Amazon and Mercardo Libre both face regulatory scrutiny, following the release of new findings in Mexico.

A report from the Federal Economic Competition Commission (COFECE) — an agency in the Mexican government responsible for regulating anti-competitive behavior — found that Amazon and Mercado Libre control too much of the ecommerce market’s sales and transactions in the country, impeding new merchants from successfully entering the market.

Amazon and Mercado Libre are the largest online marketplaces in Mexico. Together, the report says, they control more than 85% of online marketplace sales and transactions in the country.

“We are aware of this preliminary report and are closely collaborating with COFECE,” Amazon said in a statement.

Mercado Libre issued a statement saying it was analyzing COFECE’s preliminary report, which the marketplace described as the start of the process. It also pledged its cooperation.

Amazon.com Inc. is No. 3 in the Global Marketplaces Database. MercadoLibre Inc. is No. 8. The Digital Commerce 360’s database ranks the largest online marketplaces around the world based on third-party gross merchandise value (GMV).

Amazon, Mercado Libre investigated in antitrust report

“There are no conditions of effective competition in the marketplace service market for sellers,” according to a translation of the preliminary opinion in the COFECE antitrust report. The report cites an investigation the commission held from March 31, 2023, to Oct. 27, 2023.

The report found that in Mexico, Amazon and Mercado Libre also:

• Have the ability to set prices
• Create barriers to entry into the market
• Exert significant competitive pressure over smaller competitors

It says although there are some competitors in the market, most of them are much smaller in size compared to Amazon and Mercado Libre. As such, the smaller competitors’ ability to exert competitive pressure is not significant, the regulator asserted. Additionally, it states that Amazon and Mercado Libre are the only competitors that have systems for collecting and processing large volumes of data. Those systems allow the companies to offer sellers various tools within their platforms. The tools then incentivize sellers to remain on the marketplaces. That ensures a sufficient number of users to generate and maintain industry effects, according to the report.

COFECE report proposes corrective measures

Among the barriers to competition cited, COFECE identified that Amazon and Mercado Libre artificially influence buyer behavior by offering streaming services in their loyalty programs. As a corrective measure, COFECE proposes the marketplaces dissociate streaming services from their memberships and loyalty programs.

Another barrier to competition is the lack of transparency in offer management. It asserts that Amazon and Mercado Libre’s marketplaces use algorithms to manage offers. The regulator is concerned that a lack of transparency in that process could undermine efficient market functioning.

“COFECE also orders Amazon and Mercado Libre to take all necessary and sufficient actions to ensure that sellers can find comprehensive information about the variables and weighting factors they consider in selecting the featured offer,” according to a Mexico Business News report on the COFECE findings and corrective measures.

Also at issue is the idea that a preference for proprietary logistics solutions creates a third obstacle for market competitors.

“Amazon and Mercado Libre give preferential treatment to products from sellers who use their fulfillment services,” the report said, according to Mexico Business News.

“A seller would be unable to hire a single company that offers fulfillment in a comprehensive manner, and from there participate in various sales channels,” the report said.

As a solution, COFECE proposes that the marketplaces modify the criteria for the “Prime” and “Full” labels on products eligible for delivery using the marketplaces’ fulfillment networks. It suggests modifying the criteria so the labels are not exclusively or preferentially assigned to sellers who use the marketplaces’ fulfillment services.

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