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Amazon pressing for new terms in UK
25.06.14 | Benedicte Page
UK publishers have raised concerns about Amazon’s new contractual arrangements, with the giant retailer pressing for improved terms from a number of publishers, even as its stand-off with Hachette Book Group continues in the US.
Along with improved discounts on wholesale contracts, Amazon has introduced a number of new clauses in publisher contracts. One causing particular worry is a proviso that should a book be out of stock from the publisher, Amazon would be entitled to supply its own copies to customers via its print-on-demand facilities.
Meanwhile in a separate development, the European Union's Directorate General for Competition is understood to have approached major UK publishers over an investigation into Most Favoured Nation (MFN) clauses—the terms came under the spotlight during the inquiry into the shift to the agency model ins 2010, but the EU is looking at a new review focused specifically on MFN.
The EU move comes as Amazon and Hachette USA continue to tussle over terms. At an investor presentation at the end of May, Hachette Livre chief executive Arnaud Nourry said Amazon was seeking to “dramatically change terms”. It is understood that there are some parallels between the terms on offer to Hachette USA and publishers in the UK. The New York Times reported that Amazon is asking for payment for a range of services, in what the paper called “similar to so-called co-op arrangements with traditional readers, like paying Barnes & Noble for placing a book in the front of the store”.
In the UK a number of publishers spoken to as part of The Bookseller's investigations into the Hachette dispute said Amazon was also now putting them under "heavy pressure". According to the sources, new demands include adjusting terms so that e-books and physical book terms have parity; the adjustment is said to be in the direction of "p", which traditionally attracts a higher percentage for the retailer compared with "e". Amazon is also understood to be targeting academic terms, which have historically been more favourable to the publisher. The retailer also wants to impose a ceiling on the digital list price of e-books in preparation for 2015 when the retailer will have to begin imposing the standard 20% rate of VAT on digital titles.
New contracts are also said to include MFN clauses, whereby effectively books cannot be sold for a lower price than Amazon's anywhere, including on a publisher's own website. Amazon is also understood to want matching terms where a publisher enters into a new business arrangement, for example with a subscription service. Publishers told The Bookseller that MFN clauses had disappeared from contracts, but were now making a reappearance.
Another clause of particular note requires publishers to guarantee they have books in stock, allowing Amazon to do print-on-demand editions to customers – with extra terms benefits – should books be out of supply. The clause has echoes of a demand made in 2008 that small publishers use its POD service, with Amazon arguing at that time that it could “provide a better, more timely customer experience if the p.o.d. titles are printed inside our own fulfilment centres”. Publishers are worried that the clause would allow Amazon to effectively take over their stock-control.
Meanwhile, the use of MFN clauses is thought to have come under the Brussels spotlight, with the same EC competition authorities which earlier investigated publishers over agency pricing. Within the last few weeks, it is understood that some publishers' sales personnel have been summoned to meetings in Brussels, said to be "much more friendly" than the meetings held while agency pricing was being investigated.
The EU has investigated MFN clauses in the past, but has never ruled them illegal. However, under the terms of price-fixing settlements entered into by the five settling publishers in 2012, those publishers are forbidden until 2017 from entering into any agreement for e-books which contains a retail price MFN clause.
A spokesperson for the European Union's Directorate General for Competition refused to confirm or deny that it launched a new preliminary investigation into the matter. It said it was continuing to monitor the e-book market, but declined to give specifics.
Despite being contacted several times today (23rd June) Amazon's UK press office has not responded to a request for comment.