Amazon offers to drop ‘favored nation’ clauses to end Europe ebook probe

European Commission Amazon ebook anti-trust investigationAmazon has offered to drop its ‘parity’ clauses in publisher contracts in Europe after an anti-trust investigation by the European Union over concerns about reduced competition among ebook distributors and less consumer choice.

The European Commission had particular concerns about clauses sometimes referred to as ‘most-favoured-nation’ or ‘MFN’ requiring publishers to tell Amazon about more favorable or alternative terms offered to Amazon’s competitors and/or offer Amazon similar terms and conditions.

This requirement includes publishers having to offer to Amazon any new alternative business models, such as using different distribution methods or release dates, or making available a particular catalogue of ebooks.

The EC considers these type of clauses may make it harder for other ebook retailers to compete with Amazon by developing innovative products and services and could limit competition between ebook distributors and reduce consumer choice.

Amazon has offered the following commitments:

  • Not to enforce (i) any clause requiring publishers to offer Amazon similar terms and conditions as those offered to Amazon’s competitors or (ii) any clause requiring publishers to inform Amazon about such terms and conditions.

This commitment would cover terms and conditions concerning business models, release date and catalogue of ebooks, features of ebooks, promotions, agency price, agency commission and wholesale price. Amazon would also notify publishers that it would no longer enforce such provisions.

  • To allow publishers to terminate ebook contracts that contain a clause linking discount possibilities for ebooks to the retail price of a given ebook on a competing platform (so-called Discount Pool Provision). Publishers would be allowed to terminate the contracts upon 120 days’ advance written notice.
  • Not to include, in any new ebook agreement with publishers, any of the clauses mentioned above, including Discount Pool Provisions.
  • The commitments would apply for a period of five years to ebook agreements throughout the European Economic Area.

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The European Commission opened a formal anti-trust investigation into Amazon’s practices in June 2015. It is calling for comments from market players and other interested parties on the proposals within one month.

If a company breaks commitments, the EC can impose a fine of up to 10% of the company’s worldwide turnover, without having to find an infringement of the EU anti-trust rules.