News

OFT gives go-ahead for Amazon/TBD merger

The Office of Fair Trading has cleared Amazon to take over The Book Depository, ruling the merger would not lead to a lessening of competition within the UK book industry.

The OFT decided there was limited pre-merger competition between the two companies and found that competition within Amazon Marketplace would continue to be strong after the takeover. It said The Book Depository only accounted for between 2-4% of the online market for physical books, and that TBD had most of its growth in overseas markets rather than the UK.

During its investigation, the OFT looked at the levels of competition between top selling titles and “deep range”, less popular books. It found for popular titles Amazon would face strong post-merger competition from bricks and mortar booksellers, supermarkets and other online retailers, including other Amazon Marketplace sellers. For deep range titles, the OFT decided Amazon would face rivalry from other online retailers and Amazon Marketplace sellers.

Amelia Fletcher, OFT chief economist and decision-maker in the case, said: “Amazon has a strong position in the online retailing of books and a number of concerns were raised by third parties. However, following a thorough investigation we are satisfied that this small increment to Amazon’s position does not raise competition issues.

“The evidence showed limited competitive constraint from The Book Depository which, in fact, has shown most growth and expansion in overseas markets rather than the UK.  We concluded that the UK book market has a significant number of bestseller and deep-range suppliers both online and off-line and that existing levels of competition will be preserved after the merger. Therefore the acquisition will not be referred to the Competition Commission for further investigation.”

Amazon announced a deal to take over The Book Depository in July. The Booksellers and Publishers Associations, the Independent Publishers Guild and the Bookseller Group opposed the merger. Nigel Roby, The Bookseller Group's managing director, said: "This is a disappointment. The Bookseller Group’s position has been that the OFT should use this opportunity to look at Amazon’s existing competitive position. It was never about Book Depository per se, which sells overseas primarily. The ruling says that ‘Amazon’s share of the UK online book market is strong’ which as understatements go will take some beating as a 75% share seems likely.

"The OFT’s test is to establish whether a 25% share of supply in the UK is created or enhanced. Patently it has. That Amazon allows Marketplace sellers access to its platform – which the OFT describes as strong post-merger competition – does not obviate that it has an overwhelmingly dominant market position."

It is currently unclear how long it will take the merger to now be completed.

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"Amazon would face strong post-merger competition from bricks and mortar booksellers"

LOL!!

Words fail me.

@Old Bookseller - that was more or less my response. The OFT does seem rather optimistic about bookshops compared to the publishing industry's view.

Has anyone noticed that Amazon is no longer discounting titles like they used to but allowing the traders on the market place to do that? We used Amazon to buy some stock because the discounts were greater than the publisher but over the past 8 weeks books that used to be 40% or 50% are now 14% or 23% now is this because Amazon profits have dropped by 73% and the same has happened at TBD too.

"competition from bricks and mortar booksellers, supermarkets and other online retailers, including other Amazon Marketplace sellers."

Ah, the other Amazon Marketplace sellers. Those will be the ones that Amazon take a 15% commission on all sales, a monthly listing fee and a slice of the postage charged to the customer...

I thought that the OFT would pass this takeover and then refer Amazon predatory pricing to the Competition Commission for further examination - so much for logical analysis !!

Amazon's predatory pricing, which has destroyed so many retail sectors, is apparently acceptable to the OFT ; the OFT live in cloud cuckoo land if they believe that bricks and mortar booksellers could economically afford to compete with Amazon "loss leading".

When most brick and mortar retailers are closed then perhaps a few politicians will realise that they should have examined Amazon's strategies ; Amazon.co.uk from their Luxembourg base will no doubt continue to make corporation tax payments at the past three years level to the Inland Revenue. (Amazon.co.uk last payment to Inland Revenue for Corporation Tax was in 2007 - £19,367. Details in Daily Telegraph 9th Sept 2011 http://www.telegraph.co.uk/finance/comment/richardfletcher/8745314/Is-th...

Not yet:
Bad Signs/Ellory offered at 59% off - that's 14% above what we can achieve from the publisher.

ouch.
Other amazon marketplace sellers.

waht, the ones that HAVE to sell there because it's one of the only places that are available online, because they've got he lion's share of the business?
How on earth can the competition commission call Merketplace sellers competition to amazon? they're wholly reliant on amazon for their sales.

Clive that article was very illuminating. I often wondered how much Amazon pays in corporation tax. The answer is, clearly, nothing. How Amazon can claim to be a service company rather than a retailer is beyond me!

Today is probably the worst day in history of book-selling. Green light for amazon means less educated readers, more "kindloids" and other victims of abusing book culture phenomenons for fat profit of "nice" guys from Wall Street.

they shall have competition from me soon. as I shall have to do an "everything must go sale" as when we close I dont want all the books in my bedroom, garage, and living room.
the kids books are ok I have a couple of kids that can read through them, and grandkids that will enjoy the picture books...... I bought them all from my wholesaler and the publisher AT MORE THAN I COULD OF BOUGHT A LOT OF THEM FOR ON AMAZON.
so whatch out amazon i shall be in competition with you very soon.

