The U.K.’s Competition and Markets Authority (CMA) today announced that it has accepted proposals from Facebook’s parent Meta and Amazon to limit how they use data gathered from their respective marketplaces to benefit their own products and bottom lines.
The CMA has been probing both companies as part of separate investigations, though the cases bore similarities in terms of how each platform was using data to give them what the CMA argued was an “unfair advantage.”
The crux of the case against Meta centered on how it was using advertising data funnelled from Facebook to inform decisions around content displays and product recommendations in Facebook Marketplace, the classifieds service it launched back in 2016. So in effect, Meta could use ad interaction data from Facebook to display more relevant items in users’ Marketplace feed, which, while arguably was beneficial to consumers, was detrimental to Facebook Marketplace competitors that use Facebook and other Meta platforms to advertise their products.
The European Commission (EC) and the CMA announced separate but seemingly collaborative efforts to investigate Meta on this practice in June 2021, with the CMA confirming last August that it was proceeding with a formal investigation and the EC following suit shortly after.
However, the CMA gave a strong indication in May that it was prepared to accept commitments from Meta to change its ways. This includes giving advertisers an opt-out in terms of preventing their advertising data being used by Meta in Facebook Marketplace, something that Meta has said it will develop a “technical solution” to achieve.
As per the CMA’s final findings:
Meta will implement technical systems to prevent the use of certain competitor advertising data in the operation of Facebook Marketplace and the development and/or improvement of the product design, layout and/or functionality of Facebook Marketplace. This technical solution will apply for advertisers who have voluntarily opted out of their advertising data being used, or who have been automatically opted out by Meta (and who have not objected to this).
It’s worth noting here that some — possibly most — advertisers will have to opt-out of their advertising data being used, which will likely mean that Meta will still be able to leverage a lot of advertising data. Such is the power of defaults.
Additionally, Meta has said it will use “all reasonable endeavours” to prevent employees working on product development from using ad data where it might give it an advantage over advertisers that use its platforms.
While Meta’s commitments appear to be just that — commitments — the CMA has said it will set up a monitoring trustee to oversee Meta’s adherence, including its new technical system rollout and employee training.
Concurrent
The CMA’s concurrent investigation into Amazon over similar data-abusing marketplace practices has also now come to an end. This comes more than a year after it first opened an investigation into whether the ecommerce giant was unfairly using data from third-party marketplace sellers to help Amazon itself decide which products to sell, manage supply-and-demand (stock levels), and set prices.
Moreover, the CMA was also looking into whether Amazon favored its own products, or those that form part of the Fulfilled by Amazon (FBA) program, in terms of being featured in the prominent featured “buy box” section.
“Data provided to the CMA by Amazon shows that where both Amazon Retail and third-party seller offers were eligible to be the Featured Offer on a product page in 2021, an offer by Amazon Retail was selected to be the Featured Offer in more than 80% of cases.” the CMA wrote. “The CMA has received complaints from third-party sellers which allege that the criteria for selecting the Featured Offer discriminate in favour of Amazon-fulfilled offers, including in circumstances where Amazon-fulfilled offers are less competitive on price.”
Put simply, Amazon allegedly put its profits ahead of whatever might have been more beneficial to the customer, and as the platform-owner put competing sellers at a disadvantage.
As a result of all this, Amazon started making moves this summer to appease the CMA with several commitments of its own, which the CMA has now accepted.
As per the CMA’s final report published today, Amazon has said that it will not use “non-public” data it holds on third-party sellers on Amazon’s marketplace, including anything related to payments of fulfilment services, for “decisions and decisional processes relating to retail operations by Amazon Retail that are in competition with third-party sellers.”
This includes aggregated, individual, and anonymized data.
As for the “buy box,” Amazon said that will apply “objectively verifiable and non-discriminatory conditions and criteria for the purposes of determining the selection of the Featured Offer.” It also said that it won’t use any Prime labelling as part of the “buy box” featured offer.
Finally, the CMA had also noted that third-party sellers that use courier services outside of Amazon’s own fulfilment services or Royal Mail were unable to independently negotiate terms and rates for Prime delivery services with the carriers supplying those services — indeed, the sellers had to adhere to whatever rates Amazon had agreed with the carriers. Moving forward, Amazon said it will allow third-party sellers to negotiate their own rates with the carriers for Prime-eligible offers.
Similar to the Meta case, the CMA’s approach to monitoring Amazon’s adherence to its commitments will involve setting up an “independent trustee” to oversee matters, something that will surely come with challenges — and that’s assuming they get full unhindered cooperation from Amazon.
Concessions
Today’s announcement comes shortly after the CMA achieved some notable concessions from Microsoft to close its megabucks Activision acquisition, but the concessions in these latest cases are somewhat different and perhaps don’t really cut to the heart of the problem. That is, as platform-owners and data-harnessers, Meta and Amazon still hold too much sway.
“We shouldn’t underestimate how difficult it is for regulators to get concessions from the Big Tech firms, and these concessions are sensible,” Tom Smith, a former CMA legal director who’s now partner at London-based law firm Geradin Partners, explained to TechCrunch. “However, neither of these cases touch the core business models of the firms. They are easy for the firms to live with, and their compliance will be extremely difficult to monitor.”
Across the pond, meanwhile, the Federal Trade Commission (FTC) and Department of Justice are lining up their own antitrust cases against Amazon and Google respectively. And though they are at a far-less advanced stage, they seem to be more extensive in scope, with Attorneys general from 17 states alleging that Amazon has used a “set of interlocking anticompetitive and unfair strategies” to create a powerful monopoly.
“The FTC’s Amazon case and the DOJ’s Google case are more ambitious in that regard,” Smith continued.