On September 2, 2019, the Paris Commercial Court sanctioned Amazon for having imposed unfair conditions on businesses selling on its platform. Amazon received a record fine of €4 million and was ordered to remove or modify the contentious clauses from its contracts and terms of use within six months, failing which it will incur a periodic penalty of €10,000 for each day’s delay.

In the last ten years, the French e-commerce sector has experienced very significant growth. While online sales represented approximately €20 billion in 2008, they accounted for more than €37 billion in 2011,[1] and €64 billion in 2015. Over the same period, the development of online intermediation platforms followed a similar trend, with the share of such “marketplaces” in the e-commerce sector increasing by 50% between 2012 and 2015. In France, Amazon is the clear leader among online marketplaces, with a €5 billion turnover and 170,000 independent resellers registered on its platform (“vendors”).

In 2015 and 2016, the French Directorate General for Competition Policy, Consumer Affairs and Fraud Control (“DGCCRF”) carried out investigations on possible concerns raised by the functioning of online marketplaces from an antitrust standpoint or under French rules on restrictive trade practices (pratiques restrictives de concurrence). A key issue is that vendors are usually small and medium businesses which do not have market power, contrary to marketplaces. In July 2017, following the completion of the investigation, the Minister for the Economy, Bruno Le Maire, filed a lawsuit against several European entities of the Amazon Group before the Paris Commercial Court.

According to the Minister, Amazon’s contracts with vendors and terms of use contained a number of clauses that created a significant imbalance to the vendors’ detriment and, as such, constituted restrictive trade practices in violation of Article L. 442-1, I, 2° (then Article L. 442-6, I, 2°) of the French Commercial Code, in particular:

Clauses enabling Amazon to modify any of the contractual terms or to suspend or terminate the contract on a discretionary basis and without prior notice;

Clauses enabling Amazon to suspend vendors in the event of non-compliance with performance indicators; and

Most-favored nation (“MFN”) clauses compelling vendors to maintain a “parity” between the products offered on amazon.fr and those offered on other online sales channels.

Amazon’s defense

Article L. 442-1, I, 2° (then Article L. 442-6, I, 2°) of the French Commercial Code prohibits companies from “forcing or trying to force a trade partner to comply with obligations creating a significant imbalance between the parties’ rights and obligations”. In its defense, Amazon had argued that these provisions were inapplicable to contracts with vendors located outside of France, which represented the majority of vendors selling on amazon.fr. However, this argument was dismissed at the outset by the Court, which recalled that the legislation at stake amounted to overriding mandatory provisions (“lois de police”).

On the substance, Amazon submitted that the DGCCRF could not merely rely on the existence of an asymmetry between the parties’ bargaining power to prove that it had “forced or tried to force” vendors. Amazon further asserted that the possible imbalances created by the contentious contractual clauses were not significant and ultimately benefitted consumers.

The Paris Commercial Court’s assessment

First, the Court recalled that a party’s attempt to “ force” another party into significantly imbalanced contractual obligations may be established on the basis of a body of evidence, e.g. the “must-have” position or economic power of one of the parties, a lack of room for negotiation, and/or the existence of general and unclear clauses in every contract. In the present case, the Court thus ruled that Amazon’s “ forcing or trying to force” vendors could be established, noting in particular that Amazon is the largest online retailer in the world and in France and faces very limited competition (given that brick & mortar stores cannot be included in the relevant market).

Second, the Court conducted an individual assessment of each of the clauses targeted by the DGCCRF’s allegations, examining both the way in which these clauses were drafted and their implementation by Amazon in practice.

Unsurprisingly, the Court ruled that clauses enabling Amazon to modify any of the contract terms or to suspend or terminate the contract, on a discretionary basis and without prior notice, created a significant imbalance between the parties’ rights and obligations. In this respect, the Court noted that the fact that vendors were free to terminate their contracts with Amazon without providing reasons was insufficient to compensate for the imbalance, as the consequences of termination for Amazon and vendors were in no way comparable. Following a similar reasoning, provisions granting Amazon the discretionary right to “ forbid or limit access to any Amazon website”, “delay or suspend a sale”, or “refuse to put up [a product] for sale” were deemed illegal, as they essentially allowed Amazon, in its capacity as retailer, to limit the competition it faced from vendors by restricting their sales.

