The Italian Competition Authority today issued a fine of €1.128 billion, or about $1.27 billion, to Amazon.com Inc. after finding that some of the company’s business practices harmed rivals. 

The Italian Competition Authority, or AGCM, has also ordered Amazon to implement a number of business changes. The company pushed back against the regulator’s decision in a statement today, describing the proposed fine and changes as “unjustified and disproportionate.”

At the heart of a matter is a service called Fulfillment by Amazon, commonly known as FBA, that the online retail giant offers to third-party merchants who sell products through its e-commerce platform. FBA allows third-party merchants to use Amazon’s logistics network to deliver products to customers. 

According to the AGCM, Amazon has abused its dominant position in the e-commerce market to boost the adoption of the FBA logistics service unfairly. In the process, the regulator said, the company has harmed competing e-commerce logistics providers.

The methods through which Amazon was found to have unfairly boosted FBA involve its Prime subscription program. Prime, which has more than 200 million members worldwide, gives users access to additional features and offers on Amazon. 

Because Prime has so many members, it’s important for third-party merchants selling goods through Amazon. 

According to the AGCM, “Amazon prevents third-party sellers from associating the Prime label with offers not managed with FBA.” As a result, third-party merchants who don’t use the FBA logistics service to ship products to consumers have more limited opportunities to promote their goods than companies that do. In contrast, third-party merchants who do have access to Prime gain the ability to participate in Amazon’s Black Friday, Cyber Monday and Prime Day promotional events, which can help them generate additional revenue.

Another factor behind the AGCM’s decision to fine Amazon is the online retail giant’s Buy Box feature. The Buy Box is a panel that appears next to Amazon product listings. It allows customers to make a purchase quickly using a convenient “Buy Now” button.

A third-party merchant whose product is featured in the Buy Box can potentially receive a significant sales boost. The AGCM determined that third-party merchants have a higher chance of getting their products featured in the Buy Box if they use Amazon’s FBA logistics service.

Another area of concern identified by the AGCM is the way Amazon measures third-party merchants’ e-commerce performance. “Third-party sellers using FBA are not subject to the stringent performance indicators that Amazon applies to monitor the non-FBA sellers’ performance,” the regulator stated today.

In addition to issuing a $1.27 billion fine, the AGCM has ordered Amazon to change some of its business practices. “Amazon will have to grant sales benefits and visibility on Amazon.it to all third-party sellers which are able to comply with fair and non-discriminatory standards for the fulfillment of their orders,” the regulator stated.

The sales and marketing benefits Amazon has been ordered to provide must be “in line with the level of service that Amazon intends to guarantee to Prime consumers.” Furthermore, the company is required to publish the standards that third-party merchants need to meet to qualify for the sales and marketing benefits. 

“We strongly disagree with the decision of the Italian Competition Authority (ICA) and we will appeal,” Amazon said in a statement to TechCrunch today. “The proposed fine and remedies are unjustified and disproportionate.”

“More than half of all annual sales on Amazon in Italy come from SMBs, and their success is at the heart of our business model,” Amazon added. “Small and medium-sized businesses have multiple channels to sell their products both online and offline: Amazon is just one of those options. We constantly invest to support the growth of the 18,000 Italian SMBs that sell on Amazon, and we provide multiple tools to our sellers, including those who manage shipments themselves.” 

Photo: Amazon