Commercial Awareness Update – W/C 14th November 2022

The A-Z of Amazon’s Competition Law Controversy

Overview

Amazon – a shopper’s paradise.

With endless items on offer, we are certainly spoilt for choice. Its origins lie within a bookselling company which transpired into what we know now as a pillar for the e-commerce world.

It is no surprise that it is the world’s leading e-commerce company. From air fryers to zip ties, Amazon has it all. Amazon’s next-day delivery, coupled with its vast range of selections, exemplifies why the company has such excellent customer service.

The safety features and sense of security underpinning the website are indicative of its customer retention rates. With limited areas for scams and dishonest behaviour, the website is cemented on reliability and trust.

However, what happens if Amazon’s primary objective of customer satisfaction is replaced with an exclusive goal – lucrative investments?

Amazon has wrapped itself around a potential lawsuit concerning its ‘self-favouring’ algorithm that unfairly eliminates the company’s competition.

The ‘compensation culture’

In brief, the compensation culture alludes to this idea that a buyer automatically assumes they can sue and be compensated for the most trivial matters. Companies’ reluctance to provide compensation for these nugatory issues stems from their anxiety that it will erode their reputation.

Do Amazon consumers feed into this idea of the compensation culture?

86 per cent of shoppers in the UK use Amazon. Yet, Amazon currently stands in an awkward position with its customers. Amazon shoppers in the UK could receive a share of £900 million in compensation once a legal claim is submitted. It is said that the company breached competition law and caused customers to pay higher prices.

Do these claims have legitimate legal grounds?

Arguably, the company’s easy-to-navigate website conceals its hidden agenda – profit, profit and more profit. More than 80 per cent of purchases on the site are made through the featured offers in the “buy box”.

It is alleged that independent sellers are excluded from this buy box, even when they offer the same product cheaper or on better terms. It is found that if the claim succeeds, Amazon would be breaching section 18 of the UK Competition Act 1998 and Article 102 of the Treaty on the Functioning of the European Union. Competition law, in a nutshell, offers a platform of fairness that maintains market competition.

The manipulation exhibited through Amazon’s website’s self-favouring algorithm illustrates its systematic approach that jeopardises Amazon’s well-known motto, ‘low prices and fast delivery.’

In response, legal action is filed in the Competition Appeal Tribunal in London, where consumers will seek damages.

Amazon’s previous investigations

Has Amazon’s fast-paced service lost its momentum? In hindsight, it is apparent that this is not Amazon’s first scandal. Nevertheless, previous investigations undertaken by the European Commission reveal that Amazon is also under two formal antitrust investigations.

In November 2020, the investigators evaluated the same alleged ‘self-referencing’ by Amazon. The commission’s preliminary finding revealed that the buy box favoured Amazon’s retail business. Is Amazon’s disregard for these findings to blame, or is it a result of the law?

Yet, this seems to be a pattern that follows Amazon globally. For example, in December 2021, Italy’s competition regulator concluded that Amazon had abused its dominant position once again. Similarly, in the United States in December 2021, the House Judiciary Subcommittee on Antitrust concluded that Amazon’s online retail dominance gives it monopoly power over third-party sellers on its US marketplace and effectively precludes retailers who have not purchased its logistics services from “winning the Buy Box”.

A legal response

This repetitive trend raises questions as to the authorities governing competition law. We are left to consider what law firms should do to regulate these arising issues. Law firms, like Amazon, are businesses.

Their primary function is to generate profit to ensure stability and continuity in providing legal advice that creates a positive rippling effect in society. Hence, law firms understand the importance of generating success measured through profit.

Nonetheless, firms must act when companies go beyond this expected standard. Lawyers look at competition law domestically and within the EU legislation to prevent anti-competitive behaviour in the market. It generates honest competition designed to ensure the market is fair for consumers and producers.

Objectively, in correspondence to the facts mentioned earlier, lawyers have found an imbalance of power between Amazon and its consumers. Lawyers prosecuting Amazon argued that this imbalance meant that consumers were paid too much and denied choice. The only remedy is to compensate them financially. The answer to who is right and wrong is blurred.

In conclusion, Amazon’s slipping reputation for its excellent customer service has been hindered by these speculations of unfair behaviour. The decision in the Competition Appeal Tribunal will remedy all that has been discussed in hopes of providing clarity.

Article written by Shruti Viththiananthan 

The Lawtech Boom

Investment in the UK lawtech market has increased by a staggering 101% in the past three years. The fintech market has only grown by 21%, and the climatetech industry has expanded by a mere 5%. What is so attractive about lawtech, and where does it go from here?

Rapid rise

We know from our History of Law modules that legal systems are nothing new. Originating in Ancient Greece and Rome, lawyers (iuris consulti) could practice openly, although their remuneration was limited.

Long-standing traditions mean standardised practices. The legal profession has taken its time to modernise and reform. That being said, the lawtech revolution is taking the profession by storm and is making up for years of stagnation.

Examples of lawtech

Which problems does lawtech solve? Who develops this technology? Chris Ireland explains this in a very insightful article.

