Deal in sight for Amazon in e-books case against EU

One benefit to Amazon in settling the case is that it would crystallise the EU's market definition of the e-books market and Amazon’s position on it. [Tolbxela / Flickr]

An imminent commitments decision in the Amazon e-books case would help both parties avoid an escalation which would be in neither of their interests, according to sector experts. EURACTIV’s partner PaRR reports.

Settling the European Commission investigation into anti-competition clauses in Amazon’s e-books contracts with publishers would allow Amazon to escape fines, civil claims, further investigations and reputational damages, Maverick Law competition partner Bas Braeken noted.

“Amazon has largely managed to stay out of the EC competition spotlight and, given the issues faced by other tech companies like Google in recent years, I’m sure it would prefer to keep things that way,” Matthew Johnson, partner with economic consultants Oxera, said.

The Commission also avoids the need of establishing the heavy burden of proof required in a full-fledged abuse of dominance decision by accepting Amazon commitments, according to JonesDay competition lawyer Geoffroy van de Walle.

The EU executive opened a formal investigation into Amazon’s e-book distribution arrangements in June 2015, assessing whether the company engaged in restrictive practices through clauses in contracts with publishers.

On 24 January, it opened a consultation on commitments proposed by Amazon to end the problematic parity clauses in the European Economic Area. Interested third parties had until 26 February to submit observations to the Commission.

EU opens investigation into Amazon's e-book business

The European Commission opened a formal antitrust investigation into Amazon’s e-book business on Thursday, opening yet another front in mounting EU scrutiny of America’s global tech giants.

Company avoids precedent without clear market definition

The probe saw the EU executive focus on the company’s dominance, rather than on the agreements with the publishers.

The agency initially investigated whether the clauses were in breach of both the rules prohibiting anti-competitive agreements (Article 101 of the Treaty on the Functioning of the EU – TFEU) and the abuse of dominant market provisions (Article 102 of that same treaty). But when it published the commitments, only the abuse of dominance charge was retained.

That suggests that most favoured nation (MFN) clauses in the eBooks agreement are not necessarily a breach of 101(1), an independent lawyer said.

“It depends on the precise wording of the agreements, whether it’s wholesale or retail prices that are directly affected, and the nature of the relationship between Amazon and the publishers. If it’s a ‘true agency’ relationship then 101(1) would not apply,” the lawyer added.

Competition authorities generally prefer to deal with such MFN clauses under article 101, since establishing that a firm is in a dominant position can be challenging, Johnson said.

“For MFN clauses to be considered a violation of article 101, the market share of the company imposing the clauses does not have to amount to dominance,” Braeken added.

“In the case of cumulative agreements, even MFN clauses applied by a company representing only a small market share can be considered to be a violation of Article 101,” he said.

Investigations by the French and German competition authorities into online travel agencies using MFN clauses were dealt with under Article 101 TFEU.

One competition authority economist described Article 101 TFEU as the “easy way” to tackle retail price MFN clauses, which are considered a “hardcore restriction” under that provision, automatically giving rise to a breach of competition law.

Article 102 TFEU, on the other hand, requires proof both that the company involved enjoys a dominant position and that this has been abused.

Establishing under Article 102 that these clauses damage the economy is a very difficult task due to unclear guidelines on exclusionary abuses and a complete lack of guidelines on exploitative abuses, the authority economist said.

Amazon’s clauses could constitute both an exploitative and an exclusionary abuse, van de Walle pointed out.

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Commission avoids burdensome proof of abuse of dominant position

PaRR has learned that the European Commission decided to limit its case to Article 102 TFEU after seeing indications that the driving force behind these clauses was Amazon and not the publishers.

Amazon made clear in a statement following the Commission publication of its commitments that it disagreed with the agency’s definition of the relevant market in which it was said to be dominant.

“In our view, there is no separate market for the sale of e-books as they compete directly with print books and many other forms of media,” a company statement said.

Settlement of the case would mean that the EC never has to establish the dominant position.

One benefit to Amazon in settling the case rather than risking a formal infringement decision and potential fine is that the latter outcome would crystallise the Commission’s market definition of the e-books market and Amazon’s position on it, according to Johnson.

That would expose the company to further probes using the same market definition assessment, Johnson explained.

Braeken noted that infringement decisions included more detailed market definitions, market shares and competition analyses, which could trigger other competition authorities to start their own investigations.

Commenting on the Amazon commitments, European consumer organisation BEUC recently advocated prohibiting MFN clauses altogether, since some of these clauses “are unlikely to meet the conditions of article 101(3)”.

The European Commission and Amazon declined to comment.

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