Amazon has scored an early (partial) victory in a court challenge over the European Union’s designation of its e-commerce marketplace as subject to the strictest level of regulation under the bloc’s recently rebooted digital rulebook, the Digital Services Act (DSA).
Today the General Court of the European Union to rule to its advantage by agreeing to suspend a requirement under the DSA that Amazon must make its ad library public.
However, the court did not agree to suspend a separate DSA requirement on Amazon to provide store users with the option of not profiling the recommendations it serves.
Back in April, Amazon Store was one of 19 platforms listed as being subject to the strictest levels of regulation under the DSA which seeks to apply a greater degree of transparency and accountability to larger platforms and their algorithms.
The e-commerce giant quickly challenged its classification as a VLOP (aka Very Large Online Platform). It has also applied for interim measures to suspend some requirements under the regulation pending a decision on the broader legal challenge.
Regarding the ad library issue, Amazon’s lawyers argued that the requirement to publish the ad archive would lead to the disclosure of confidential information that would cause “serious and irreparable harm to its advertising activities and, by extension, to all of its activities,” according to the ruling.
The company also claimed that disclosing the advertising information would weaken its competitive position and cause an irreversible loss of market share, as well as harm its advertising partners.
The General Court agreed that Amazon had demonstrated that publishing the information, before deciding whether to challenge VLOP status, could cause it serious and irreparable business harm – although this was on the assumption that the advertising information in question was already confidential (the Commission’s lawyers had agreed It, on the contrary, suggested that most of the data the DSA requires to be collected in the ad library is already public).
The judge who heard Amazon’s request for interim measures did not delve into this and was operating on the basis that the information was confidential. (But the ruling also notes that “at the very least, prima facie, some of the information that the applicant is required to publish in its advertising repository has not yet been made available to the public,” noting that the main proceeding will consider this issue in more detail. )
According to the ruling, Amazon is amassing an advertising library — and may yet be required to put the data online if its broader legal challenge to the Commission’s VLOP classification fails.
With respect to recommendation systems, where Amazon was unsuccessful in its request for interim measures, its lawyers again sought to argue that a DSA obligation on VLOPs to provide opt-outs to users of profiling-based recommendations would result in a significant and irreversible loss of market share – Causing serious and irreparable damage.
The e-commerce giant argued that without the ability to personalize the products users see, it would face significant hurdles in meeting customer expectations – suggesting this could lead to a poor shopping experience for users who may not be aware of the effects of opting out of profile-based recommendations.
Amazon also suggested that offering an off switch to this type of personalization would hurt third-party sellers who use its marketplace to reach customers.
However, the tech giant was unable to quantify the level of damage claimed for its business – providing only a rough estimate of the negative impact of opting out of the recommendation system which it suggested could fall in a range between $500 million and $3.8 billion.
In the ruling, the court notes that the DSA does not require any profile-based recommendation systems, but merely give users the option to opt out — while also noting that Amazon remains free to inform users of the effects such choices may have on their experience of its platform.
It also expresses doubts about Amazon’s assertion that having an opt-out option would reduce usage of its store, as customers could choose to turn on profiling recommendations again.
Given the level of uncertainty about the impacts here, the court did not find that Amazon had demonstrated irreparable harm to the legal standard required to grant interim measures—and declined to suspend this per diem requirement.
Amazon’s broader challenge to being designated as a VLOP under the regulation continues.