Amazon fined €4m for unbalanced clauses in contracts with marketplace's third-party vendors

On September 02, 2019, the Paris Commercial Court imposed a civil fine of €4m on Amazon due to the significant imbalance resulting from 7 clauses in the contract concluded with third-party vendors on its amazon.fr platform. Amazon is also ordered to amend these clauses.

An investigation was initiated by the the DGCCRF (Directorate General for Competition, Consumption and the Repression of Fraud) in 2015 regarding the practices of certain major platform operators, which ultimately led the French Minister of Economy to summon three Amazon entities (Amazon Payments Europe (APE), Amazon Services Europe (ASE) and Amazon France Services (AFS)), on the grounds of former Article L. 442-6, I, 2° of the Commercial Code 1 , before the Paris Commercial Court in July 2017.

While Amazon claimed that AFS should be exonerated because no contract has been concluded between this entity and third-party sellers (AFS having only concluded service agreements with ASE), the Court nevertheless considers that Article L. 442-6, I, 2° of the French Commercial Code is applicable because of its active and direct involvement in the relationship with third-party sellers.

In contrast, the Court holds that Article L. 442-6, I, 2° of the French Commercial Code does not apply to the payment management contract concluded between third party sellers and APE, a payment and e-money institution - subject in this respect to the specific provisions of the Monetary and Financial Code which prevail, as a special right, over the provisions of the French Commercial Code.

While the application of Article L. 442-6 of the French Commercial Code was contested by Amazon because of a jurisdiction clause (Luxembourg) contained in the ESA contracts, this clause is considered unenforceable, as Article L. 442-6 of the French Commercial Code is an overriding mandatory provision.

Consequently, it is not relevant here that two thirds of third-party sellers are domiciled abroad since a significant number of them are nevertheless domiciled in France, as well as the majority of consumers, and especially since France is the place where the products are delivered and where the contract is performed, and the infringement of competition occurs on the national market towards other platforms, third-party sellers and consumers.

As to the merits of the case, the Court recalls that in order to establish a violation of Article L. 442-6, I, 2° of the French Commercial Code, it is necessary to provide evidence (i) of a subjection by the trading partner (ii) to a significant imbalance.

Concerning the subjection, which is usually assessed in the light of a body of evidence, the Court finds that there is a disproportionate balance of power on the relevant online sales market 2 benefiting to Amazon, not only in relation to its partners but also in relation to its competitors.

Indeed, Amazon has achieved a worldwide turnover of €250bn in 2018 and €5bn in France, an amount three times higher than its French main competitor (Cdiscount). The Court acknowledges the fact that Amazon is relatively unavoidable for small third-party sellers and emphasizes on the lack of contract negotiation (although this is inherent in any marketplace).

With regard to the 11 clauses initially contested by the French Minister of Economy, based on 10 anonymous seller's minutes drawn up by the DGCCRF and whose probative value is confirmed by the Court (2nd judgment in this respect), 7 were finally found to be clearly unbalanced, and in particular:

• the clause whereby Amazon unilaterally modifies the contract and conditions at its discretion, without prior notice or information to the other parties
• the clause whereby vendor accounts are unilaterally suspended on the basis of performance indicators, which may change at any time without notice or notification to the contracting parties and whose consequences are arbitrary, imprecise and without any proportionality in relation to the failure to comply
• the "parity of conditions" clauses allowing Amazon to benefit from the same conditions as those granted by a third-party seller to other competing marketplaces (even if Amazon no longer uses this clause), especially since the ambivalent wording of this clause may lead assimilate it to a price parity clause, clearly constitutive of a significant imbalance
• the so-called 'site control' clause relating to the refusal to sale a product, due to its general nature and the imprecision of its drafting
• the clause relating to the 'A to Z guarantee', which authorises ASE to reimburse the customer even in the event of failure to return the product, even if, after investigation, the complaint is considered unjustified and insofar as it authorises the display of the aforementioned unjustified complaints with the one justified on the seller' s comments
• the clauses of the 'Shipped by Amazon' service exempting Amazon from its responsibility for delivery abroad and from its responsibility as depository and handler when it is entrusted by the seller with the storage and shipping of the products.

Concerning the fine, the Minister requested a civil fine of €9.5m 3 , but the Court considers that it is not justified to increase the fine to an amount exceeding the ceiling of €5m, as the overrun can only be imposed if the benefits resulting from the breach exceed this ceiling. The Court finally sets the fine at 75% of the said ceiling given Amazon's good faith and its asserted intention to significantly modify the contested clauses.

1 Now Article L. 442-1, I, 2° of the French Commercial Code since Order No. 2019-359 of 24 April 2019 recasting Title IV of Book IV of the French Commercial Code on transparency, restrictive practices of competition and other prohibited practices.

2 The Court points out here that the argument that physical stores would be a sufficient alternative for a small distributor cannot be taken seriously at the end of the first quarter of the 21st century.

3 Reflecting the possibility of increasing the amount of the fine normally capped at €5m, in proportion to the benefits derived from the breach, to 5% of the turnover achieved in France by the author of the practices.