Federal Court of Justice confirms Amazon’s paramount significance for competition across markets

Year of issue 2024
Date of issue 14.05.2024

No. 97/2024

Order of 23 April 2024 - KVB 56/22 - Amazon

The Competition Senate of the Federal Court of Justice (BGH, Bundesgerichtshof) today confirmed the Bundeskartellamt’s decision determining that Amazon is of paramount significance for competition across markets. Thus, for the first time, the Competition Senate has ruled in first and final instance on an appeal against a declaratory decision under section 19a (1) of the Competition Act (Gesetz gegen Wettbewerbsbeschränkungen, GWB). Section 19a GWB, which entered into force on 19 January 2021, serves to modernise and strengthen abuse control under competition law. It provides for a two-step procedure in which the Bundeskartellamt, in a first step, can issue a decision determining the company’s paramount significance for competition across markets (section 19a (1) GWB) and, in a second step, can prohibit the company concerned from engaging in certain forms of conduct (section 19a (2) GWB).

Facts:

Amazon operates worldwide, inter alia in the e-commerce sector, as a bricks-and-mortar retailer and as a cloud services provider (Amazon Web Services, AWS). On 27 December 2021, the corporate group was the world’s fifth most valuable company, with market capitalisation of USD 1.721 billion and a gain in stock-market value of approximately 443% in the previous seven years. The company achieved total revenue amounting to approximately USD 469.8 billion worldwide in the business year 2021. Germany generated approximately USD 37.3 billion of that amount. Thus, in terms of revenue, Germany constituted the second most important (sales) market after the USA. The annual profits (worldwide) rose from USD 3 billion in the business year 2017 to USD 33.4 billion in 2021, thus by 1013%. With 1.6 million employees as of 31 December 2021, Amazon is one of the world’s largest employers.

With its order of 5 July 2022 in accordance with section 19a (1) GWB, the Bundeskartellamt issued a declaratory decision that Amazon.com, Inc,. including its affiliated companies, has a paramount significance for competition across markets. The validity of the decision is limited to five years from the date on which it becomes final. Amazon.com, Inc. and a German group company have lodged an appeal against this order requesting the decision to be invalidated. During the appeal proceedings, Amazon was designated as a gatekeeper by the European Commission in accordance with Article 3 of the Digital Markets Act (DMA). Since 7 March 2024, the DMA’s regulations governing market behaviour apply within the European Union to Amazon Marketplace and Amazon Advertising, the intermediation platforms operated by Amazon.

The ruling of the Federal Court of Justice:

The appeal was unsuccessful. The Federal Court of Justice has jurisdiction for the appeal in first and final instance in accordance with section 73 (5) no. 1 GWB. To that extent, there are no constitutional concerns. Nor do any reasons arise from European law to preclude section 19a (1) GWB and the declaratory decision issued on the basis of that provision. Section 19a (1) GWB is a provision of national competition law, the application of which is admissible alongside the DMA. Since the declaratory decision does not relate to a particular information society service, it also does not breach the prohibition arising from Directive 2000/31/EC (Directive on electronic commerce) on restricting the freedom to provide information society services from another Member State. It was also unnecessary to notify section 19a (1) GWB to the European Commission under Directive (EU) 2015/1535, because it is not a general provision concerning services of the information society within the meaning of that directive. Accordingly, there was no reason to submit a request for a preliminary ruling to the Court of Justice of the European Union.

In accordance with section 19a (1) GWB, the Bundeskartellamt rightly determined that Amazon operates to a considerable extent in multi-sided markets under section 18 (3a) GWB and that the group has paramount significance for competition across markets.

Amazon maintains 21 country-specific domains worldwide with trade platforms (Amazon Store) and, via these, as a manufacturer and retailer, also distributes physical and digital goods to end customers (for example Amazon Retail, Home Entertainment, Twitch, Prime Video, Kindle Content, Amazon Music, Amazon Games, Amazon Echo and Amazon Alexa, Amazon Fire, Fire TV, SmartHome equipment). At the same time, Amazon operates the trading platforms as online marketplaces and enables third-party online traders to offer their goods to end customers in exchange for a commission. Amazon has its own logistics infrastructure, acting as an intermediary between third-party online traders and shipping service providers for shipping orders also in Germany. Amazon Advertising brings together advertising customers and suppliers of advertising spaces.

The decision establishing the paramount significance for competition across markets does not require any specific danger to competition or restraint to competition. Rather, it is sufficient if strategic and competition possibilities exist, the abstract risk potential which is addressed by the provision. Section 19a (1) GWB is intended to enable the Bundeskartellamt to more effectively control large digital companies whose resources and strategic positioning allow them to have considerable influence on the business activities of third parties, to distort the competitive process to their own advantage and to transfer their existing market power to more and more new markets and sectors. The Bundeskartellamt correctly established that Amazon has strategic and competitive potential of this kind. The group operates in a large number of different markets that are vertically integrated and that are related in a multifaceted and conglomerate way and has a dominant position in the German market for online marketplace services for commercial traders. It has paramount financial power and paramount access to data of relevance to competition, such as customer and user data, data from trade platform operations and advertising platforms and related services, as well as from Amazon Web Services (AWS) operations. As the operator of many national online marketplaces, Amazon has a key position worldwide and in Germany for retailers’ access to their sales markets and can exert considerable influence on third-party traders’ sales activities. The current validity of the provisions of the DMA and the commitments made by Amazon to the European Commission during the appeal proceedings within the context of abuse proceedings do not preclude the declaratory decision.

Karlsruhe, 23 April 2024

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