European Commission Opens Formal Investigation into Amazon’s E-Book Distribution Arrangements
- By David Grogan
On Thursday, June 11, the European Commission (EC) opened a formal antitrust investigation into “certain business practices by Amazon in the distribution of e-books,” according to an EC press release. The Commission is concerned that certain clauses included in Amazon’s contracts with publishers concerning e-books could constitute a breach of European Union antitrust rules that prohibit the abuse of a dominant market position and restrictive business practices.
“Amazon has developed a successful business that offers consumers a comprehensive service, including for e-books. Our investigation does not call that into question,” EU Commissioner in charge of competition policy Margrethe Vestager said in a statement. “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.”
The investigation was sparked by Amazon’s contracts with publishers that require publishers either to inform the company about “more favorable or alternative terms” offered to other retailers, or to ensure that Amazon receives terms on par with 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 or may reduce choices for consumers.
“I strongly appreciate that the Commission has decided to act for the benefit of a controlled market,” Dr. Kyra Dreher, European and International Booksellers Federation co-president and managing director of the Retail Booksellers Committee, Boersenverein des Deutschen Buchhandelsand, said in a prepared statement. “Amazon’s business practices have an effect not only on those publishers presently involved in the German case; they can also pose a threat to all e-book sellers and distributors in our respective countries. As EIBF co-president I welcome this move, which is good for the European book industry and for European consumers.”
In a statement, Tim Godfray, Chief Executive of The Booksellers Association of the U.K. and Ireland, stated: “We are thrilled and delighted that the European Commission’s Competition Authority has decided to launch a formal investigation not just into the European e-book sector, but specifically into Amazon’s e-book distribution arrangements and certain business practices.”
Godray stressed that monopolies are bad for consumers in the long run. “Amazon has unparalleled market power and has become a behemoth. Locking Kindle readers into a proprietary system to prevent consumers from sourcing e-books from whichever bookseller they want can’t be good for book buyers. In the interests of consumers, we want to see fair competition, an end to any unfair restrictive practices, and a diverse marketplace.”
Regarding the investigation, ABA CEO Oren Teicher said, “It is heartening to see that the EU is taking a closer look at possible antitrust behavior on the part of Amazon. In the past, it has been distressing to see a lack of similar activity here in the U.S. regarding potentially anticompetitive activities in the book industry. Perhaps, given the example of the EU, that may change on this side of the Atlantic.”
The Commission noted that 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.