Amazon Faces EU Antitrust Probe Into E-Books Contracts

[eschwartz]

I m well aware that they make that discount. However, I assume the discount comes out of Amazon's pocket, just like the other retailer eats the cost.

That is what a wholesale model does. It lets the retailer set competitive prices based on what other retailers offer.

I assume, without hard evidence, that Amazon demands the most favorable terms that the supplier offers to other vendors. Because with a wholesale model (where this is relevant) the retailer prices literally have nothing to do with anything whatsoever.

Dur. I mentioned Agency to demonstrate the obvious difference between the two. Use your deductive reasoning skills.


If anyone has some sort of evidence or any reason whatsoever to think Amazon makes suppliers eat the cost of Amazon price-matching a cost that Kobo/Google/B&N eats, please lay your facts on the table.

[HarryT]

Originally Posted by eschwartz

If anyone has some sort of evidence or any reason whatsoever to think Amazon makes suppliers eat the cost of Amazon price-matching a cost that Kobo/Google/B&N eats, please lay your facts on the table.

The evidence is the personal experience of authors here at MR, reported in the "Writers' Corner" forum here. When Amazon cut the price of a book because it's been discounted at another bookstore, the amount of money the author receives is correspondingly reduced.

[shalym]

Originally Posted by HarryT

The evidence is the personal experience of authors here at MR, reported in the "Writers' Corner" forum here. When Amazon cut the price of a book because it's been discounted at another bookstore, the amount of money the author receives is correspondingly reduced.

That's Agency pricing, though. The authors set the price, and sign an agreement that the book won't be sold for less anywhere else. In exchange for that, they get 70% of whatever Amazon gets when the book is sold. Is that the agreement that the publishers have with Amazon? Or are they using the warehouse model?

Shari

[eschwartz]

Yes, precisely. That is the point I have been trying (apparently unsuccessfully) to make: It is entirely reasonable in every way, shape, and form for Amazon to price-match, assuming no contract terms require them sticking with the highest price in town! And if the book is sold under the agency model, the author is absorbing the cost in all stores, so why should Amazon be any different? And if the book is sold under Agency, the retailers are absorbing the cost, in all stores again, so why should Amazon be any different?

And AFAIK, Amazon is absorbing the cost whenever other retailers are. Do you have any evidence that Amazon is, and I quote:

Originally Posted by eschwartz

If anyone has some sort of evidence or any reason whatsoever to think Amazon makes suppliers eat the cost of Amazon price-matching a cost that Kobo/Google/B&N eats, please lay your facts on the table.

Wildly listing every time Amazon passes a cost to the rights-holder is not an actual answer. It merely means, as far as I am concerned, that you are referring to case #1 (agency model), which means that the only fair thing is for the author to absorb the cost.

[AnotherCat]

Originally Posted by Dopedangel

I think you are not getting what Amazon is doing and how it is anticompetitive. Lets say your book is being sold for $10 where $7 is for you $3 for the sellers. Now lets say a seller is willing to make less money and sell for $9 now where you still get your $7 but the seller get $2. But Amazon says that you have to relist with them at $9 meaning you get $6.7 and Amazon gets $2.3...

Unfortunately that is nothing to do with the question I asked.

You had claimed that Amazon forcing suppliers to give it the cheapest price... and I asked Would you point me to a trusted source where that claim is made. That because as far as the Bloomberg link [which you posted when making the claim] says Amazon requires in its purchase contracts terms as good as is offered to others i.e. Amazon does not require to be the "cheapest", just that it wants to “ensure that Amazon is offered terms at least as good as those for its competitors.”.

So I am waiting for a trusted source which validates your claim that Amazon requires to be offered the cheapest selling price by its suppliers i.e. terms and conditions in which Amazon requires the price of the supply to it to be lower than the same supply to the seller's other customers.

I am not saying that they don't, just that your Bloomberg link makes no such claim and I am just seeking validation of your claim.

In your example you actually have Amazon's buying price as being the same as its competitors, whereas your claim is that they force suppliers to give it the cheapest price (i.e. give it a price cheaper than its competitors get). So your example does not address my question.