Why doesn't the BA offer a book token for the first person who can name an occasion when the OFT has prevented a merger in the book trade?

I can't remember the OFT ever preventing a merger or take-over in publishing or the book trade (although it did refer Waterstones/Ottakars to the Competition Commission).

Why can't the government cut the OFT, it clearly serves no purpose?

What's even more terrifying about that article are all the comments by the barking mad Torygraph readers who think it an outrage that companies should have to pay any tax at all on their profits.

Then consider that the paper is owned by the Barclay brothers, who are themselves tax exiles. The fact is, the feral rich have been systematically looting the world economy ever since the financial deregulation of the 1980s, and it's absurd to think that the present government or its quangos like the OFT are anything other than their willing servants.

Terrible news

And the most surreal thing of all is that the OFT believes the Marketplace sellers are competition for Amazon, as pointed out above. I think at the very least one could hope that the people investigating this at the OFT would understand the issues - but they clearly don't, which makes the exercise pointless, and an additional expensive burden on all of us paying business AND personal tax. Meanwhile, another large step down the road for Amazon domination of the book industry. This is bad news not just for booksellers, but for specialist publishers, as Amazon and its subsidiaries eat our market and put our booktrade partners out of business. Now they not only know who buys our books and will not (as they are perfectly entitled not to) give us access to that information, but also are setting up in competition as publishers. I cannot believe they will nurture as we have done the areas that we publish in and have tried over the years to provide information for, or go out looking for books to make a difference in the world. RIP book trade, RIP intelligent and risk taking publishing.

The following link makes very interesting reading by way of background information/perspective...

http://www.oft.gov.uk/shared_oft/economic_research/oft981.pdf

Perhaps they should prepare a new edition and offer it for sale via a direct link to...

Try swapping the term 'Amazon marketplace' for 'landlord'. When I owned a bookshop 15% of the cover price of a book went straight into a landlords pocket who honestly couldn't give a monkeys what we were selling. At least Amazon has a passing association with the book trade.

Totally agree with this one! It hurts us little ones!

When a major author goes to Amazon to be published, traditional publishers will wake up and smell the coffee.

Right now they're the pesky middleman in the way of total control so will exterminated too.

Possible future development - Amazon kill Marketplace trade by limiting sellers of new books to say 20,000-50,000 units - this would mean Aphrohead, Superbookdeals etc. would have to dramatically narrow their product offerings, perhaps to the point they are no longer viable. Just my 2c. Guess we will see....

"Amazon would face strong post-merger competition from bricks and mortar booksellers"

LOL!!

Words fail me.

@Old Bookseller - that was more or less my response. The OFT does seem rather optimistic about bookshops compared to the publishing industry's view.

Has anyone noticed that Amazon is no longer discounting titles like they used to but allowing the traders on the market place to do that? We used Amazon to buy some stock because the discounts were greater than the publisher but over the past 8 weeks books that used to be 40% or 50% are now 14% or 23% now is this because Amazon profits have dropped by 73% and the same has happened at TBD too.

Not yet:
Bad Signs/Ellory offered at 59% off - that's 14% above what we can achieve from the publisher.

"competition from bricks and mortar booksellers, supermarkets and other online retailers, including other Amazon Marketplace sellers."

Ah, the other Amazon Marketplace sellers. Those will be the ones that Amazon take a 15% commission on all sales, a monthly listing fee and a slice of the postage charged to the customer...

Totally agree with this one! It hurts us little ones!

I thought that the OFT would pass this takeover and then refer Amazon predatory pricing to the Competition Commission for further examination - so much for logical analysis !!

Amazon's predatory pricing, which has destroyed so many retail sectors, is apparently acceptable to the OFT ; the OFT live in cloud cuckoo land if they believe that bricks and mortar booksellers could economically afford to compete with Amazon "loss leading".

When most brick and mortar retailers are closed then perhaps a few politicians will realise that they should have examined Amazon's strategies ; Amazon.co.uk from their Luxembourg base will no doubt continue to make corporation tax payments at the past three years level to the Inland Revenue. (Amazon.co.uk last payment to Inland Revenue for Corporation Tax was in 2007 - £19,367. Details in Daily Telegraph 9th Sept 2011 http://www.telegraph.co.uk/finance/comment/richardfletcher/8745314/Is-th...

Clive that article was very illuminating. I often wondered how much Amazon pays in corporation tax. The answer is, clearly, nothing. How Amazon can claim to be a service company rather than a retailer is beyond me!

ouch.
Other amazon marketplace sellers.

waht, the ones that HAVE to sell there because it's one of the only places that are available online, because they've got he lion's share of the business?
How on earth can the competition commission call Merketplace sellers competition to amazon? they're wholly reliant on amazon for their sales.

