Munich Regional Court issues preliminary injunction against Amazon: Abuse of market power through unjustified account blocking
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In a preliminary injunction dated 14 January 2021, the Regional Court of Munich I ruled that Amazon must immediately lift the block on a seller account and immediately release any existing credit balance withheld from the account.
Following an oral hearing, the Regional Court revoked the injunction on appeal by judgement of 12 May 2021, see UPDATE below.
Amazon had accused the retailer of manipulating customer reviews for its products without providing any further justification. The allegations could not be verified due to a lack of relevant information.
Although, according to the deactivation notice, the allegations were clearly based on vague suspicions at best, Amazon deactivated the merchant account with immediate effect, deleted all offers and ‘froze’ the entire credit balance on its account.
Wrongly, as the Munich I Regional Court has now ruled (LG München I, Beschluss v. 14.1.2021, Az. 37 O 32/21, nicht rechtskräftig, noch nicht zugestellt, hier als PDF abrufbar).
Numerous courts have already ruled that Amazon is wrong to block retailers. The special thing about the current decision is that it is based on antitrust law and the abuse of a dominant market position.
Amazon blocks seller account and deletes all listings
The applicant was registered as a seller on Amazon and achieved an annual turnover of almost 1 million euros there. At the beginning of December 2020, the claimant received an email informing her that her Amazon.de seller account had been deactivated and all offers had been removed from the website. Credit balances would not be paid out, but would be frozen for the time being.
Amazon did not give a comprehensible reason for the blocking
Amazon stated that the applicant had ‘manipulated’ customer reviews for its products. The reviews in question were not disclosed. As a result, the applicant was no longer able to access her account without restriction, she could not post any offers and could not access the credit to which she was entitled. Every day, she lost thousands of euros in sales without being able to justify her actions to Amazon.
Munich Regional Court I orders immediate unblocking
The allegations were not true. After an out-of-court request to immediately reactivate the applicant, restore the deleted offers and also release the credit balance was unsuccessful, the Munich I Regional Court issued the aforementioned temporary injunction on 14 January 2021.
Accordingly, Amazon must – in simple terms – refrain from deactivating the applicant’s Amazon seller account, removing offers from the Amazon.de website or withholding funds from her account without giving reasons and without the opportunity to comment, subject to a fine of up to € 250,000.00 or imprisonment for up to 6 months.
The amount in dispute was set at €100,000 by the regional court. The decision is not final, it has not yet been served on Amazon and can be challenged by means of an appeal. In addition, Amazon also has the option of conducting proceedings on the merits.
Drumbeat: abuse of a dominant market position
While some regional courts have already established the unlawfulness of unmediated account blocking by Amazon – including on the basis of corresponding applications by LHR Rechtsanwälte – and have prohibited this by means of a temporary injunction, the present decision has a new quality and significantly strengthens the rights of online retailers. The air is getting much thinner for Amazon.
Unlike the decisions in the past, the injunction has now been explicitly based on antitrust law. (§§ 33 Abs. 1 i.V.m. 19 Abs. 2 Nr. 1 GWB).
The court agreed with the applicant that Amazon has a dominant position in the relevant product and geographic market for the provision of online marketplace services to online retailers. The court – rightly – allowed the prima facie evidence resulting from the extensive investigations conducted by the German Federal Cartel Office in 2018 and 2020 and by the EU Commission in 2020 and the corresponding findings to suffice.
The court states:
In its case report of 17 July 2019, B2 – 88/18. p. 11, the German Federal Cartel Office expressly left open the question of whether Amazon has a dominant market position. No in-depth and conclusive investigations had been carried out in this regard. Nevertheless, the Federal Cartel Office reopened proceedings against Amazon in 2020, and the EU Commission, in its press release of 10 November 2020, also casually and naturally assumes that the defendant is dominant in the area of marketplace services in France and Germany.
Amazon must therefore demonstrate non-discriminatory behaviour based on objective considerations when entering into and terminating business relationships.
The court emphasises that, according to the Bundeskartellamt’s case report of 17 July 2019, one of the critical points that gave rise to the abuse proceedings was the immediate blocking of seller accounts without any justification. This is behaviour that Amazon – as the present case shows – is apparently unwilling to refrain from.
Amazon liable for loss of sales
The next step for the seller is to claim compensation from Amazon for the lost sales during the period of the unauthorised blocking. The seller must of course take into account any costs saved. They are also entitled to interest payments for the period in which they were unable to dispose of the blocked credit balance.
Amazon faces a fine of up to €1 million
Finally, what is often overlooked: The violation can be punished as an administrative offence pursuant to Section 81 (2) No. 1 in conjunction with Section 81c (1) sentence 1 ARC with a fine of up to one million euros.
Pursuant to Section 81d, the type and extent of the infringement, the manner in which the infringement was carried out, previous infringements by the undertaking, reasonable and effective precautions taken before the infringement to prevent and detect infringements and the endeavours of the undertaking to detect the infringement and make good the damage, as well as precautions taken after the infringement to prevent and detect infringements are taken into account when determining the amount of the fine.
Lawyer Thomas Herro, specialised lawyer for intellectual property law and partner of the law firm LHR:
‘For us, it was only a matter of time before Amazon’s dominant market position could be conclusively demonstrated or proven in court and retailers would have an effective legal means of defending themselves against arbitrary blocking under antitrust law. While Amazon’s motivation to keep unreliable retailers or sellers who manipulate product descriptions or reviews off the platform is understandable, it must also go without saying that such serious accusations should not be made out of the blue and that retailers should not be blocked without a comprehensible reason. Amazon will now have to pay for the lost profits. ’
(Disclosure: Our law firm represented the applicant).
UPDATE 17.5.2021:
Following an objection by Amazon, the Regional Court cancelled the initially issued temporary injunction after holding an oral hearing. In the opinion of the Regional Court, the blocking of the applicant was – exceptionally – justified.
The applicant has therefore initially lost the case. It is currently examining the prospects of success of an appeal. But Amazon will not be happy with the decision either. The Regional Court has not only confirmed Amazon’s market power in the extensive and carefully drafted reasons for the decision, but also that the deactivation notifications are generally insufficient and that the – often mantra-like – demands for ‘action plans’ repeatedly made by retailers are unfounded.
For the majority of other retailers affected by lockdowns, the decision is therefore a ray of hope.
We will analyse the ruling in detail and report on it here in due course.
Journalists are invited to contact us if they have any questions:
LHR Attorneys at Law
Stadtwaldgürtel 81-83, 50935 Köln
Telefon: +49-2212716733-0
Email: [email protected]
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