Originally Posted by Dopedangel

Amazon is not the only ebook distribution channel to discount books without the prior consent of the author – and price drops are fine if they help you sell more books without denting your profit, but only Amazon insists on being the cheapest supplier as part of their terms and conditions
only Amazon will drop your book if it’s cheaper on a different store

I think what is being forgotten is that Amazon is a customer, it seems a strange claim that a customer has to get the author's approval of the price that the customer on sells at. That would, in fact be anticompetitive because the author is then preventing competition among the retailers.

Furthermore you seem to be saying that Amazon has to sell an author's books even if Amazon does not want to. For example, you seem to be saying that if another retailer sells a title at a lower price than Amazon wishes to sell at, then Amazon has to keep listing the book at its higher selling price even if Amazon considers it not worth its while to do so and would rather drop it rather than meet the competition of the lower price offered by other retailers.

None of this stuff is new, it happens and is accepted in all sorts of markets. A very visible, but just one of many examples, is supermarkets where the supermarket as a customer may require its suppliers to offer them prices which are no higher than those the supplier sells at to the supermarket's competitors, and if they don't they drop the line. Furthermore, going further, arrangements where supermarkets "sell" prime shelf space to a supplier's line, for example, are common (e.g. I will put your line in prime shelf space, or promotional space, but you will have to take some of the risk of my giving up that space from another proven performing product by cutting your price of supply to me or by crediting me back any lessening of profit that may eventuate from my reallocating that space to you from the previous performing shelf holding product).

Maybe authors and publishers think they have some precious place in the business world making them immune from competitive business practices common in other markets. If Amazon are dragging them into the real world by demanding their rights as their customer to not be disadvantaged insofar as the price and terms that they have to buy titles in at, and that their own selling price is their own business not the author's, and if they do not get those they then dump the title, then, in my view, that is an excellent thing.

[Dopedangel]

Amazon does not decrease the prices it just removes your ebooks from their website forcing you to list the book at the price matching the other sellers discount. So Amazon does not have to match the price and take the loss on revenue.
As Amazon has largest market share taking your ebooks off Amazon or keeping them of is not feasible for any author.
Amazon is not the customer they are the sellers they are selling their services to the publishers and authors for % of sales so what they are doing is anticompetitive and wrong and they are abusing their market position against other ebook sellers.
You are giving a false example as the authors or publishers are supplying at the same price to Amazon or other sellers. What kind of margins Amazon is willing to take is up to them. Authors are not selling to them at different prices or selling to another supplier at a cheaper price.
And like I said in your hate against Authors and Publishers you are not getting the simple point that this is not about Amazon vs Publishers rather about Amazon vs Other sellers. Yes Amazon can ask for better prices from publishers because of its market share but it is anticompetitive to get in written in contract that other sellers cant sell cheaper than what Amazon is selling at.

[Shades]

Originally Posted by Dopedangel

Amazon does not decrease the prices it just removes your ebooks from their website forcing you to list the book at the price matching the other sellers discount.

You say all this, but where is your trusted source? "He said she said" isn't a trusted source.

[Dopedangel]

Originally Posted by Shades

You say all this, but where is your trusted source? "He said she said" isn't a trusted source.

Yes EU are just investigating Amazon without any trusted sources and all the authors are lying. There's none so blind as those who will not see.

[Little.Egret]

Originally Posted by Dopedangel

Amazon does not decrease the prices it just removes your ebooks from their website forcing you to list the book at the price matching the other sellers discount.
{...}

Authors selling through KDP have in fact noted that the Amazon price is reduced rather than the book removed from the website. The only 'removes' or suspends have been when an Amazon robot finds an unexplained copy.

[AnotherCat]

Originally Posted by Dopedangel

...Amazon is not the customer they are the sellers they are selling their services to the publishers and authors for % of sales...

Even a cursory look at their publically available price sheets shows that your generalization is incorrect, so I don't know if you have never looked at them or whether you are inclined to making generalizations that suit your agenda (refer also to the comment by another regarding your "he said, she said" approach).

