Amazon has accepted new contract terms with book publishers in the European Union after Commissioner Margrethe Vestager led an investigation into Amazon’s practices. After today’s decision, Amazon will no longer force publishers to provide the best price on the company’s Kindle store.
The investigation started a couple of years ago as publishers started to worry that Amazon’s contracts would hurt everyone’s bottom line. With that clause, publishers wouldn’t be able to sell their own books on other platforms at a cheaper price.
This used to increase Amazon’s competitive advantage and tended to create a race to the bottom. Now, publishers have a bit more power against Amazon. And other distribution platforms like Apple’s iBooks Store can compete more easily.
Publishers can renegotiate their contracts starting today, and especially the pricing part. Amazon can no longer demand the best price in new contracts starting today.
Amazon is accepting those demands so that it doesn’t have to pay any fine following the investigation. At the same time, the ebook market has more or less stagnated for the last few years. It is no longer the hot new thing that it used to be five years ago. People like buying actual books after all.
So it seems like it’s not worth fighting this fight for Amazon. The company is probably more worried about a potential investigation into its tax practices.
Like many companies, Amazon has been optimizing its tax rate by paying royalties to a subsidiary that pays very little taxes. By settling the ebook case with the European Commission, Amazon shows that it is willing to negotiate with the European Union.