It seems the EU has suddenly taken an interest in the most-favored-nation clause found the contracts some ebook retailers have signed with publishers
The European Commission opened a formal antitrust investigation into Amazon’s ebook business on Thursday, opening yet another front in mounting EU scrutiny of America’s global tech giants. The investigation adds to the pressure on the online retailer in Europe, where it is already being investigated for the low tax rates it pays in Luxembourg.
The Commission said it would look in particular into certain clauses included in Amazon’s contracts with publishers. These clauses, it said, required publishers to inform Amazon about more favorable or alternative terms offered to Amazon’s competitors, a means to ensure Amazon is offered terms at least as good as those of its competitors.
In the Amazon ebooks case, the Commission said it had 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. "Amazon has developed a successful business that offers consumers a comprehensive service, including for ebooks," Competition Commissioner Margrethe Vestager said in a statement.
"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 ebook distributors from innovating and competing effectively with Amazon."
So let me get this straight: Amazon is under investigation for a contract clause which it uses to make sure its prices can't be beat? The EU thinks a consumer can be harmed when retailers vie for the lowest price?
Okay. I do not see how that could be possible, so I am really looking forward to the report from this investigation. Maybe the European Commission sees something I don't.
Update: A reader raised a few points which I overlooked:
If you can’t beat the price there is no reason trying to obtain better prices , a clause like this is in practice price fixing. Smaller players can be at a disadvantage too if they don’t have the leverage to include similar clauses in their contracts or if Amazon forbids such clauses with others.
And if you have an innovative business model that could put you ahead, you can’t keep the details secret. For the publishers, it allows for less flexibility , you can’t give someone a good quote for some new business model ( or just for the hell of it) if that would mean a huge contract with Amazon will have do be adjusted down too.
In a statement proved to the press, Amazon said that they are"confident that our agreements with publishers are legal and in the best interests of readers. We look forward to demonstrating this to the Commission as we cooperate fully during this process." That of course doesn't mean anything other than the press office is not asleep on the job.
This is not the first time that the European Commission has delved into ebook contracts. In 2011 the Commission investigated the multi-party negotiations Apple conducted with Big Six publishers in 2010. That case did not result in fines or prosecution but it did lead to several of the publishers settling with the EU. They agreed to drop the fixed price requirements from their contracts for two years (that clause will expire later this year) and no MFN clause for five years.
image by johnlaudun
(the stub of this post is supplied by Reuters, with additional reporting and editing provided Nate Hoffelder)