On 24 January 2017, the European Commission announced it was inviting comments on voluntary commitments offered by Amazon relating to parity clauses included in its contracts with publishers of e-books. In brief, Amazon has offered to end the use of parity clauses under these commitments, which will apply for a period of five years. The commitments will be overseen by a trustee.
By way of background, on 11 June 2015, the Commission announced that it had started an investigation into Amazon’s distribution contracts with publishers of e-books (see VBB on Competition Law, Volume 2015, No. 6, available at www.vbb.com). The Commission was concerned with clauses which gave Amazon the right: (i) to be notified of more favourable or alternative terms offered by publishers to its competitors; and/or (ii) to be granted terms and conditions at least as favourable as those offered by publishers to its competitors (referred to by the Commission collectively as “parity clauses”).
On 9 December 2016, the Commission adopted a preliminary assessment within the meaning of Article 9(1) of Regulation (EC) No. 1/2003 (“Assessment”). According to the Assessment, Amazon may be dominant in the relevant markets for the retail distribution of English and German language e-books to consumers in the EEA, and Amazon’s parity clauses used in the context both of agency and reseller agreements may constitute an abuse of its dominant position in breach of Article 102 TFEU and Article 54 of the EEA Agreement. The Commission takes issue in the Assessment with a wide range of specific parity clauses, which (according to its press release) require publishers to offer Amazon similar terms and conditions as those offered to Amazon’s competitors, or to inform Amazon of such terms. These clauses comprise:
- Price-Related Parity Clauses (such as: Agency Price Parity; Discount Pool Provisions; Promotion Parity; Wholesale Price Parity; and Agency Commission Parity)
- Non-Price-Related Parity Clauses (such as: Business Model Parity; Selection and Features Parity)
- Notification Provisions (under which publishers must notify Amazon of alternative or more favourable terms offered to other retailers).
The Commission considers that these Parity Clauses and Notification Provisions have a number of anti-competitive effects including: dis-incentivising publishers from innovating; making it difficult for other e-book retailers to compete with Amazon in creating innovative products and services; deterring entry and expansion by e-book retailers; and risking higher prices and less choice for consumers.
Amazon has offered to address the Commission’s concerns by offering:
- Not to enforce any of these Parity Clauses or Notification Provisions, and to inform publishers that it will not enforce them.
- To permit publishers to end e-book contracts with Amazon containing Discount Pool Provisions (i.e., a clause linking discount possibilities for Amazon to the retail price of a given e-book on a competing platform). Publishers will be allowed to terminate the contracts upon 120 days’ advance written notice.
- Not to include, in any new e-book agreement with publishers, any of the clauses mentioned above, including Discount Pool Provisions.
The Commission has invited comments on the proposed commitments by 26 February 2017.
The case illustrates the increasing competition law risks relating to the use of parity clauses when they benefit firms with market power. Thus far, these clauses have garnered scrutiny from the Commission in the earlier (Apple) E-books case, as well as from the national authorities in, in particular, the HRS and Booking.com cases (see e.g., VBB on Competition Law, Volume 2014, No. 3, VBB on Competition Law Volume 2015, No.7 and VBB on Competition Law, Volume 2016, No. 11, available at www.vbb.com).
