Amazon eBook Contracts

European Union antitrust investigation into the Amazon’s eBook Business

The European Commission opened in 2015 a formal antitrust investigation into Amazon’s ebooks distribution agreements. At the heart of the Commission investigation were the clauses included in Amazon’s contracts with publishers, and the European Commission were concerned that publishers were forced to inform Amazon about their agreements with competitors. “The Commission has concerns that such clauses may make it more difficult- reads a statement from the European Commission in 2015 -for other ebook distributors to compete with Amazon by developing new and innovative products and services”

Article 102 of the Treaty on the Functioning of the European Union (TFEU) and Article 54 of the EEA Agreement prohibit the abuse of a dominant position which may affect trade and prevent or restrict competition.

The Commission opened a formal antitrust investigation into such arrangements in June 2015. The Commission took the preliminary view that Amazon may have abused its dominant position on the markets for the retail distribution of English and German language e-books to consumers by requesting parity conditions in its e-books agreements with publishers. The Commission invited comments from interested parties on a previous version of the commitments offered by Amazon on 24 January 2017.

“Amazon has developed a successful business that offers consumers a comprehensive service, including for ebooks. Our investigation -said in 2015 the EU Commissioner in charge of competition policy, Margrethe Vestager- 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 ebook distributors from innovating and competing effectively with Amazon. Our investigation will show if such concerns are justified.”

The Commission opened an investigation in June 2015 because it had concerns about clauses included in Amazon’s e-books distribution agreements that could have breached EU antitrust rules. These clauses,sometimes referred to as “most-favoured-nation” clauses, required publishers to offer Amazon similar (or better) terms and conditions as those offered to its competitors and/or to inform Amazon about more favourable or alternative terms given to Amazon’s competitors. The clauses covered not only price but many aspects that a competitor can use to differentiate itself from Amazon, such as an alternative business (distribution) model, an innovative e-book or a promotion.

The Commission considered that such clauses could make it more difficult for other e-book platforms to compete with Amazon by reducing publishers’ and competitors’ ability and incentives to develop new and innovative e-books and alternative distribution services. The clauses may have led to less choice, less innovation and higher prices for consumers due to less overall competition in the European Economic Area (EEA) in e-book distribution.

Change in Amazon ebook contracts with European publishers

The European Union reached an agreement in May 2017 with Amazon following the above antitrust investigation into the company’s ebook business.

Article 9 of the EU’s Antitrust Regulation (Regulation 1/2003) allows the Commission to conclude antitrust proceedings by accepting commitments offered by a company. Such a decision does not reach a conclusion on whether EU antitrust rules have been infringed but legally binds the company to respect the commitments.

Amazon has sought to address the Commission’s concerns by offering not to enforce, introduce or to change the terms of its agreements with publishers. It amended its proposal following feedback received from interested parties on the suitability of Amazon’s originally proposed commitments.

In May 2017, the European Commission concluded that the amended final version of the commitments offers a timely, effective and comprehensive solution to the competition concerns it had identified. They will help ensure that innovation for e-books by publishers and other third parties can benefit companies other than Amazon and protect effective competition for e-books to the benefit of consumers.

More specifically, Amazon offered the following commitments:
Not to enforce (i) relevant clauses requiring publishers to offer Amazon similar non-price and price terms and conditions as those offered to Amazon’s competitors or (ii) any such clauses requiring publishers to inform Amazon about such terms and conditions. The commitments cover in particular provisions related to alternative/new business models, release date and catalogue of e-books, features of e-books, promotions, agency price, agency commission and wholesale price.

To allow publishers to terminate e-book contracts that contain a clause linking discount possibilities for e-books to the retail price of a given e-book on a competing platform (so-called Discount Pool Provision). Publishers are allowed to terminate the contracts upon 120 days’ advance written notice.
Not to include, in any new e-book agreement with publishers, any of the clauses mentioned above, including Discount Pool Provisions.

The commitments apply for a period of 5 years and to any e-book in any language distributed by Amazon in the EEA.
If Amazon were to breach the commitments, the Commission could impose a fine of up to 10% of Amazon’s total annual turnover, without having to find a violation of the EU competition rules.