However, whether sales are on commission or not makes no difference as to the customer relationship between the "manufacturer" (in this case the author or publisher) and the commission seller (you are saying Amazon always is such, but I am don't agree so I am referring to commission arrangements as they are in the world).

First, pricing: In the conventional case of a "manufacturer" selling to an on selling "wholesaler" (or retailer) a price is agreed and the "manufacturer" gets, in effect, the "wholesaler's" selling price less the "wholesalers" margin. In the commission case the "manufacturer" gets the selling price ex the commission seller to the market less the commission; the commission is the commission seller's margin. In both cases, whether that of the "wholesaler" and that of the commission seller, they get that margin. The margin's magnitude might differ between the two cases but that only because the costs covered by that may be different, it is likely that the profit content within the margin is similar in both cases. In effect, the pricing relationship is the same.

Second, the working relationship between the two parties: I would have thought this to be obvious, but apparently not. In both cases the relationship is the same. Whether a "wholesale" or commission arrangement the "manufacturer" supports that party as a customer. If he wants to get the best from his product in the end market the "manufacturer" provides a product and support for it to both "wholesaler" and commission sellers in the same way. Examples are; meeting the market's expectations of quality, providing support to the seller's marketing (in way of presence, product details, agreeing to sharing cost of specials, etc.), providing support to the seller's handling of complaints, warranty, etc., ensuring product is available to the agreed delivery schedule, etc. etc. etc.

So it is that, regardless of whether sales are made on commission or not, in both cases the relationship is one where the "wholesaler" or the commission seller is treated as the "manufacturer's" customer and your claim is incorrect.

There are many cases where people get confused about who is the customer and who is not. A couple of well known examples are; where organizations provide services which the takers of those services are required to take by legislation - who is the customer, the taker of the services or the government, and the often quoted one of newspapers where who is the customer, the reader or the advertisers?

Anyway, I get the impression this is not going to influence your thinking in any way at all, so I will leave the subject at that.

[SteveEisenberg]

Originally Posted by AnotherCat

A very visible, but just one of many examples, is supermarkets where the supermarket as a customer may require its suppliers to offer them prices which are no higher than those the supplier sells at to the supermarket's competitors, and if they don't they drop the line.

Where is this visible in the EU?

I just googled, looking at search terms such as:

mfn tesco or carrefour

And I failed to find the visible evidence. I may be missing it and will be glad to be enlightened.

Originally Posted by AnotherCat

So I am waiting for a trusted source which validates your claim that Amazon requires to be offered the cheapest selling price by its suppliers i.e. terms and conditions in which Amazon requires the price of the supply to it to be lower than the same supply to the seller's other customers.

The contracts between Amazon and the major publishers are secret. The European Commissioner for Competition, and her staff, plan to break through this secrecy. Then they will know. And if Amazon and/or publishers are charged with a violation, we will know:

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.

I would be surprised if Amazon's contract with, say, HarperCollins, calls for it to get better terms than any other retailer. Perhaps the contract calls for wholesale prices tied with the cheapest, or includes a complex formulation coming close to that.

Note that the word cheapest is not present in the relevant law:

https://en.wikipedia.org/wiki/Articl...European_Union

[AnotherCat]

The matters in response to my earlier post.

Originally Posted by SteveEisenberg

Where is this visible in the EU?

I just googled, looking at search terms such as:

mfn tesco or carrefour

And I failed to find the visible evidence. I may be missing it and will be glad to be enlightened.

Where did I claim that was so in the EU? I gave supermarkets just as a typical example of business practices that occur in the wide world while addressing the general (wide world) claim by another poster that the Amazon relationship was not as a customer. Whether they do or not in the EU is irrelevant to that.

Originally Posted by SteveEisenberg

The contracts between Amazon and the major publishers are secret. The European Commissioner for Competition, and her staff, plan to break through this secrecy. Then they will know. And if Amazon and/or publishers are charged with a violation, we will know:

I would be surprised if Amazon's contract with, say, HarperCollins, calls for it to get better terms than any other retailer. Perhaps the contract calls for wholesale prices tied with the cheapest, or includes a complex formulation coming close to that.