Today is probably the worst day in history of book-selling. Green light for amazon means less educated readers, more "kindloids" and other victims of abusing book culture phenomenons for fat profit of "nice" guys from Wall Street.

they shall have competition from me soon. as I shall have to do an "everything must go sale" as when we close I dont want all the books in my bedroom, garage, and living room.
the kids books are ok I have a couple of kids that can read through them, and grandkids that will enjoy the picture books...... I bought them all from my wholesaler and the publisher AT MORE THAN I COULD OF BOUGHT A LOT OF THEM FOR ON AMAZON.
so whatch out amazon i shall be in competition with you very soon.

Why doesn't the BA offer a book token for the first person who can name an occasion when the OFT has prevented a merger in the book trade?

I can't remember the OFT ever preventing a merger or take-over in publishing or the book trade (although it did refer Waterstones/Ottakars to the Competition Commission).

Why can't the government cut the OFT, it clearly serves no purpose?

What's even more terrifying about that article are all the comments by the barking mad Torygraph readers who think it an outrage that companies should have to pay any tax at all on their profits.

Then consider that the paper is owned by the Barclay brothers, who are themselves tax exiles. The fact is, the feral rich have been systematically looting the world economy ever since the financial deregulation of the 1980s, and it's absurd to think that the present government or its quangos like the OFT are anything other than their willing servants.

Terrible news

And the most surreal thing of all is that the OFT believes the Marketplace sellers are competition for Amazon, as pointed out above. I think at the very least one could hope that the people investigating this at the OFT would understand the issues - but they clearly don't, which makes the exercise pointless, and an additional expensive burden on all of us paying business AND personal tax. Meanwhile, another large step down the road for Amazon domination of the book industry. This is bad news not just for booksellers, but for specialist publishers, as Amazon and its subsidiaries eat our market and put our booktrade partners out of business. Now they not only know who buys our books and will not (as they are perfectly entitled not to) give us access to that information, but also are setting up in competition as publishers. I cannot believe they will nurture as we have done the areas that we publish in and have tried over the years to provide information for, or go out looking for books to make a difference in the world. RIP book trade, RIP intelligent and risk taking publishing.

The following link makes very interesting reading by way of background information/perspective...

http://www.oft.gov.uk/shared_oft/economic_research/oft981.pdf

Perhaps they should prepare a new edition and offer it for sale via a direct link to...

Try swapping the term 'Amazon marketplace' for 'landlord'. When I owned a bookshop 15% of the cover price of a book went straight into a landlords pocket who honestly couldn't give a monkeys what we were selling. At least Amazon has a passing association with the book trade.

When a major author goes to Amazon to be published, traditional publishers will wake up and smell the coffee.

Right now they're the pesky middleman in the way of total control so will exterminated too.

Possible future development - Amazon kill Marketplace trade by limiting sellers of new books to say 20,000-50,000 units - this would mean Aphrohead, Superbookdeals etc. would have to dramatically narrow their product offerings, perhaps to the point they are no longer viable. Just my 2c. Guess we will see....

Anonymouse - I think this very unlikely. It seems very likely that amazon make more money (definitely moer margin) on marketplace sales than on their own sales.

Chris:
Yes, you are correct. In fact Marketplace sellers prop up the behemoth. Without them Amazon would collapse pretty quickly I suspect. There's a very good reason Amazon swallowed up Abebooks, Chrislands et al - their profit comes from the marginals. Wait until the B&M stores implode and then watch the price hike begin.

Quoted from the above report:

"Amazon would face rivalry from...Amazon Marketplace sellers"

I simply don't understand how Marketplace sellers can be seen as a viable rival to Amazon when Amazon itself profits from every Marketplace transaction? It's not true competition, it's just a different percentage of profit that Amazon make. As such it absolutely should not be considered by the OFT as just reasoning for allowing this merger to take place!

"The Book Depository which, in fact, has shown most growth and expansion in overseas markets rather than the UK."

That's because those of who live overseas refuse to pay Amazon's outrageous shipping prices. If TBD can ship overseas, air mail, FREE, why can't Amazon? Sad day.

Exactly! The shipping is outrageous from Amazon. I refuse to pay and buy all my books at TBD

Not for much longer, I would reckon.

I think George Orwell would have relished the newspeak whereby an 'Office of Fair Trading' is in practice an 'Office of Promoting Corporate Monopoly Trading'. But why is everyone focussed on Amazon and The Book Suppository when Books2anywhere are undercutting everyone, with Stratford Books, Browns Books and others close behind, often often offering up to 60% on newly published books (and most books in print here and from America) on listing sites, on top of (presumably) paying their 15% to ABEbooks etc. Perhaps someone can explain the economics of this ? Could they be angling for an Amazon buy-out by massive loss-leading competition ? No doubt the purchase price will then pay the huge debts they must surely have accumulated - while the rest of us go to the wall (also part of the plan, no doubt).

Clive that article was very good. I often wondered how Amazon pays their taxes. The answer is, clearly, nothing.