Italy Fines Amazon and Apple 230 Million over Reseller Collusion

Italy’s antitrust authority has fined Amazon and Apple a combined $230 million (€203M), following an investigation into resale of Apple and (Apple-owned) Beats equipment on the Amazon Italy ecommerce platform. The collusion is said to have decreased the amount of money available to consumers buying Apple and Beats items on the marketplace.

The AGCM also ordered the tech firms to end the reseller limits. The sanction was announced today, with the agency pointing to a restrictive agreement between the pair to block some “legitimate” resellers of Beats products Now. Amazon will pay €134.5M ($151 million), while Apple will pay €68.7M ($77.3 million).

The deal that the government claims it discovered was concluded in October 2018. According to Art. 101 of the Treaty on the Functioning of the European Union, which prohibits official and unofficial resellers of Apple and Beats goods from using Amazon, according to AGCM’s announcement, there were a number of contract terms that prohibited both official and informal resellers.

The restriction prevented sales of Apple and Beats products except through Amazon itself or designated resellers who had been “selected individually and in an unjust manner,” according to Art. 101 of EU law.

“[T]he investigation established the intention to introduce a purely quantitative restriction on the number of retailers, allowing only Amazon and certain subjects, identified in a discriminatory way, to operate,” it writes in the release [which we’ve translated from Italian with Google Translate].

“The terms of the agreement also restricted cross-border sales, as retailers were discriminated against on a geographic basis. The restrictions of the agreement have affected the level of discounts offered by third parties, decreasing their size.”

According to the study, Amazon’s local marketplace accounts for at least 70% of consumer electronics kit purchases in the country, with “at least 40%” coming from vendors that utilize Amazon as a brokerage platform.

“It therefore appears essential that the application of competition rules ensure a level playing field for all retailers who use marketplaces as an increasingly important place for carrying out their commercial activity, especially in today’s context, avoiding the implementation of discriminatory behaviors that restrict competition,” it adds.

“In this perspective, the Authority’s decision recognizes, in line with the jurisprudence of the EU Court of Justice, the need for distribution systems, in order to be compatible with competition rules, to be based on qualitative criteria, not discriminatory and applied equally to all potential resellers.”

Following an analysis of the Amazon-Apple agreement, Italy’s regulatory body determined that Germany’s and Spain’s national competition authorities began similar inquiries.

This summer, Spain’s Comisi onacional de los Mercados y la Competencia announced a potential fine against Amazon and Apple, which was conducting its own investigation (which it estimated would take up to 18 months to complete).

Following complaints by merchants on its market, Germany’s Bundeskartellamt opened an abuse proceeding against Amazon in April 2018. The proceeding was closed the following year when Amazon made general terms of business adjustments for vendors and committed additional measures to reduce competition concerns.

Following a major reform to German competition law pertaining to digital platforms, the Bundeskartellamt has initiated open proceedings into the market power of both Google and Apple, which will allow the Federal Cartel Office to impose ex ante restrictions on how Amazon and Apple can operate in Germany to manage market abuse.

The AGCM’s decision has been criticized by the two tech titans, who were asked for comment. At the time of publication, Apple had not responded but Amazon confirmed that it will appeal, stating:

“We strongly disagree with the decision of the Italian Competition Authority (ICA) and we intend to appeal. The proposed fine is disproportionate and unjustified.

“We reject the ICA’s suggestion that Amazon benefits by excluding sellers from our store, since our business model relies on their success. As a result of the agreement, Italian customers can find the latest Apple and Beats products on our store, benefiting from a catalogue that more than doubled, with better deals and faster shipping.”

Amazon also attempted to argue that the agreement it had with Apple was beneficial for customers, resulting in a higher number of Apple products available on its marketplace and demonstrating certain instances where discounts were given to specific Apple items.

Amazon also denied any market dominance, claiming that its marketplace represents less than 1% of the global retail industry and that there are larger companies in every country in which it does business, including Italy. It went on to say that third-party merchants account for around 60% of purchases on its marketplace, with roughly 18,000 Italian SMEs selling through Amazon.