Amazon hit with record US$1.3 billion fine for abuse of supply chain monopoly

• Amazon leveraged its dominant position within the supply chain to encourage sellers on Amazon’s own logistics service
• Amazon “strongly disagrees” with the fine and plans to appeal
• Besides the fine, Italian regulators want Amazon to give outside vendors who don’t use FBA the same sales and visibility opportunities

Amazon has been giving special perks to third-party merchants who use its warehousing and delivery networks. Leveraging its dominant position in the market, the tech giant has been encouraging sellers on its Italian platform to use its own logistics service, Fulfilment by Amazon (FBA). And to the Italian antitrust watchdog, that is an abuse of supply chain dominance.

So they slapped Amazon with a €1.13 billion euros (approximately US$1.28 billion) fine, one of the biggest penalties imposed on a US tech giant in Europe. The Autorità Garante della Concorrenza e del Mercato, or AGCM, said that Amazon was harming competing operators in the e-commerce logistics service.

Essentially, merchants who pay to use the FBA system have access to Amazon Prime customers, which means their products can often be shipped within 24 hours, without delivery fees. Those vendors can also participate in promotions like Black Friday, Cyber Monday, and Prime Day that are not available to those who do not use Amazon’s fulfillment system. Amazon site is usually used as a marketplace for outside vendors that provides the majority of the products available and the tech giant then takes a percentage of each sale.

But for an additional cost, the company offers Fulfillment by Amazon, which allows vendors to store their products in Amazon’s warehouses and delivery system, as well as programs for inventory management, returns, and customer service.

The investigation found that those “functions are crucial for the success of sellers and for increasing their sales,” the competition authority said in the statement. This was done “to the detriment of the logistics services offered by competing operators, as well as to strengthen the dominant position.” AGCM further said it will impose corrective steps that will be subject to review by a monitoring trustee.

Amazon plans to appeal as it “strongly disagrees with the decision of the Italian Competition Authority,” the company said. “The proposed fine and remedies are unjustified and disproportionate.” To top it off, the company said there were other methods for outside vendors to reach Prime customers other than Fulfillment by Amazon. According to the tech giant, a majority of third-party merchants selling products on Amazon do not use the company’s logistics system.

So now Italian regulators are demanding Amazon to give outside vendors who don’t use FBA, the same sales, and visibility opportunities. The company has a year to come up with standards that outside logistics companies must meet to qualify. 

This is not the first time the tech giant is under scrutiny in Europe. In fact, Amazon has constantly been targeted for either data-related issues or matters of supply chain d0minance as well as monopoly issues generally. Currently, the European Commission is investigating Amazon for unfairly using data collected from third-party merchants to bolster its own product offerings. Other tech giants including Alphabet’s Google, Facebook, Apple, and Microsoft have drawn heightened scrutiny in Europe.

The AGCM even fined both Amazon and Apple €200 million (US$226 million) together last month for an agreement that restricted the sale of products made by Apple and its subsidiary Beats to a selected group of sellers on the e-commerce platform.