Moreover, the Court took the view that clauses relating to vendors’ compliance with performance indicators, while not problematic in themselves, were likely to create a significant imbalance, inasmuch as (i) the evaluation criteria of vendors’ performance were imprecise and could be unilaterally amended by Amazon without prior notice, (ii) Amazon’s assessment of vendors’ performance partly relied on extraneous elements (such as consumers’ decision to return a product simply because they changed their mind), and (iii) the consequences of non-compliance (in particular the time period during which an account could be suspended) were arbitrary and not proportionate to vendors’ alleged shortcomings.

In line with previous case law, the Court also considered that an MFN clause included in Amazon’s contracts with vendors, and compelling the latter to “maintain a parity” between products offered on amazon.fr and products offered on other online sales channels, notably by providing “the same quality of information” regarding resale prices and shipping rates, unduly benefitted Amazon. The Court noted in particular that the drafting of the MFN clause potentially prevented vendors from charging lower resale prices on marketplaces other than Amazon, and that this constituted sufficient grounds to order Amazon to clarify the clause.

On the whole, the Court ruled that seven out of the eleven clauses targeted by the Minister’s lawsuit created a significant imbalance between the rights and obligations of Amazon and vendors. Interestingly, Amazon had already agreed to amend some of the sanctioned clauses earlier this year, following investigations from the German and Austrian competition authorities.

Third, the Court evaluated whether, on the whole, the benefits received by vendors from their contract with Amazon could outweigh the clauses favoring Amazon—and concluded in the negative. Although it acknowledged that vendors were able to benefit from the trust of millions of consumers thanks to Amazon’s reputation and brand image, and from a number of tools put in place by Amazon to facilitate the management of sales, prices and stocks, the Court stated that Amazon already received adequate consideration for such benefits through commissions paid by vendors.

In addition, the Court held that some of the contentious clauses, especially those relating to performance indicators, could potentially enable Amazon to “test” the success of a new product sold by a vendor, and subsequently favor the sale of its own competing product after having matched the vendor’s price. In particular, the Court noted that whether or not a vendor could access Amazon’s “buy box” (i.e. the box on the right side of the Amazon product page allowing consumers to add items for purchase to their shopping cart) is determined by an algorithm relying on vendors’ compliance with performance indicators, which themselves are discretionarily set by Amazon, thereby making it possible for Amazon to withdraw access to the buy box and make vendors less attractive.

Sanctions and implications

The Paris Commercial Court imposed a €4 million fine on Amazon. While the final amount is significantly lower that what the Minister for the Economy had requested (€9.5 million), it still constitutes the highest fine ever imposed for restrictive trade practices. In addition, the Court ordered Amazon to remove or modify the illegal clauses within the next six months, failing which it will incur a periodic penalty of €10,000 for each day’s delay.

Following the 2016 and 2017 rulings against Booking.com and Expedia on similar grounds, the Paris Commercial Court’s judgment against Amazon confirms that digital platforms should expect antitrust scrutiny not only from the French Competition Authority, but also from the French executive branch. In this respect, Cédric O, the current Secretary of State for the Digital Sector, emphasized that the government in place was “firmly committed to the promotion and the defense of a balanced and transparent digital economy for the benefit of French consumers”.[2]

Amazon is the subject of a number of other antitrust probes, most notably from the Italian competition authority since April 2019, and the European Commission since June 2019. According to publicly available information, both investigations concern Amazon’s relations with small vendors.

[1]              French Competition Authority, Opinion no. 12-A-20 of September 18, 2012 relating to the functioning of the e-commerce sector, para. 8.

[2]              https://w w w 2.economie.gouv.fr/fi les/fi les/directions_ ser vices/dgccrf/presse/communique/2019/CP-Sanction-A mazon.pdf (free translation).