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Amazon and the Terrible, Horrible, No Good, Very Bad Year Abroad

This article was originally published on our parent site for the book publishing industry, Publishing Trends

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A recent article in The Telegraph calls 2015 “the year Amazon delivered on its founder’s vision.” The reporter James Titcomb explains that in 2015 Amazon grew to double its share price, finally became profitable, and is now “almost untouchable as an online retailer” due to its streamlined delivery  service. While it’s been a good year in many respects, the company has also had its share of troubles – facing government investigations, employee strikes, and new privacy laws in Europe.

Here’s a timeline of Amazon’s problems in Europe in 2015:

January 16, 2015

The European Union’s antitrust office (the European Commission) releases a preliminary report that the tax deal established between Amazon and Luxembourg’s government in 2003 gave unfair state aid and could have enabled Amazon to underpay its taxes. (Note: countries in the European Union can offer businesses low tax rates, but must offer all deals to every company. To not offer the same tax rates to Amazon’s competitors makes this a possible case of illegal state aid.) The investigation into this allegation began in October 2014 and included other multi-national companies like Apple and Starbucks, but this is the first announcement of any findings. Amazon and Luxembourg’s Finance Ministry “deny any special tax treatment or benefits” and say all allegations are unsubstantiated.

May 1, 2015

Amazon announces that it has begun reporting revenue from its operations in Britain, Germany, Italy, and Spain differently. Previously, Amazon reported this revenue via Luxembourg and Ireland for lower taxes. This change will have Amazon paying higher taxes in the aforementioned countries, therefore taking away more from its profits. Amazon says these changes were in the works for the past two years and that the EU’s investigation has no bearing on it. Ireland announces that it will phase out the tax arrangement that Amazon has, called the “Double Irish,” entirely after pressure from other European Union members.

June 11, 2015

The European Commission begins an antitrust investigation into “whether Amazon used its dominant position in the region’s ebooks market to favor its own products over rivals,” according to the New York Times. It reportedly did so by including clauses in contracts with European publishers to inform it if they ever offered more favorable terms for ebooks to other digital retailers. The article says that Amazon “has been estimated to sell about eight out of every 10 e-books in Britain. In Germany, the market share is just under half,” which brings into question whether these clauses are too anti-competition.

September 21, 2015

Amazon’s German distribution center employees go on strike, led by the trade union Verdi. The employees are demanding a labor agreement for better working conditions and higher wages, which the union says would be similar to the agreement the company has with its retail workers. Verdi has been responsible for frequent strikes at the company for employee rights since May 2013.

November 16, 2015

Germany’s Federal Cartel Office begins an investigation into Apple’s agreement with Amazon for purchasing audiobooks via Audible. Audible is the exclusive supplier of audiobooks to iTunes, and therefore has control over 90% of the audiobook market in Germany. The investigation starts after a complaint is filed by the German Publishers and Booksellers Association, which has objections to the practices used by Audible and claims that it is violating competition law.

November 30-December 1, 2015

Verdi announces more strikes in Germany, with Poland employees showing support via a demonstration and press conference.

December 15, 2015

The European Commission announces an agreement for stricter privacy laws, four years after beginning the EU Data Protection Reform. The agreement “will allow people to regain control of their personal data.”  According to Bloomberg, the reform, which is supposed to pass in early 2016 and fully enacted within two years, will require companies like Amazon, Google, and Facebook “to explain exactly what information they are collecting, for what purposes, and how long it will be retained.” This means that Amazon’s ability to advertise and sell products based on consumers’ preferences will be restricted. Noncompliance with the new laws could result in fines of up to four percent of the company’s global sales.

The antitrust investigations being conducted by the EU and Germany, as well as the strikes, remain an ongoing concern for Amazon as it moves into the new year. Adding on this newer announcement that it will have to modify its marketing strategy means there will probably be many changes for the company in 2016. There’s no way to know how exactly these changes could impact any of the affected companies long-term, but the outcome of the tax investigation and the implementation of the new privacy laws go to show that Amazon is far from “untouchable.”

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