Amazon Sues European Commission Over VLOP Designation
Amazon follows Zalando in challenging the designation, further adding to the woes of European authorities.
By Zsuzsa Detrekoi
According to the EU’s Digital Services Act, the EU has implemented new regulations on transparent advertising, illegal content, and disinformation that are going to affect tech companies, especially the large ones, which are classified as VLOP if they have over 45 million average monthly active users in Europe. The targeted companies were required to report their user numbers by February 2023. Based on the reported data, the Commission published a list of VLOPs and Very Large Online Search Engines last April. This list included 19 companies such as Facebook, Google, Instagram, and TikTok.
As a VLOP, tech companies are required to comply with specific rules to address the risks associated with the dissemination of illegal content and potential societal harms. These rules include risk management obligations, risk mitigation measures, crisis response mechanisms, an independent audit system, and ensuring that users do not receive recommendations based on profiling. Additionally, tech companies must fulfill additional requirements for online advertisement transparency. The deadline for compliance with these rules is August 25, 2023. Failure to comply can result in a penalty of up to 6% of the company’s annual income, which is a very steep fine.
Amazon is contesting the designation claiming that the company has been unfairly “singled out”: “We agree with the EC’s objective and are committed to protecting customers from illegal products and content, but Amazon doesn’t fit this description of a ‘Very Large Online Platform’ (VLOP) under the DSA and therefore should not be designated as such.”
Amazon alleges that the designation of the company as VLOP was based on a discriminatory criterion used in the EU regulation against a US-based company, disproportionately violating the principle of equal treatment and the company’s fundamental rights. Amazon also challenges the DSA’s obligation to provide at least one option for the recommender system that is not based on profiling, as well as the advertising transparency requirement, as discriminatory. According to the company, Amazon is “not the largest retailer in any of the EU countries where we operate, and none of these largest retailers in each European country has been designated as a VLOP. If the VLOP designation were to be applied to Amazon and not to other large retailers across the EU, Amazon would be unfairly singled out and forced to meet onerous administrative obligations that don’t benefit EU consumers.”
Amazon most likely referred to the Polish-owned Allegro and Bol.com from the Netherlands; however, neither of them seemed to cross the 45 million users’ threshold.
The DSA draws the limit between online platforms and very large online platforms based on the numbers of visitors that the companies must report to the Commission periodically. Both Amazon and Zalando initially reported to the Commission that their average monthly active recipients of the service exceeded 45 million. When filing the company’s claim, Zalando’s CEO, Robert Gentz revealed that the company boasts a user base of around 31 million from direct sales, hence using the number of its visitors as a key argument in suing the Commission. Separately, Amazon built its case on a discrimination claim.
To avoid the August 25 deadline, Amazon has asked the court to suspend the designation under an “interim measure” order, which is a quick decision from a lower-tier court. However, in order to obtain the suspension, the company must prove that they have a reasonable appeal “at first sight” and that the case is urgent, which means that they would suffer “serious and irreparable harm” without the suspension. The court must balance the parties’ interests and the public interest. If the interim measure is not provided, the company will have to comply with the specific requirements for VLOPs and will face a lengthy lawsuit with the Commission.
The 45 million limit appears to be clear, but it proves challenging for companies to comply with, although the Commission has an option to set up a methodology for calculating the number of average monthly active recipients. While the chances of Amazon winning its case in court are slim, if the company prevails, it would deal a blow to the EU’s attempt to regulate the internet.
Zsuzsa Detrekoi is a technology and law expert with the Media and Journalism Research Center.
