Amazon Faces EU Scrutiny on Recommender Algorithms, Ad Transparency

The European Commission issued Amazon a new request for information (RFI) on Friday, continuing its scrutiny of the major marketplace’s compliance with the EU’s digital services regulations

This development underscores the extent to which EU enforcers are intensifying their examination of the e-commerce behemoth. The bloc has requested additional information regarding Amazon’s recommender systems, ad transparency provisions, and risk assessment measures.

In November last year, the Commission issued an RFI to Amazon that concentrated on preserving fundamental rights, including its recommender systems and the risk assessments and mitigations surrounding the dissemination of illegal products.

The EU’s Digital Services Act (DSA) mandates that platforms and services adhere to a set of governance standards encompassing areas such as content moderation.

The law also mandates that online marketplaces implement measures to enable them to address risks associated with the sale of illegal products.

Although the regime imposes an additional layer of algorithmic transparency and accountability obligations on more significant marketplaces, such as Amazon, this is the primary focus of the Commission RFIs.

The EU designated Amazon as a vast online platform (VLOP) in April 2023, and the supplementary regulations have been in effect since the end of August last year. The Commission is responsible for enforcing these additional obligations on VLOPs.

The stakes for the e-commerce colossus are still high, as it is still being determined whether the most recent Commission RFI to Amazon will result in a formal investigation of its DSA compliance.

The penalties for violating the pan-EU law can be as high as 6% of global annual turnover, which could result in significant financial penalties for any confirmed violations. (NB: The company’s full-year revenue for 2023 was $574.8 billion, indicating that its regulatory risk is in the double-digit billions, at least on paper.)

The Commission has issued an RFI to Amazon regarding the measures it has implemented to comply with DSA regulations regarding the transparency of recommender systems and their parameters, as detailed in a press release.

It also stated that it is seeking additional information regarding Amazon’s policies regarding maintaining an ad repository, another legally required transparency measure for larger platforms.

Additionally, the Commission expressed its desire for additional information regarding Amazon’s risk assessment report. The DSA mandates that VLOPs proactively evaluate systemic risks that may arise on their platforms and implement measures to mitigate them. Additionally, platforms are required to document their compliance procedures.

“Amazon is specifically requested to furnish comprehensive information regarding its adherence to the provisions regarding the transparency of recommender systems, the input factors, features, signals, information, and metadata that are utilized by these systems, and the options that are available to users to opt out of being profiled for recommendation systems,” the EU stated.

“The company is also required to furnish additional information regarding the design, development, deployment, testing, and maintenance of the online interface of the Amazon Store’s Ad Library, as well as the supporting documents associated with its risk assessment report.”

Amazon has been granted until July 26 by the European Union to furnish the requested information. Subsequently, its subsequent actions will be contingent upon evaluating Amazon’s response. However, sanctions may be initiated by failing to respond satisfactorily to an RFI.

The EU designated online marketplaces as one of the few priority issues in enforcing the DSA’s regulations regarding VLOPs last year. Additionally, it appears to be attentive to the surroundings.

Shortly after designating the duo, it issued separate RFIs to rival marketplace VLOPs, Shein and Temu, late last month.

Although the Commission’s RFIs also expressed concern regarding the risks associated with illegal commodities and manipulative design (including as a potential child safety risk) in their case, they also requested additional information regarding the operation of their recommender systems.

What is the reason for the significant interest in this area? The content and products that platform users view can be influenced by algorithmic categorization, which has the potential to impact their overall experience significantly.

In summary, the EU requests that the DSA unlock these black-box AI systems to ensure that commercial agendas intended to attract attention and increase sales are not the sole factors influencing these automated decisions.

This is a measure to protect against AI-driven societal harms, such as platforms that promote content detrimental to individuals’ mental health or suggest that shoppers purchase hazardous products.

Amazon is dissatisfied with the regime. It contested its DSA designation as a VLOP last year. Last autumn, it was granted an interim stay on one aspect of VLOPs’ DSA compliance: the obligation to publish an advertisement library.

Nevertheless, the EU General Court reversed the previous decision in March, thereby reversing the partial suspension.

“Amazon is obligated to fulfill the complete set of DSA obligations as a result of the Court’s rejection of Amazon’s request to suspend the obligation to make its advertisement repository publicly available and its designation as a Very Large Online Platform,” the Commission stated.

“This entails the meticulous identification and evaluation of all systemic risks pertinent to its service, the provision of an alternative in their recommender systems that is not based on user profiling, and the establishment of a publicly accessible advertisement repository.”

Unsurprisingly, the Commission is seeking additional information in this area, given that Amazon has expended money on attorneys to argue that it should not be required to comply with the DSA ads library element and the subsequent overturning of the stay.

The European Union was contacted with inquiries. Additionally, we contacted Amazon to request a response to the Commission’s RFI.

This statement was sent to TechCrunch by a company spokesperson via email: “We are in the process of reviewing this request and are collaborating closely with the European Commission.”

A secure, predictable, and trusted shopping environment is a common objective of the European Commission, which Amazon shares.

This is a critical issue for all retail industry participants, and we make a substantial investment in safeguarding our store from illegal content and bad actors and establishing a trustworthy purchasing experience. We have expanded upon this robust foundation to ensure compliance with the DSA.