this ruling, although representing little more than a “parking fine”, will be overlooked by prosecutors seeking to build a future case against the giant retailer.

As follows the full, rough, translation of the original article:

EXCLUSIVE.

The Paris Commercial Court sentenced Amazon to a fine of 4 million euros. The platform is also obliged to amend seven clauses under penalty. In question, the existence of a significant imbalance to the detriment of third-party sellers passing through this marketplace. Next INpact releases the judgment of 2 September 2019. In 2015 and 2016, the Directorate-General for Competition, Consumption and Fraud Control launched several surveys of marketplaces accessible in France. The goal? Gauge this sector and update any anti-competitive or restrictive practices.

Three companies stand out, all related to Amazon: Amazon Payments Europe, Amazon Service Europe and Amazon France Services, respectively APE, ASE and AFS. In December 2017, Bercy revealed his procedure initiated before the Commercial Court in July 2017. The administration recalled the ban on restrictive practices. Article L442-6 of the Commercial Code prohibits “to submit or attempt to subject a trading partner to obligations creating a significant imbalance in the rights and obligations of the parties”.

It claimed for this purpose in particular a civil fine of 9.5 million euros. The importance of this amount is easily explained. The company generates in France a turnover of over 5 billion annually.

And more than the majority of sales (60%) are made by third-party sellers, those using its marketplace. During its investigation, the DGCCRF identified several clauses that constitute a significant imbalance. They relate to contracts linking third party vendors with Amazon.

The jurisdiction of the French courts

Over the 49 pages, only APE, which deals with the part “payment”, could finally be put out of cause, not the other two companies. In this respect, Amazon France Service has been considered as a commercial partner of ASE, associated in the development of marketplaces.

ASE has also tried another circumvention: to oppose to the court the clause that attributes jurisdiction to the Luxembourg courts, while ensuring that two thirds of its sellers would be installed abroad.

The blow of the sword touched the water: the provisions in question being police laws, they are not subject to contractual conditions.

A significant imbalance

In the body of the decision, three points were sought: the existence of an economic bid, obviously unbalanced contract clauses and finally a possible rebalancing for the benefit of sellers in the benefits of using this platform.

The criterion of the tender was retained without difficulty, by the combination of several ingredients. Vendors face non-negotiable clauses. Amazon enjoys an economic power without equivalent.

The site is even essential for small third-party sellers, boosted by the network effect (or snowball).

“Amazon is obviously one of the” superstars “of the Internet, which this network phenomenon explains the exponential growth.

11 clauses were identified by the Minister of the Economy in his procedure.

For example, one of them allows Amazon to modify at any time, without notice, and in its absolute discretion the contract binding to sellers. It is up to the seller to look for this information published in the conditions of the site.

Unhappy, he can still terminate the contract, “but then without having had time to find a substitute,” said the court.

Result: either the seller resigns or he loses a significant share of turnover. A clause deemed “exorbitant of French law and contrary to all uses” concludes the decision.

Amazon was unsuccessful in arguing that trading with 170,000 vendors was impossible in an automated process. What the court told him was that “the automated system, precisely because it is, would work just as well with notice.”

With a certain malice, he also recalls that billions of transactions are made every day and that Amazon is in perfect ability to send them a letter on the order, and another on the state of delivery.

discretionary clauses

Another clause pinned, the one that allows Amazon to terminate a contract with immediate effect “for any reason and at any time by simple notification.”

A contractual condition much too “general, discretionary and imprecise”, considers the court which notes the absence of notice and proportionality.

Similarly, Amazon offers the possibility of imposing limits on salespeople based on “performance factors” without explaining their scope and the consequences of non-compliance with the evaluation criteria.

Still in the same vein, the platform is sanctioned for having the freedom to prohibit or restrict access to the site “at its sole discretion”. According to Amazon, the idea is to fight against the sale of dangerous products.

Only problem, the consular judges have not found this clarification in the contract. Same fate for the part that authorizes ASE to refund a customer even in case of non-return of the product of the third-party seller.

An imbalance not compensated by the benefits removed

In a logic of “balance”, the court then examined whether the imbalance of most pinned clauses was not offset by a series of benefits for sellers:

consumer confidence for Amazon, tools sharpened to facilitate management commercial operations, in addition to the storage of products.

The judges mainly recalled that these different benefits are not offered, but have as counterpart “the level of the various commissions paid to ASE by the third vendors”.

And these different benefits also benefit ASE for its own products and attract more and more third party sellers.

“On the other hand,” he says, “some of the shortcomings, especially those relating to business performance indicators, are such as to allow Amazon Service Europe to use a stipulation to, after testing a new product on a market. launched by a third-party seller, favoring the sale of his own to determine that of the third-party seller after aligning his price “.

7 censored clauses, 4 million euros fine

In the end, the court ruled that 7 of the 11 clauses pinned by Bercy were clearly unbalanced to the detriment of third-party sellers.

Amazon will have to modify them. 3 will remain intact, and one has been modified during the procedure. Amazon will have to modify them within 6 months, on pain of 10,000 euros per day.

Rather than the 9.5 million euros defended by Bercy, the court has finally revised down the fine to 4 million euros, especially given the good faith of Amazon, and different “positive steps” since the opening of the procedure.

Note however that the DGCCRF had requested the parameters of the algorithm used, from the United States, to highlight the products in the “Buy Box” Amazon … In vain.

The court finally refused the publication on the grounds that the press release of Bercy dated December 18, 2017 had been very widely (disseminated) and that this judgment should suffer a similar fate.

Download the judgment of the Commercial Court of Paris of September 2, 2019 news available until tomorrow. Posted on 03 September 2019 at 16:27 By Marc Rees


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