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Commission accepts e-book commitments from Amazon

The European Commission has accepted commitments from Amazon over 'parity clauses' in its distribution agreements with e-book publishers in Europe.08 May 2017

These clauses are sometimes called 'most favoured nation' or MFN clauses and require publishers to tell Amazon about any different terms that they offer to Amazon's competitors, and to offer the same or similar to Amazon.

The Commission was concerned that the 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". This could lead to less choice, less innovation and higher prices for consumers, it said.

The Commission opened an antitrust investigation in 2015 into the clauses.

Amazon amended its proposal following feedback r on the suitability of its originally proposed commitments.

The company has now said that it will not enforce parity clauses, including provisions related to alternative or new business models, release dates and catalogues of e-books, features, promotions, agency price, agency commission and wholesale price.

Amazon will allow publishers to terminate any e-book contracts that contain a 'discount pool provision' clause linking discount possibilities for e-books to the retail price of a given e-book on a competing platform. Publishers can terminate the contract by giving 120-days written confirmation.

Finally, Amazon will not include any of the above in new e-book agreements with publishers.

Commissioner Margrethe Vestager, in charge of competition policy, said: "Today's decision will open the way for publishers and competitors to develop innovative services for e-books, increasing choice and competition to the benefit of European consumers. Amazon used certain clauses in its agreements with publishers, which may have made it more difficult for other e-book platforms to innovate and compete effectively with Amazon. We want to ensure fair competition in Europe's e-books market worth more than €1 billion."

The Commission's decision makes the commitments legally binding on Amazon, it said.

Amazon is currently the largest distributor of e-books in Europe. The investigation focused on e-books in English and German as these are the largest markets for e-books in the European economic area.

This is not the first time that the Commission has investigated the e-books sector under anti-trust rules. 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.

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.