Every wonder how Amazon manages to sell e-books for less than their competition? So does the EU and they are investigating the contracts Amazon makes publishers sign.
The European Commission has opened a formal antitrust investigation into certain business practices by Amazon in the distribution of e-books. The Commission will in particular investigate certain clauses included in Amazon’s contracts with publishers. These clauses require publishers to inform Amazon about more favourable or alternative terms offered to Amazon’s competitors and/or offer Amazon similarterms and conditions than to its competitors, or through other means ensure that Amazon is offered terms at least as good as those for its competitors.
The Commission has concerns that such clauses may make it more difficult for other e-book distributors to compete with Amazon by developing new and innovative products and services. The Commission will investigate whether such clauses may limit competition between different e-book distributors and may reduce choice for consumers.If confirmed, such behaviour could violate EU antitrust rules that prohibit abuses of a dominant market position and restrictive business practices.The opening of proceedings does not prejudge in any way the outcome of the investigation.
EU Commissioner in charge of competition policy Margrethe Vestager said: “Amazon has developed a successful business that offers consumers a comprehensive service, including for e-books. Our investigation does not call that into question. However, it is my duty to make sure that Amazon’s arrangements with publishers are not harmful to consumers, by preventing other e-book distributors from innovating and competing effectively with Amazon. Our investigation will show if such concerns are justified.”
Scope of the investigation
E-books have experienced a surge in popularity in recent years and are of increasing importance to online retail. Amazon is currently the largest distributor of e-books in Europe. Initially, the Commission’s investigation will focus on the largest markets for e-books in the European Economic Area, namely e-books in English and German.
The Commission has concerns that certain clauses included in Amazon’s contracts with publishers concerning such e-books could constitute a breach of EU antitrust rules that prohibit the abuse of a dominant market position and restrictive business practices. In particular, the investigation is focused on clauses which seem to shield Amazon from competition from other e-book distributors, such as clauses granting it:
- the right to be informed of more favourable or alternative terms offered to its competitors; and/or
- the right to terms and conditions at least as good as those offered to its competitors.
The Commission will now investigate further whether such clauses may hinder the level playing field and potentially decrease competition between different e-book distributors to the detriment of consumers.
This is not the first time the European Commission is investigating the e-books sector under EU antitrust rules. In December 2011 the Commission opened proceedings in the sector because it had concerns that Apple and five international publishing houses (Penguin Random House, Hachette Livres, Simon & Schuster, HarperCollins and Georg von Holtzbrinck Verlagsgruppe) may have colluded to limit retail price competition for e-books in the EEA, in breach of EU antitrust rules. In December 2012 and July 2013, respectively, the companies offered a number of commitments, which addressed the Commission’s concerns.
Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) prohibit respectively anticompetitive agreements and the abuse of dominant market positions. The implementation of these provisions is defined in the EU’s Antitrust Regulation (Council Regulation No 1/2003), which is also applied by national competition authorities. The fact that the Commission has opened proceedings does not mean it has conclusive proof of antitrust violations.
Article 11(6) of the Antitrust Regulation provides that the initiation of proceedings by the Commission relieves the competition authorities of the Member States of their competence to also apply EU competition rules to the practices concerned. Article 16(1) of the same Regulation provides that national courts must avoid giving decisions which would conflict with a decision contemplated by the Commission in proceedings it has initiated.
The Commission has informed Amazon and the competition authorities of the Member States that it has opened proceedings in this case.
There is no legal deadline to complete inquiries into anti-competitive conduct. The duration of an antitrust investigation depends on a number of factors, including the complexity of the case, the extent to which the undertaking concerned cooperates with the Commission and the exercise of the rights of defense.
Michael Kozlowski is the Editor in Chief of Good e-Reader. He has been writing about audiobooks and e-readers for the past ten years. His articles have been picked up by major and local news sources and websites such as the CBC, CNET, Engadget, Huffington Post and the New York Times.