Last week the European Commission announced it would launch a formal enquiry into whether Amazon's dominance of the ebooks market in the UK and Germany is anti-competitive. The news is the latest in a number of antitrust enquiries to have affected the content industries - most notably the US Department of Justice's investigation into the agreements that Apple's iBook store struck with publishers that led to the technology giant being fined for anticompetitive behaviour. (Incidentally State Attorneys in New York and Connecticut also opened investigations into Apple's relationship with record companies following the launch of the Apple Music streaming service).
The scope of the EU's antitrust investigation is restricted to ebooks only, and will focus on whether the deals that Amazon strikes with publishers in which it requires them to disclose the terms under which they supply ebooks to their rivals. The investigators will use this information to determine whether this practice gives Amazon an unfair advantage over other ebook retailers as the dominant player in the market. Commenting on the announcement, the EC Competition Commissioner Margarethe Vestager said: "It is my duty to make sure that Amazon's arrangements with publishers are not 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."
If it is found to have acted in an anti-competitive manner it's possible that Amazon will face a number of restrictions on the way it does business. For example, when the DoJ won its case against Apple in 2013, it was able to place an external monitor into Apple's business. The judgement also effectively forced the end of the agency model for ebook sales, where the retailer gave publishers a proportion of the selling price of the book. This was replaced by the wholesale model that Amazon favoured: a move that was widely credited with driving down the price of ebooks. This situation lasted until last year, when a protracted dispute between Hachette and Amazon over terms of business led to Amazon reportedly striking a new deal that restored some elements of the agency model. Since then, Amazon's deals with other publishers have also come up for re-negotiation and also been renewed with some agency model elements.
As the terms of the investigation require the EU to look into the content of Amazon's contracts with publishers, it's likely that we will learn a great deal more about the working practices of a company that has always jealously guarded the terms it requires of its suppliers. We may also soon understand better whether Amazon's ebook selling practices do lock other ebook stores out of the market and limit competition, as it has so often been accused.