Japan’s competition regulator has approved a plan by Amazon Japan to make the lowest-priced available offer visible on a product page when none of the sellers qualifies for the site’s prominent featured position.
Under the plan, the company will show shoppers the available offer with the lowest combined product price and delivery charge, together with a way to proceed to purchase. The change applies where no featured offer appears because no seller meets the platform’s price condition.
The Japan Fair Trade Commission approved the commitment on 11 November after investigating the company’s pricing practices. It said the approval was not a finding that Amazon Japan had violated competition law.
How the featured position works
On Amazon’s Japanese store, multiple sellers can offer the same product through one product-detail page. Usually, one eligible seller’s offer is displayed prominently alongside purchase buttons. Other offers can be viewed on a separate page.
The regulator said a seller currently needs to price a product at or below a benchmark described as the competitive price to be eligible for that featured position. Amazon selects from eligible offers using other factors, including delivery conditions. Meeting the price condition therefore does not guarantee that a particular seller will be selected.
The commission defines the benchmark as the lowest selling price for the same product at a number of other online stores that Amazon considers alternatives for shoppers. For that comparison, the selling price includes any delivery charge and subtracts the value of points awarded on purchase.
When no offer meets the price condition, the product page does not display an offer as featured. In that situation, even the lowest-priced available offer on Amazon’s store is not shown on the main product page, although shoppers can find offers on a separate page.
The commission estimates that most purchases on the store are made through a featured offer without customers opening the separate list. It considers that the importance of the prominent position could leave sellers with little choice but to meet the benchmark, potentially restricting their freedom to set prices.
A fallback display
The approved measure addresses the situation in which no offer qualifies because none is at or below the benchmark. In that case, the product page will display the price, delivery conditions, shipper and seller for the lowest-priced available offer, with an entry point for the customer to buy it.
For this fallback display, the comparison is the product price plus any delivery charge. This is not identical to the commission’s definition of the existing competitive-price benchmark, which also takes account of points. The plan does not say that every offer will become the featured offer, or that the fallback applies when a featured offer is already displayed.
Amazon Japan will also inform sellers and consumers about the display through help pages and other means. Sellers are to be notified of the measures, and relevant employees informed. The display measure is to remain in place for five years from the date it begins operating; the regulator’s published summary does not specify that start date.
A third party approved by the commission will monitor implementation and report to the regulator. Annual reports during the five-year period will cover the display measure, as well as training and audits. The plan also calls for a compliance code concerning sellers’ prices, periodic staff training and audits by the company’s legal personnel.
Why the regulator intervened
The commission dates Amazon Japan’s introduction of the algorithm-based eligibility mechanism to September 2019. Its competition assessment is that the system could affect not only sellers but also competing online shops. The regulator considers that a rival’s promotions or lower charges might be less effective if Amazon sellers responded to the benchmark by lowering their own prices.
Those are the regulator’s competition concerns, not a finding that a violation occurred. The commission notified Amazon Japan of the commitment procedure on 4 November. It approved the subsequent plan, considering the measures sufficient and their implementation reliable.
The commission may rescind approval and resume its earlier investigation if, for example, it determines that the measures are not being carried out in accordance with the plan. Amazon Japan undertook to work to improve transparency and provide shoppers with information for their choices, while continuing discussions with the regulator.
