Amazon has offered commitments to the European Commission to end the antitrust investigation into its use of ‘most favoured nation’ (MFN or parity) clauses in its e-books contracts with publishers, launched in 2015. The Commission is now inviting comments on these proposed commitments from customers and rivals.
The Commission’s concern is that the clauses may breach EU antitrust rules and result in reduced competition among e-book distributors and less consumer choice.
Amazon’s MFN clauses require publishers to inform Amazon about more favourable terms or conditions offered to Amazon's competitors and to offer Amazon similar terms and conditions. This includes requiring publishers to offer Amazon any new or different distribution methods or release dates, any better wholesale prices or agency commissions, or to make available a particular catalogue of e-books.
The Commission considers that the cumulative effect of these clauses is to make it harder for other e-book retailers to compete with Amazon by developing new and innovative products and services. It also takes the view that imposing these clauses on publishers may amount to an abuse of a dominant market position.
In parallel, Audible, Amazon’s audio-books subsidiary, has announced the end of its exclusivity provisions in its distribution agreement with Apple following a joint antitrust investigation by the Commission and the German competition authority, the Bundeskartellamt.
Amazon’s proposed commitments
Amazon disputes the competition law basis for the Commission’s investigation. Nevertheless, in order to bring the investigation to a close (and to avoid the risk of a costly infringement decision), it has offered commitments:
- Not to enforce:
- any clause requiring publishers to offer Amazon similar terms and conditions as those offered to Amazon's competitors; or
- any clause requiring publishers to inform Amazon about such terms and conditions.
- To allow publishers to terminate e-book contracts that contain a clause linking discount possibilities for e-books to the retail price of a given e-book on a competing platform. Publishers would be allowed to terminate the contracts upon 120 days' advance written notice.
- Finally, not to include, in any new e-book agreement with publishers, any of these clauses.
The commitments would apply for five years and (as is usual for behavioural commitments) be subject to oversight by a monitoring trustee.
E-Books - déjà vu?
This is not the first time the Commission has investigated the e-books sector. In 2011 it opened antitrust proceedings against Apple and five international publishing houses (Penguin Random House, Hachette Livres, Simon & Schuster, HarperCollins and Georg von Holtzbrinck Verlagsgruppe) on the basis that it considered that they had colluded to limit retail price competition for e-books. In that case the companies also offered commitments to address the Commission's concerns (see our previous comment).
Where does this leave MFNs?
The Commission and national competition authorities have conducted investigations into MFN clauses in a number of other sectors, including online motor insurance and online sports goods retail, on which we have previously commented.
While MFNs are not per se unlawful, and in some circumstances may even be pro-competitive, companies should carefully consider their possible anti-competitive effects before including them in new contracts.