The Associated Press reports that Amazon has been ordered by Mexico’s Federal Commission on Economic Competition (COFECE) to reveal its algorithms and inform vendors on the platform “of all the variables and factors that are taken into consideration in selecting promoted items, to encourage certainty and transparency.”
In addition, COFECE is ordering Amazon to “wall off” its Amazon Prime Video streaming service from its e-commerce offerings and no longer use it as a method of attracting customers to its Prime membership offering. “They (streaming services) are an artificial strategy that attracts and retains customers, while at the same time reducing the likelihood that vendors and buyers will use alternative marketplaces,” the commission said. “They also increase the cost of competition entering the market.”
The AP writes that “COFECE also ordered Amazon not to take the “logistics” method — the manner of delivering purchases — into account in determining the order or prominence of search results.”
The findings from COFECE also apply to Uruguay-based firm Mercado Libre, described as Latin America’s largest online retailer. COFECE says that the new regulations are appropriate since Amazon and Mercado Libre together control 85 percent of online sales in Mexico.
The AP writes that “the companies will be given three months, with a possible extension of another three months, to implement the requested changes to delivery practices and publication of the algorithms.
“Online sellers have complained in the past that Amazon Prime forces vendors to use the company’s own delivery services.
“Amazon has pushed back against allegations it conditions Prime status — which denotes fast shipping — on whether sellers use its fulfillment service, Fulfillment by Amazon.
“‘We are aware of this preliminary report and are closely collaborating with COFECE,’ Amazon said in a statement. ‘Our pro-competitive practices in Mexico spur competition and innovation across the retail industry, and have produced greater selection, lower prices, and faster delivery speeds for customers and greater opportunities for sellers across the country’.”
KC’s View:
Seems pretty clear that Amazon’s definition of “pro-competitive practices” isn’t the same as the criteria being applied by COFECE.
One does sort of get the sense that Amazon’s business model is sort of like a big Jenga game, with pieces being removed, and sometimes moved around, in ways that could, over time, threaten the stability of the whole enterprise.
I don’t think that Amazon is going away. But I do think that leadership has to consider ways in which it may need to adjust its business model to compensate for a broad regulatory climate in which its methods are being challenged.
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