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From Antitrust Law Daily, May 4, 2017

Amazon’s commitments on e-book ‘parity’ clauses accepted by EC

By Mark Engstrom, J.D.

The European Commission (EC) has accepted Amazon.com’s commitments to abstain from enforcing parity clauses in its e-book distribution agreements with publishers. The clauses at issue required publishers to offer Amazon terms and conditions that were similar to or better than those that were offered to Amazon’s competitors. They also required publishers to inform Amazon about alternative or more favorable terms that were provided to competitors. The EC’s decision renders Amazon’s commitments legally binding, according to today’s announcement.

"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, said Margrethe Vestager, the European Commissioner in charge of competition policy. "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," she added. "We want to ensure fair competition in Europe’s e-books market worth more than 1 billion euros."

The clauses at issue covered price and other appurtenances—alternative business/distribution models, innovative e-books, promotions, etc.—that competitors could use to differentiate themselves from Amazon. After today’s decision, Amazon will no longer enforce or introduce those clauses in its publisher agreements. The commitments will contribute to fair competition in the platform economy, the EC observed.

In 2015, the Commission initiated a formal investigation based on concerns that Amazon’s "parity" or "most-favored-nation" clauses might have violated EU antitrust rules. The Commission took the preliminary view that Amazon could have abused its dominant position in the retail distribution markets for English and German e-books by requesting parity conditions in its agreements with publishers. In the Commission’s view, the clauses could lead to less choice, less innovation, and higher prices as the result of decreased competition in e-book distribution in Europe.

In its amended commitments, Amazon offered to abstain from enforcing, introducing, or changing the terms of its publishers’ agreements. More specifically, Amazon offered the following commitments: (1) declining to enforce clauses that required publishers to offer Amazon terms and conditions that were similar to those that were offered to Amazon's competitors, or to inform Amazon about those terms and conditions; (2) allowing publishers to terminate e-book contracts that contained a clause linking discount possibilities for e-books to the retail price of a given e-book on a competing platform (the "Discount Pool Provision"); (3) allowing publishers to terminate their contracts upon 120 days’ advance written notice; and (4) eschewing in new e-book agreements the inclusion of any clause that contravened those commitments.

The EC concluded that Amazon’s commitments—which applied for five years to any e-book that was distributed by Amazon—offered a timely, effective, and comprehensive solution to its competition concerns. If Amazon breached any of those commitments, the EC could impose a fine of up to 10 percent of Amazon's total annual turnover, without having to first determine that Amazon had violated the European Union’s competition rules.

Companies: Amazon.com, Inc.

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