Amazon has successfully wrapped up an antitrust deal in Europe today. The European Commission has closed its investigation into the retail giant’s ebook business after accepting voluntary commitments from the company. The settlement allows publishers to scrap some ebook contracts and reopen negotiations.
Amazon is technically a monopsonist, meaning it has dominant market power, and so is able to gain favourable terms of trade in the supply chain.
In June 2015, the European Commission opened an investigation into its ebook contracts, querying whether the giant had abused its position. The Commission concluded that "most favoured nation" (MFN) clauses most likely did distort the market. In particular, when a publisher cut a deal with another retailer, it was obliged not only to tell Amazon the price it had cut, but offer Amazon the same price.
Today the Commission agreed to three proposals from Amazon. The company promised not to enforce the MFN clauses. It will mean publishers can now cut deals with other distributors and retailers under the same terms or better than any they offer to Amazon and will not have to inform the retailing giant of this.
Contracts linking discounts to the retail price are also verboten, and the pledges are to last for five years.
In 2014, Amazon’s contracts were described as “a form of assisted suicide” for the publishing industry by the editor of trade mag The Bookseller Phil Jones.
Amazon’s dominance in ebooks is down to a spectacularly misguided attempt to hobble what would have been its biggest competitor in the market, Apple, in which the European Commission played a part. The US Department of Justice decreed that Apple was conspiring with publishers in its bid to offer an alternative. The European Commission followed suit in forcing publishers to abandon the “agency model” they preferred instead. One district judge wondered aloud why he was pursuing an antitrust case against a company with almost no market share (Apple) thus strengthening the position of the dominant player in the market (Amazon):
“Would it not matter that all these people got together in order to defeat a monopolist like mice that get together to put the bell on a cat?” Judge Jacobs asked the state.
The reply he got from Obama’s deputy solicitor general was that publishers could have avoided antitrust scrutiny by er, ... giving their product away as a loss leader. Not so good for authors, then. ®