Amazon Walks Back (Crazy) New Fee on Sellers Not Paying for Amazon Logistics

Report from Bloomberg

In Brief – Just a month after announcing that third-party sellers will be charged a new 2% fee if they fulfill orders themselves as part of Amazon’s Seller Fulfilled Prime (SFP) program, the ecommerce and logistics giant has announced that they are abandoning the fee increase due to negative seller reaction. On the Amazon Marketplace, most sales involve products that qualify for “Prime” designation, including sales by third-party sellers. Most Prime products are stored, picked, packed, and shipped by Amazon’s Fulfilment By Amazon (FBA) logistics system. In 2015, the company created a limited SFP program to allow third-party sellers to use alternative logistics services and still qualify for Prime. However, in 2019 entrance into SFP was suspended, pushing all new Prime-eligible sellers into FBA. Amazon announced this summer that SFP was selectively reopening but it reportedly remains difficult to join.

Context – Amazon announced the fee increase on sellers who do not use FBA at the same time the Federal Trade Commission was wrapping up work on what is expected to be a major antitrust complaint. The move was seen by industry experts as a finger in the FTC's eye. Jason Boyce, an online sales advisor, said the new SFP fee “shows Amazon is not scared at all.” Now? It's out-of-date thinking to see Amazon as a low-price online retailer trading profits for market share. Smart analysts now focus on how Amazon's third-party marketplace pushes sellers to use its massive FBA logistics service and advertise on Amazon. When all those fees are calculated, sellers on Amazon now often pay 50% in fees. It’s become their top antitrust problem. In the EU, Amazon offered to change practices that push sellers into FBA to settle a major antitrust complaint, and they are offering similar changes to address antitrust concerns in the UK. Whether they do the same in the US remains to be seen. Amazon is also widely accused of using “dark patterns” to nudge consumers to not cancel Prime. They have changed practices in Europe on that issue, but not yet in the US, where they still face an FTC complaint.

X Sues to Block California’s Social Media Content Moderation Law

Report from Reuters

In Brief – X Corp, formerly known as Twitter, has sued the State of California in federal court to block the enforcement of AB 587, a state law enacted last year imposing transparency rules on large social media companies detailing how they address a range of objectionable content. The law requires covered platforms to have detailed public content moderation policies and report twice a year on the numbers of objectionable posts and how they were addressed. Categories of content listed in the legislation include hate speech, racism, extremism, radicalization, disinformation, misinformation, harassment, and foreign political interference. In its legal complaint, X argues that the law’s "true intent" is to pressure platforms to more aggressively act against content that the government finds objectionable, violating the First Amendment, Dormant Commerce Clause, and federal preemption under Sec. 230 of the CDA, and is asking for a preliminary and permanent injunction.

Context – California enacted its social media transparency law following social media regulation being passed in Florida, Texas, and New York. Each state is effectively controlled by one political party. Republican-led Florida and Texas acted first, enacting laws in 2021 to combat alleged Big Tech “viewpoint” discrimination, a top conservative concern. Democrat-led New York and California followed with laws pushing platforms to better police hate speech and harassment. Trade groups representing the largest digital platforms challenged the laws in Florida and Texas. Florida’s law was blocked in the US Eleventh Circuit while Texas’s law was upheld in the US Fifth Circuit, although it was later enjoined by the US Supreme Court. Backers of aggressive content moderation have criticized X (formerly Twitter) since progressive critic Elon Musk took over the platform, so X’s willingness to take on the California law seems true to form. Many expect the High Court to take up the issue next year, encouraged by the Biden Administration Solicitor General to step in to preserve platform First Amendment rights.

UK Parliament Finally Passes the Online Safety Bill

Report from the BBC

In Brief – The Online Safety Bill (OSB), which began its long and winding journey in 2017 with a promise to make the UK “the safest place in the world to be online”, has cleared its final parliamentary hurdle and will become law. Over the years, the plans were expanded from the starting point of combatting child sexual material and terrorism advocacy to cover more and more types of bad content, culminating with platforms mandated to combat “legal but objectionable” material. Under fire for threatening free speech, the OSB was trimmed back last fall and refocused somewhat on harms to younger users. The legislation's final list of content that platforms will need processes to control, overseen by regulator Ofcom, includes child sexual abuse, controlling or coercive behavior, extreme sexual violence, people smuggling, promoting or facilitating suicide and self-harm, animal cruelty, selling illegal drugs or weapons, and terrorism. The prospect that Ofcom would require messaging apps to have the capability to scan user communications to detect prohibited content, effectively outlawing end-to-end encryption, had led leading messaging app providers including WhatsApp and Signal to threaten to leave the market. The government defused the standoff by saying that Ofcom would not consider doing so until scanning messages could be done while still protecting privacy, something they admitted was not yet technically possible.

Context – The travails of the OSB highlights the UK’s schizophrenic digital policies pairing regulatory intervention with aspirations to be a pro-innovation alternative to the EU. Along with the high-profile encryption battle, the OSB threatens jail time for corporate executives when their companies fail to appropriately police CSAM and creates an age-gating requirement that draws the ire of platforms like Wikipedia. The UK Digital Markets, Competition and Consumers bill largely parallels the EU Digital Markets Act, and the UK competition regulator has proven particularly aggressive on tech acquisitions. Finally, the OSB comes on line after the EU Digital Services Act, adding potentially conflicting compliance measures to meet similar goals.

Microsoft’s Offer to Unbundle Teams in EU Not Likely to Resolve Antitrust Case

Report from Bloomberg

In Brief – A formal antitrust complaint from the European Commission competition authority accusing Microsoft of anticompetitive practices in bundling its Teams videoconferencing and messaging service into the Microsoft Office 365 software package remains likely despite Microsoft’s efforts to placate concerns. The Commission, which has received complaints from competitors stretching back to Slack’s in 2020, opened a formal investigation in July. The digital giant is said to have offered regulators a range of concessions to resolve the investigation in talks throughout the year. Despite the lack of agreement, Microsoft announced at the end of August that it would make unilateral changes for some users of Office 365 in the EU and Switzerland on October 1, including no longer requiring business customers of Office 365 to have Microsoft Teams automatically installed on their devices and reducing the price of Office 365 when Teams was not included. However, critics contend that the Microsoft offer covers too narrow a range of EU-based customers and the proposed price differential for the Office-Teams bundle is far too small.

Context – Microsoft's regulatory good behavior campaign and a string of Activision videogame licensing deals appear to have been key to winning over the European Commission on its massive acquisition and delivering what increasingly looks like a win. But the digital giant is now needing to manage a collection of other competition policy issues in Europe and the Commission might be interested in proving its toughness. Along with the Teams investigation, there are complaints from some European cloud services providers that Microsoft uses software licensing to pull EU customers to its cloud infrastructure, and a NextCloud complaint that Microsoft unfairly bundles its OneDrive cloud system with Windows. Microsoft’s Windows PC operating system and LinkedIn have been designated gatekeeper core platforms under the Digital Markets Act regulatory scheme, and the Commission is studying adding Microsoft’s Bing, Edge, and the Microsoft Advertising Platform as well.