A look at what will happen next in the world economies
Tuesday, July 14, 2015
EU Competition Watchdog Investigates Amazon Over Electronic-Books Business
As we have discussed before, cheat the taxes and they will find you. Aivars Lode By Tom Fairless
BRUSSELS—European Union regulators have opened a formal investigation into Amazon.com Inc.’s electronic-books business, the latest in a series of probes targeting U.S.-based technology giants that could affect how they operate in Europe.
The European Commission, the bloc’s top antitrust regulator, said Thursday that it was investigating whether Amazon uses its market power to force illegal terms on to publishers that harm purchasers of e-books. The regulator is concerned that parts of Amazon’s contracts with publishers “seem to shield Amazon from competition from other e-book distributors,” it said in a statement.
U.S. tech companies are facing a wave of scrutiny in Europe, their biggest overseas market, as regulators crack down on alleged violations ranging from unfair competition to inadequate data protection.
Amazon is embroiled in several of those probes, which could force the companies involved to make significant changes to their business practices.
The EU opened separate investigations in recent weeks into how large Web companies like Amazon and Google Inc. operate in Europe, and whether e-commerce companies are raising barriers to competition across the region. Amazon’s tax affairs in Luxembourg are also being scrutinized as part of a widening EU investigation into whether multinational companies received an illegal advantage from alleged sweetheart tax deals.
At issue in the investigation announced Thursday are clauses in Amazon’s contracts with publishers that the EU believes may limit competition between vendors of e-books, and reduce choice for consumers. The clauses, known as most-favored nation, or MFN, are common in industries like cable television in the U.S., but they may run afoul of antitrust rules in Europe if they reduce price competition, antitrust lawyers say.
Amazon said it is confident that its agreements with publishers “are legal and in the best interests of readers,” and pledged to cooperate fully with the investigation.
The company is currently the dominant distributor of e-books in Europe. In the U.K., for instance, Amazon accounted for 78% of e-book sales at Hachette Livre, according to an investor presentation last year from Hachette’s owner, Lagardère SCA.
Multiple book publishers have been lobbying the commission to investigate Amazon, one publishing executive said, but it is unclear whether any company had made a formal complaint. “They are the biggest customer for most of us, so you don’t want to upset them,” the executive said.
The probe will initially focus on e-books in English and German, the largest markets for such products in the region, the EU said. There is no deadline for such investigations, which can last years and are often broadened beyond their initial area of focus.
Margrethe Vestager, the EU’s antitrust chief, said she wants to ensure “that Amazon’s arrangements with publishers aren’t 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,” Ms. Vestager said in a statement.
Regulators on both sides of the Atlantic have targeted the e-books business before. The EU opened formal proceedings in 2011 to investigate whether Apple Inc. and five publishers had illegally colluded to fix the price of e-books before Apple’s first iPad launch in 2010. The case was settled after all the companies involved agreed to alter their contracts.
The U.S. Justice Department settled a similar case with publishers in December 2012, though Apple has appealed the judgment.