Yes I agree that contracts with major suppliers are likely to be secret, and that supports my refutation of the claim by another that all Amazon contracts are of a commission nature.

Originally Posted by SteveEisenberg

Note that the word cheapest is not present in the relevant law:

https://en.wikipedia.org/wiki/Articl...European_Union

Article 101 which addresses cartels and price fixing I find amusing in that the EU itself is a cartel, a cartel of nations which fix economic and other matters between them (such as manufacturing standards, taxes, movement of the workforce across borders, etc.) such that collectively they are both the world's biggest economy and biggest economic cartel.

[pwalker8]

A couple of points -

First, the EU has in the past used anti-trust against American companies to protect EU companies. I would be very surprised if this isn't just another one of those attempts.

Second, most favored nation clauses, i.e. "you can't sell it for less elsewhere" are quite legal and not particularly uncommon, especially in an agency model. In the US, anti-trust is dependent on if the practice is used to suppress competition.

[SteveEisenberg]

Originally Posted by AnotherCat

Article 101 which addresses cartels and price fixing I find amusing in that the EU itself is a cartel, a cartel of nations which fix economic and other matters between them (such as manufacturing standards, taxes, movement of the workforce across borders, etc.) such that collectively they are both the world's biggest economy and biggest economic cartel.

I suppose this is one way to look at the EU. You could also say that about the United States of America, the United Mexican States, the Swiss Confederation, the Federation of Malaysia, etc.

While there's a possibility of EU member states individually investigating the competition implications of Amazon-publisher eBook contracts, it's likely they won't, because of Brussels already taking care of it. So this cartel thing may be a plus for Amazon in limiting their legal bills.

Originally Posted by pwalker8

First, the EU has in the past used anti-trust against American companies to protect EU companies. I would be very surprised if this isn't just another one of those attempts.

I don't think there's much risk you'll be surprised. Three of the big five publishers are part of European companies, and, even though they agreed to any MFN clauses, they'd probably be glad to see them invalidated.

However, it's one thing to note that anti-trust is being used in this way, and another thing to show that there's something unfair here. Consider:

http://ec.europa.eu/commission/2014-...s-antitrust_en

. . .between 2010 and 2014 we adopted 30 cartel decisions involving 231 companies and imposed fines totalling €8.9 billion.

Of these, 190 European companies received fines totaling €4.8 billion – just over half of the total – while 17 US-based companies received fines of €652 million – about 7% of the total.

US trustbusters not only go after foreign companies, they also sometimes -- unlike the EU -- send their executives to prison. I like the EU approach better.

The way I read the Sherman Act, in the US, and Article 101, in the EU, is that they both leave a lot of room for interpretation and case law. So unfairness is certainly possible. But it's also possible that's Amazon's tremendous eBook market share is being defended in ways that make it impractical for smart competitors to succeed. If the EU competition authorities can using evolving civil antitrust standards to do something about that, it sounds good to me.

____________________
* According to an estimate in a 2014 report on the e-book market, Amazon has a 79 percent market share in the United Kingdom, with the largest local e-book seller, Waterstone's, at 3.3 percent. Of course, if Britain leaves the EU, this won't be a good example.

[eschwartz]

Originally Posted by SteveEisenberg

However, it's one thing to note that anti-trust is being used in this way, and another thing to show that there's something unfair here. Consider:

http://ec.europa.eu/commission/2014-...s-antitrust_en


US trustbusters not only go after foreign companies, they also sometimes -- unlike the EU -- send their executives to prison. I like the EU approach better.

But surely, if the law has decided that the companies have well and truly done something truly wrong, then it is only fitting that the people who were in charge suffer personal consequences?

Certainly, the companies themselves will not have a problem, all too often they will simply consider an anti-trust conviction the cost of doing business.
Unless the government is prepared to tear the company into individual bite-sized pieces, which isn't all that common... Fines alone aren't very scary.