Amazon faces EU probe over e-book contracts

Biggest e-book seller in Europe under scrutiny for anti-competitive clauses in contracts with publishers

Amazon faces a probe into its e-book contracts with publishers as the EU’s Competition Commissioner Margrethe Vestager added to her growing list of fights with US technology companies.

EU regulators said the world’s biggest online retailer may be squeezing out rival distributors of e-books by insisting that publishers can not give better terms.

“We’re not actually targeting US companies — we don’t have a geographic bias,” Ms Vestager said yesterday. “This just reflects that there are many strong companies in the US that influence the digital market elsewhere.”

The e-books probe is Amazon’s latest clash with the EU after it was embroiled in an investigation into tax loopholes for multinationals including Apple. Since taking office in November, Ms Vestager has also sent Google a formal competition complaint for shutting out rival search engines and started a clampdown on possible barriers to e-commerce and digital content including Hollywood studios’ pay-TV deals.

The commission said the Seattle-based company includes clauses in its contracts that “require publishers to inform Amazon about more favourable or alternative terms offered to Amazon’s competitors” and to “ensure that Amazon is offered terms at least as good as those for its competitors”.

Amazon, now the largest distributor of e-books in Europe, helped pioneer the market with the introduction of the Kindle in 2007.

“Amazon is confident that our agreements with publishers are legal and in the best interests of readers,” the company said. “We look forward to demonstrating this to the commission as we co-operate fully during this process.”

The Amazon case follows settlements with publishers, including Penguin and Apple, in a previous probe into pricing of e-books.

The investigation adds to the pressure on the online retailer in Europe, where it is already being investigated for the low tax rates it pays in Luxembourg.

The EU said it will analyse whether the clauses inserted by Amazon prevent competitors from developing new products and “whether such clauses may limit competition between different e-book distributors”.

This behaviour may violate “EU antitrust rules that prohibit abuses of a dominant market position and restrictive business practices”, regulators said.

“‘If a publisher/e-book distributor got a better deal elsewhere and Amazon had a right to match that deal, then Amazon might become an ‘entrenched supplier’,’’ said Tim Cowen, a lawyer at Preiskel & Co in London.

Competition regulators have taken enforcement action against similar causes. Priceline Group’s Booking.com settled competition probes in France, Sweden, and Italy in April by agreeing to drop clauses preventing hotels from offering lower room prices on competing online travel services.

Officials are also probing the European tax affairs of Apple, as well as the Starbucks cafe chain, putting US multinationals squarely at the centre of concerns over low corporate tax deals arranged with small EU states.

US president Barack Obama, whose administration is trying to negotiate an ambitious transatlantic free trade deal with the EU, warned earlier this year against Europe turning to protectionism to the detriment of the US tech sector.

Earlier this week, the EU stepped up its probe into tax loopholes for multinational companies, demanding details of specific agreements in 15 nations, including euro-zone heavyweights Germany, France, and Italy.

Regulators also issued an ultimatum to Poland and Estonia for failing to hand over information about tax deals. The EU ordered them to fall in line within one month or face possible legal action at the European Court of Justice.

Ms Vestager is seeking to throw the spotlight onto the tax affairs of multinationals across the EU, potentially adding to probes targeting fiscal arrangements between Ireland and Apple, Starbucks in the Netherlands, and Amazon and a Fiat unit in Luxembourg.