The Commission is particularly interested in certain clauses included in Amazon's contracts with publishers, which require publishers to tell Amazon about terms offered by Amazon's competitors and ensure that Amazon is offers terms that are at least as good, the Commission said.
These clauses may make it more difficult for other e-book distributors to compete, the Commission said.
The investigation will look at whether the clauses limit competition and reduce consumer choice. This could violate EU antitrust rules prohibiting abuse of a dominant market position and restrictive business practices.
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."
Amazon is currently the largest distributor of e-books in Europe. The investigation will focus initially on e-books in English and German as these are the largest markets for e-books in the European economic area, the Commission said.
This is not the first time that the Commission has investigated the e-books sector under anti-trust rules, it said. In December 2011 it opened proceedings based on concerns that Apple and five publishing houses, namely Penguin Random House, Hachette Livres, Simon & Schuster, HarperCollins and Georg von Holtzbrinck Verlagsgruppe, may have colluded to limit retail price competition in e-books. The companies issued commitments that addressed the Commission's concerns, it said.
The UK Publishers' Association called for an inquiry into the market for e-books last September. In a document setting out its recommended range of policies the UK government should adopt, the trade body said that an inquiry should seek to better facilitate competition in both the e-books market and the online market for print books, which it said should be treated as separate markets.
The European Commission also announced in January that it was conducting an "in-depth investigation" into Amazon's tax arrangements in Luxembourg, saying that these may have counted as illegal state aid.
The investigation is considering a ruling granted by Luxembourg in November 2003 concerning the royalty payable by Amazon's EU operating company, Amazon EU Sarl. The royalty is paid to a Luxembourg partnership of which two Amazon US companies are members. However, it is not taxable in Luxembourg and the Commission said it may not be subject to tax in the US either.