Amazon, the OFT, and Price Parity
Until very recently, sellers on Amazon weren’t allowed to
sell any item they had listed on Amazon for less elsewhere. Many booksellers have their own sites. It
costs much less to sell a book from your own site as you aren’t paying Amazon
either their monthly fee, or the 17.25% they take from every sale, and the cut
they take of the postage. It makes good economic sense for you as a small
business to encourage people to your site with costs that undercut Amazon’s,
but under Amazon’s price parity policy, you couldn’t do this.
There was an outcry about this back in 2010, and a complaint
was made to the OFT. One of the booksellers who complained was contacted by the
OFT on 4th June 2010 via email (which I’ve seen, as I have the rest
of the emails mentioned in this piece). The bookseller was asked if they’d be
available to answer some questions, as the OFT gathered information on Amazon.
The interview happened. Not a lot else did, so the
bookseller wrote to the OFT on 10th August 2010, and asked if there was any
news, as they were still waiting to see whether or not to re-price all their
books, in accordance with Amazon’s policy, or whether the new rule would be
overturned by the OFT. Christmas came and went, with no answer. By January
2011, it was no longer the original OFT contact’s problem: they’d moved on.
Remarking in a reply to the patient bookseller that it was unusual for informal
enquiries to take as long as this did, the bookseller was told they’d be
contacted.
Years went by. In March of this year (2013) the OFT were
again in touch with the bookseller, with a reply which is a masterpiece in
obfuscation. After several reads I’m still not entirely clear what they wanted
to say: the one thing that is clear is that not much has changed since 2010.
The bookseller was told that the OFT had only recently been able to examine the
issues raised. What was it, I wonder, that bumped Amazon up the OFT’s
Prioritisation Principles after years? Could it have anything to do with Amazon’s
unpopularity late in 2012 as a UK tax avoider?
In August 2013, things at last moved on. It should be noted
at this point that the OFT still has not commented on the policy, but Amazon
have backed down. Here’s what the OFT sent to those who complained back in
2010:
You have previously contacted the
Office of Fair Trading (‘OFT’) to raise concerns about Amazon’s price parity
policy in its agreements with third party sellers trading on the Amazon.co.uk
Marketplace online retail platform.
You may already be aware that the
OFT launched a formal investigation into this policy in October 2012, under
Chapter I of the Competition Act 1998 and Article 101 of the Treaty on the
Functioning of the European Union. The webpage for this investigation can be
found here.
Amazon has informed the OFT of
its decision to end its price parity policy across its Marketplace in the
European Union effective from 30 August 2013. As a result, the OFT is minded to
close its investigation on the grounds that it is no longer an administrative
priority. Further details can be found in the OFT’s press release available here.
The OFT welcomes confirmation
from you, as a third party seller trading on Amazon.co.uk Marketplace, that
Amazon has notified you of its decision to stop enforcing its price parity
policy and remove the relevant clauses subsequently from your
agreement.
If the OFT was originally contacted in 2010, why did it take
it two years to launch a formal investigation, despite its protestations of
action in 2010?
What was the effect on booksellers? One wrote to me:
"I think the key thing is that
this policy stopped sellers having a sale or a special offer which improves
cash flow, and cash flow, as we know, is what keeps a business viable. The OFT
have taken 3 years and 5 months before Amazon have backed down and also have
STILL passed no opinion. Small businesses and consumers have been at the mercy
of this policy for all that time. They still are because there has been so
little prominence given to the change in rules that the rules might as well
still be in place."
Booksellers have, as yet, no email from Amazon alerting them
to the changes. The seller contract has been changed, but the notification was:
“Just a plain link to changes in
participation agreement in sellers home ‘headlines’ – they often tweak this and
not everyone will read it all the time.
For any bookseller not yet aware, here’s the agreement with
the changes:
You will notice that I don’t give the names of any
booksellers in this piece. As with the
previous times I’ve written about Amazon, booksellers do not want to infuriate
the company that provides them with their bread and butter. Of the sellers I
spoke to, Amazon make up 33-50% of their income; more when sales from ABE,
which Amazon also own, were included.
It’s good that Amazon have backed down on price parity. It’s
good that they can be made to, when the OFT acts. Let’s hope that, as Amazon
acquires ever more book-related businesses (Goodreads is the latest) that the
OFT keeps a firm eye on them.
~ 0 ~
Here’s a list of Amazon’s bookish businesses, according to
Wikipedia:
AbeBooks
Audible.com
Book Depository
Bookpages.co.uk, UK online book retailer, which became
Amazon UK in 1998
BookSurge, print-on- demand
Brilliance Audio, largest independent publisher of
audiobooks in the United States
CreateSpace.com, on-demand books, CDs, and DVDs.
GoodReads
Mobipocket.com, eBook software company
Shelfari (including a 40% stake in LibraryThing and whole
ownership of BookFinder.com, Gojaba.com, and FillZ);
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