Tom Torkar
Posted on 25 Oct 2013

The End of Amazon's Price Parity Policy Gives Greater Freedom to Online Retailers

Amazon's decision to end its price parity policy was announced by the Office of Fair Trading ('OFT') on 29 August 2013, just less than a year after the OFT began a formal investigation into the policy's compliance with EU and UK competition law.

Amazon's price parity policy, also referred to as a 'most favoured nation' policy, prevented third party sellers on the Amazon.co.uk Marketplace platform from offering their goods elsewhere online at lower prices. This practice received numerous complaints from retailers on the basis that this could be 'anti-competitive' under the Chapter I prohibition of the Competition Act 1998 and Article 101 of the Treaty on the Functioning of Europe, which both prohibit anti-competitive agreements. The OFT was particularly concerned that Amazon's approach to third party retailers could increase online platform fees, prevent new market entrants and directly impact on the prices third parties could charge on their own websites.

This is not the first time an investigation by the competition authorities has involved Amazon. In December 2011, the OFT investigated the publication of e-books by various high profile publishers and possible collaboration with e-commerce websites such as Amazon.

Although the controversial price parity policy continues to be in force in the USA, as of 31 August 2013, Amazon removed price parity clauses from all EU click-through agreements and discontinued the enforcement of contractual price parity obligations on its EU Marketplace third party sellers. When these agreements are renewed, the relevant provisions will be removed.

Third party retailers can now sell their products on their own website at a lower cost, reap the benefits of increased traffic to their websites and implement discounted price campaigns independently of Amazon.

The OFT has welcomed this change as a necessary measure to ensure competitive pricing and the best possible deals for the consumer as a result. The OFT has announced it will discontinue its competition law investigation into Amazon's policy. It will however continue to monitor the online retail sector and recommends that businesses who have similar policies in place should consider reviewing these with care. Smaller third parties are also more likely to question the restrictions imposed upon them as a result of the OFT's clear message that any businesses who are concerned about their autonomy to set prices should contact them.

What does this mean for you?

The decision taken by Amazon should prompt more businesses to reconsider the terms of their agreements and seek a more flexible arrangement. This is obviously good news for smaller retailers who have been restricted by such policies but will undoubtedly be a cause for concern for larger retailers with old agreements in place who may now need to reassess these from a competition law perspective.

This is a summary of complex legal issues and should not be relied upon as legal advice. If you would like more information in relation to any of the issues discussed in this article, please contact Tom Torkar, an Associate in the Technology, Media and Communications Team, at tom.torkar@michelmores.com or Jason Phelps, Head of EU Procurement and Competition, at jason.phelps@michelmores.com.