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.
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Here’s a list of Amazon’s bookish businesses, according to Wikipedia:
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.
Mobipocket.com, eBook software company
Shelfari (including a 40% stake in LibraryThing and whole ownership of BookFinder.com, Gojaba.com, and FillZ);