FRANKFURT (Reuters) - Amazon AMZN.O has reached a deal with Germany's anti-trust authority to overhaul its terms of service for third-party merchants, acting to appease regulators as the European Union announced its own investigation of the e-commerce giant.

Germany’s Federal Cartel Office said on Wednesday it was dropping its seven-month investigation after Amazon agreed to amend a Business Services Agreement that applies to hundreds of thousands of merchants trading on its platform.

Within hours, however, EU antitrust regulators said they would open their own investigation into whether the world’s largest online retailer’s terms of service and use of merchant data violated competition rules.

The changes will apply not only to Germany, Amazon’s No. 2 market after the United States, but also to its marketplaces in Britain, France, Italy and Spain, as well as its other worldwide sites in America and Asia, the German regulator said.

“We have achieved far-reaching improvements for retailers on Amazon’s marketplaces,” cartel office chief Andreas Mundt said in a statement. “We are dropping our investigation.”

Responding, Amazon said the changes to its Business Solutions Agreement, to take effect in 30 days, would clarify the rights and responsibilities of selling partners that account for 58% of physical merchandise sales on its platform.

“We’ll continue working hard, investing heavily, and inventing new tools and services to help our selling partners around the world reach new customers and grow their business,” said Amazon.

Amazon, responding to news of the EU probe, said it would cooperate fully.

FILE PHOTO: The logo of Amazon is seen at the company logistics centre in Boves, France, May 13, 2019. REUTERS/Pascal Rossignol/File Photo

PLATFORMS VS REGULATORS

Silicon Valley's tech giants have come under increasing scrutiny, with Google GOOGL.O hit with billions of euros in fines for breaches of EU competition rules.

Germany's anti-trust regulator, while subordinate to Brussels in many regards, has also been active, ordering Facebook FB.O to change how it handles user data after finding the social network abused its market dominance.

Facebook has challenged that decision, in contrast to Amazon which came to a relatively quick understanding with the German regulator. No fines had been foreseen in the Amazon case.

At issue is the power of so-called platform companies that provide a venue for others, for example, to sell new or second-hand books.

In an inherent conflict of interest, that business has also long been a mainstay of Amazon, which was founded by Jeff Bezos in his garage in 1994 and has gone on to command a market valuation of nearly $1 trillion.

Third-party sellers had complained that Amazon’s terms of service were stacked against them, a view backed by the German cartel office which found Amazon dealt with them in an opaque and arbitrary manner.

U.S. lawmakers raised similar concerns in a hearing on Tuesday, pressing Amazon counsel Nate Sutton over allegations it competed against its own sellers and pushed them to buy advertising and fulfilment services.

NEW TERMS

Among the changes in its new terms of service, Amazon will comply with European rules governing liability towards its business partners on its European platforms, whereas earlier it had faced no such liability.

It should now give 30 days notice and a reason for removing a merchant from its platform. Before, it could break off its relationship with or block a seller without warning or explanation.

Merchants using its European marketplaces will be able, in certain circumstances, to take Amazon to court in their own country, whereas before this was only possible in Luxembourg - a deterrent for small-time traders.

They will also be able to appeal against decisions by Amazon regarding who should bear the costs of returns and refunds. Other changes cover product descriptions, ease of understanding Amazon’s terms of services and fairer presentation of customer reviews, the cartel office said.

The changes will directly affect 300,000 merchants active on Amazon.de, the company’s German site, of which an estimated 60-65% are German. The site had a turnover of 20 billion euros last year, making it by far the biggest of Amazon’s European sites.

The German cartel office said it had consulted closely with the European Commission on its probe. Separately, neighboring Austria said it was dropping its own investigation after Amazon changed its terms of service.