Lawtech makes law firms more efficient. Lawyers use solutions such as Contract Express or Avvoka for document automation. Online data room services such as HighQ Collaborate or Ruby Datum make file sharing between law firms and clients easier.

Larger law firms have technology departments to enhance their offering. DLA Piper has Law&, a specific function of the firm that develops technology inspired by the real issues lawyers face. These solutions are often built in conjunction with a software developer; most firms can create the solutions using code or no-code platforms.

Recent activity

In April 2022, LawtechUK received a £4m grant in funding from the UK government to develop legal technology, which shows just how supportive the government is of reforming the legal sector.

Over in the venture capital world, Thirdfort, a London-based lawtech, recently raised a £15m Series A. The company has grown from nothing to 700 clients in three years. It supplies an ‘onboarding’ app for verifying clients’ identities.

What is next?

Sifted predicts that in four years, the industry will be worth between £5.3bn – £6.7bn, which is remarkable given the sector hardly existed five years ago. It will be interesting to see whether investors direct funds towards lawtech in light of the ‘fintech winter’.

Article written by Avishai Marcus

Layoffs At Meta: The End Of The Metaverse?

Overview

As Meta recently announced it would cut 11,000 jobs, this article discusses the impact this could have on Zuckerberg’s new project: the Metaverse. The Metaverse is in its initial stages, a three-dimensional virtual reality which can be used by billions of users at any one time to shop, work, play and meet.

Why the dismissals?

On the 9^th of November, Meta’s CEO, Mark Zuckerberg, announced it would cut 13% of its workforce due ‘macroeconomic downturn’ and ‘increased competition’ that caused Meta’s revenue to be much lower than expected.

In a statement, Zuckerberg cited that long-term growth based on the rise in e-commerce during the pandemic has not been as permeant as predicted. The large-scale culling of staff comes after £69bn was wiped off its market value in October. Many commentators predict this is due to Zuckerberg ploughing vast amounts of time and money into the Metaverse.

Meta’s shareholder Altimeter Capital Management said in an open letter to Zuckerberg, ‘Meta had lost investor confidence as it ramped up spending and investment into the Metaverse’.

In response, Zuckerberg commented, ‘in 2023, we’re going to focus our investments on a small number of high-priority growth areas, so that means some teams will grow meaningfully, but most other teams will stay flat or shrink over the next year.’ Zuckerberg further commented, ‘we expect to end 2023 as either roughly the same size or even a slightly smaller organization than today’. Many reporters have noted that this could be a clear sign that Zuckerberg is overinvesting, and investors are not agreeing. Perhaps not everyone can see the potential in the Metaverse as Zuckerberg can.

Although the Metaverse has been dubbed to completely overhaul the tech world as we know it, for many, it is a risky project, and it is clear this is having a considerable impact on Meta.

Last month the company was valued at $270bn, compared to the previous year at $1tn. It is also worth noting large-scale layoffs could also be due to the privacy changes introduced by Apple. Meta is expected to lose $10bn in advert revenues due to the changes that allow users to opt out of Meta being able to track users across apps.

Broader implications of the issues

There are,e, many legal implications when dealing with ground-breaking new technologies. Many law firms have highlighted the number of legal consequences Meta will be juggling, thus contributing to its revenue decline.

Trademark and Intellectual Property lawyers are increasingly commenting on how trademark dilution could occur in the Metaverse. If this is the case, should digital assets qualify as ‘goods’ for the purpose of trademark laws and who would be held to account when metaverse users can remain anonymous? Evidently, these are vital legal questions that will need answering as the Metaverse grows.

A key example of this is in January 2022, when Hermès sued a Non-Fungible Token creator for creating digit assets called ‘Metabirkins’ for trademark infringement.

The ‘Metabirkin’ was a line of assets duplicating the exclusive range of Birkin bags created by Hermes, a clear breach of intellectual property law.

The Metaverse has been estimated to be worth a staggering $8 trillion revenue opportunity. In light of this, over the past few years, there has been an enormous push from stakeholders across the tech industry to cultivate their metaverse strategy. Major tech companies are increasingly developing their metaverse exploration and will continue to do so through mergers and acquisitions (M&A).

Some legal commentators have predicted this will occur mainly in the gaming sector. For example, in January 2022, Sony announced a $3.2 billion deal for a video game company, Bungie. Since 2014 Meta has acquired four virtual reality companies, including the well-known Oculus. These acquisitions from Meta are expected to become more frequent as part of their $10 billion a year investment.

The proposed interconnectedness of the Metaverse will undoubtedly have substantial M&A implications, as large companies like Meta and Sony target pivotal gaming businesses that have been developing the technology required for a while.

To conclude, the jury is clearly out on the Metaverse. Whether the Metaverse will flourish over the next few years or whether it will take decades to develop is still unknown. What is known is the apprehension of stakeholders and Zuckerberg’s strong dedication to creating the Metaverse has had a huge impact on its employee relations.

Article written by Maddy Preedy