Amazon backs off ‘price parity’ clause after OFT investigation
Poor old Amazon. It’s been a funny old year, with its tax-avoiding dirty linen being washed in public, and a hugely unpopular change in delivery policy topped off by the announcement last month that the second quarter of 2013 showed a loss of $7m (£4.56m), compared with a profit of the same amount for the same period last year, despite a 22% rise in sales.
Now, after the Office of Fair Trading and its German counterpart starting poking around in its Marketplace Sellers' terms, Amazon have been forced to withdraw its ‘price parity’ rules, for fear of being caught by anti-competition regulations.
The OFT investigation was opened last October after numerous complaints that the price parity terms restricted sellers’ ability to set prices on their own websites or other online sales channels. From Amazon’s point of view, it didn’t want to be undercut by its own sellers – “we ask sellers who choose to sell their products on Amazon not to charge customers higher prices at Amazon than they charge elsewhere. This is critical to preserve fairness for Amazon customers.” However, the OFT was rapidly coming to the conclusion that this policy could lead to higher prices for consumers, and could prevent new sellers from entering the market.
The rules specifically forbade Marketplace sellers from selling the same product in any non-physical location (including websites and on eBay) for a cheaper total price (including delivery) than could be obtained by shopping through Amazon’s own website. However, with the long arm of the law closing in- the OFT has the power to levy hefty fines- Amazon has taken the pre-emptive step of deciding to remove the price parity conditions from Marketplace sellers throughout the EU with effect from today. Price parity restrictions will remain in place in the US and other jurisdictions.
In a statement released yesterday, the OFT said that it had “not reached a decision as to whether there has been an infringement of competition law” but that it was minded to close the investigation following Amazon’s announcement. The German Federal Cartel Office, which has been running a parallel investigation into Amazon’s policy, also made a related announcement.
Cavendish Elithorn, OFT Senior Director of Goods and Consumer, said: “We welcome Amazon’s decision to end its Marketplace price parity policy across the European Union.”
“As Amazon operates one of the UK’s biggest e-commerce sites, the pricing on its website can have a wide impact on online prices offered to consumers elsewhere. We are pleased that sellers are now completely free to set their prices as they wish, as this encourages price competition and ensures consumers can get the best possible deals.”