In a significant ruling on 27 March 2024, Amazon found itself on the losing end of a legal tussle with the European Commission (Commission) regarding its transparency obligations under the EU’s Digital Services Act (‘DSA’). The DSA is a world-leading and far-reaching digital law which seeks to create a safer and more open digital environment – it applies to certain digital service providers who provide “intermediary services” to recipients who are located/established in the EU, irrespective of where the provider is located.  For further information on the DSA click here. 

In this ruling, the Court of Justice of the European Union (CJEU) overturned a decision by the General Court of the European Union (GCEU), which had temporarily halted the requirement for the tech behemoth to comply with its online advertising transparency obligations under the DSA.

Background

On 23 April 2023, pursuant to its many powers under the DSA, the Commission designated Amazon Store as a so-called ‘Very Large Online Platform’ (VLOP – i.e. a platform with at least 45 million average monthly active recipients). This designation had myriad implications for Amazon because VLOPs are subject to the most onerous DSA obligations, given their potential reach and influence. The VLOP rules have applied to Amazon’s marketplace since 25 August 2023. One such rule requires Amazon to provide detailed information about its online advertising in a publicly accessible repository on its interface (pursuant to Article 26 of the DSA). 

On 27 September 2023, Amazon contested its designation as a VLOP, prompting the President of the GCEU to grant a partial stay on the implementation of an online advertising database  until the matter was resolved. In response, the Commission lodged an appeal against the suspension order in the CJEU. Notably, Amazon failed to convince the GCEU to suspend other measures that apply to its recommender systems under Article 38 of the DSA, which require it to provide at least one option for each of its systems that is not based on profiling. 

Decision Reversal

The CJEU has now overturned the partial stay, reversing the temporary suspension citing that the Commission was denied the chance to comment on its arguments during proceedings in the lower court “in breach of the principle that the parties should be heard”. In a statement, the CJEU underscored the importance of avoiding delays in achieving the objectives of the DSA and highlighted the pivotal role of large platforms in the online environment. In its judgment, the CJEU prioritised the interests safeguarded by the EU legislature over Amazon's material concerns, leading to the ultimate rejection of the suspension request. This decision is a win for transparency (one of the DSA’s key objectives) and will require Amazon to be more open about its advertising practices.

Amazon's Response

In response to the CJEU's decision, an Amazon spokesperson expressed disappointment, maintaining that Amazon “does not fit the criteria of a VLOP as defined in the DSA”. Nevertheless, Amazon reiterated its commitment to prioritising customer safety and affirmed its cooperation with the Commission regarding its obligations under the DSA. Amazon’s legal challenge to the Commission’s designation of its marketplace as a VLOP under the DSA continues. However, its compliance with the full remit of the DSA obligations for VLOPs will be expected in the interim. As is true for all VLOPs, failure to comply with the DSA obligations could result in investigations and hefty fines of up to 6% of total global annual turnover if breaches of the DSA obligations occur. 

The legal issues between Amazon and the Commission underscore the ongoing struggle to balance regulatory compliance with corporate interests, setting a precedent for how tech giants should navigate emerging transparency requirements in the ever-evolving regulatory landscape. The Commission has opened investigations into a number of VLOPs and has issued formal proceedings against one to date, illustrating its intention to fully exercise its far-reaching investigative and sanctioning powers under the DSA. We expect more DSA related developments in coming months, so watch this space.

If you have any questions regarding the DSA such as whether you are in scope and if so, what you need to do to ensure compliance, please contact Mary Traynor or Bryony Long.