Unpacking Amazon’s legal challenge to its Digital Services Act designation

A summary of its pleadings to the EU General Court, seen by Pinsent Masons, suggests it believes the designation, confirmed by the European Commission in April, is discriminatory.

However, a statement issued by a spokesperson for the company suggests more fundamental, technical questions about the scope of the DSA and the business models it addresses could be raised by the case.

The DSA in brief

The DSA was finalised by EU law makers last year. It builds on existing provisions of EU law under the E-Commerce Directive, which governs what online intermediaries need to do currently when they become aware of the existence of illegal activity on their services.

When it begins to take effect, a new tiered system of regulation will apply, with obligations of varying stringency depending on the nature and size of the ‘intermediary services’ provided. The strictest requirements apply to VLOPs and ‘very large online search engines’ (VLOSEs) and include an obligation to identify, and then address, systemic risks associated with their services. The obligations on VLOPs take effect from 25 August 2023.

Amazon’s pleadings

The main argument Amazon has raised in its pleadings is that the European Commission’s designation of Amazon Store as a VLOP “is based on a discriminatory criterion and disproportionately violates the principle of equal treatment and the applicant's fundamental rights”.

A similar legal challenge was raised by Berlin-based online fashion retailer Zalando last month.

If Amazon is not successful in completely annulling the Commission designation in respect of Amazon Store, it has alternatively asked the General Court to disapply specific obligations that would apply to the service as a VLOP under Articles 38 and 39 of the DSA.

Article 38 of the DSA stipulates that VLOPs that use “recommender systems” – essentially, means of ordering the information displayed to users – must “provide at least one option for each of their recommender systems which is not based on profiling”.

Article 39 requires VLOPs that present adverts on their online interfaces to compile a repository of information pertaining to the adverts presented and make that information accessible and searchable by users via that interface. The information to be provided is specified in Article 39 and includes the name of the product, service or brand and subject matter of the ad, the name of the organisation behind the ad, the name of the organisation that paid for the ad, when the ad was displayed, and whether the ad was targeted at specific groups – and the main parameters for determining, or excluding people from, the group. The information is to be available from the point the ads are presented to until one year has passed after they were last presented on the interface.

Amazon’s public statement

While the summary of Amazon’s pleadings focuses on claims of discriminatory treatment, its statement to the media suggests it could pursue more fundamental arguments about its designation as a VLOP before the General Court

An Amazon spokesperson said: “The DSA was designed to address systemic risks posed by very large companies with advertising as their primary revenue and that distribute speech and information. 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.”

“The vast majority of our revenue comes from our retail business, we are 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,” they added.

How the case may evolve

Amazon appears to being suggesting that the business model it operates with Amazon Store should be distinguished from the type of VLOP that the DSA’s provisions are targeted at. In that regard, it appears to be emphasising that its revenue comes from selling goods and not from disseminating information to the public and that the DSA’s provisions are aimed at social media platforms and not retail platforms.

To succeed with that argument, Amazon would need to demonstrate that it does not fall within the definition of ‘online platform’ under the DSA – VLOPs are simply online platforms that have a number of average monthly active recipients for their service in the EU that is “equal to or higher than 45 million”, calculated as an average over a period of six months, and designated as such by the European Commission under the process set out in the DSA.

For the purposes of the DSA, an ‘online platform’ means a hosting service that, at the request of a recipient of the service, stores and disseminates information to the public, unless that activity is a minor and purely ancillary feature of another service or a minor functionality of the principal service and, for objective and technical reasons, cannot be used without that other service, and the integration of the feature or functionality into the other service is not a means to circumvent the applicability of the DSA.

The concept of online platform under the DSA is agnostic as to the type of underlying hosting service provided, meaning it is possible to envisage application of the provisions to retail platforms. Amazon may, however, consider that the storing and disseminating of information with Amazon Store is a ‘minor functionality’ of its service and pursue such arguments before the General Court.

Online platforms were obliged to self-assess whether they fell within the scope of the VLOP or VLOSE provisions under the DSA by mid-February this year. While the European Commission subsequently designated 17 VLOPs and two VLOSEs in April, we do expect it will be scrutinising other platforms’ negative assessments and could make further designations in due course – a course of action that could address claims of discriminatory treatment, such as those raised by Amazon and Zalando.