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Kindle eBooks and Amazon Marketplace – The Non-Compliance Continues

BananaIP Counsels > Copyrights  > Kindle eBooks and Amazon Marketplace – The Non-Comp...

Kindle eBooks and Amazon Marketplace – The Non-Compliance Continues

Amazon’s Kindle eBooks need no introduction. Everyone is aware of them, and since the launch of the Kindle eBook store in India, Amazon claims that its publisher and customer base is growing fast. In 2018, Amazon also launched Audible, its audio book store in India. So far, I have used the term Amazon loosely to refer to several of its entities. For purposes of this post, two entities of Amazon are relevant. One, Amazon Asia Pacific Holdings Private Limited (Amazon APAC” (Registered in Singapore), and Two, Amazon Seller Services Private Limited “Amazon India” (Registered in India). Amazon APAC licenses and publishes Kindle eBooks and sells them on different marketplaces including the one hosted by Amazon India at www.amazon.in.

Amazon APAC and its eBook Business

Amazon APAC publishes and sells book licenses on Amazon India’s marketplace. The license may be purchased directly for a given price by an interested customer, or the customer may enrol for Amazon APAC’s Kindle Unlimited program that permits licensing of ten books at a time from eBooks enrolled in the Kindle Direct Publishing (KDP) Select program. Amazon APAC’s KDP is a program to license eBooks from authors and publishers and publish them for licensing to customers on different marketplaces. An author/Publisher has several licensing options on the KDP platform. She may publish her eBooks non-exclusively or exclusively on KDP. She may also enrol in the Kindle Lending Library and/or the Kindle Match Book program, which provides the eBook for free on purchase of a hard copy of the book. The exclusive license program is called ‘KDP Select,’ and enrolling a book in it is mandatory to make the work available for subscription. Enrolling in it also gives several other benefits such as higher royalty share, easy discoverability, marketing advantage, and so on.

Amazon APAC’s license with authors and publishers include several conditions that give it absolute control over eBooks published on KDP. Amazon APAC may unpublish the eBook at any time, vary the price of the eBook, license the eBook to its partners and associates without informing the author/publisher, include the book in promotional programs, give away eBooks for free, bundle eBooks with products, etc. eBooks published on KDP are available exclusively on Amazon APAC’s Kindle Store on Amazon India’s website. The books can be read only on Kindle devices and applications of Amazon group companies. In other words, KDP books and Kindle devices/applications are interdependent on each other, and one’s business is dependent on the other.

To summarize, Amazon APAC licenses eBooks from authors/publishers and makes them available on Amazon India’s marketplace to customers for exclusive use on Amazon’s Kindle devices and applications. The kindle eBooks are   sold exclusively on Amazon India’s marketplace and no other vendor except Amazon APAC is permitted to sell eBooks on amazon.in. Kindle Unlimited subscriptions, which permit customers to read up to ten books at a time, is provided for free along with Kindle devices from time to time with the objective of increasing device sales. Also, Amazon India offers eBook discounts and/or subscriptions to customers purchasing third party products like mobile phones on Amazon India’s marketplace. None of these benefits flow back to authors/publishers, but that is not the subject of this post.

Business of Licensing and Section 33 Non-Compliance

Section 33 of the Copyright Act in India permits only copyright owners and copyright societies to be in the business of licensing copyrighted works. It prohibits other parties from undertaking the business of licensing works and re-licensing or sub-licensing them. As of date, Indian Courts have not expounded/interpreted the meaning and scope of the phrase “business of issuing or granting licenses” used in Section 33, but copyright societies like the IPRs use the said provision to assert their exclusivity in licensing literary works, musical compositions and sound recordings. While dealing with royalty sharing discrepancies, the Enforcement Directorate recently reviewed compliance with the provision, but nothing noteworthy seems to have been decided regarding its scope.

Amazon APAC licenses books from authors/publishers and re-licenses or sub-licenses them to customers, partners, and others, and its activities on a literal reading of Section 33 amount to its non-compliance. Though it may be argued that Amazon APAC’s publishing and selling program is that of an intermediary, its contracts/terms with authors/publishers and customers include specific license clauses, which negate such an argument. Furthermore, the exclusivity imposed by Amazon APAC and its controls on author accounts, pricing, and other aspects of publishing makes Amazon APAC more a licensee than an intermediary. Be that as it may, Amazon APAC sells eBooks exclusively on Amazon India’s marketplace for exclusive reading on Kindle devices and applications, which give rise to questions of compliance with recent eCommerce guidelines.

FDI eCommerce Guidelines and Kindle eBooks

Recently, the Department of Industrial Policy and Promotion (DIPP) issued a Press Note to clarify the FDI eCommerce policy. The Press Note modified the FDI Consolidated Policy Circular, 2017, which came into effect on 1st February, 2019. The definition of eCommerce under the Policy includes buying and selling digital products such as eBooks. Both Indian and foreign companies are considered as eCommerce entities and therefore, Amazon India and Amazon APAC are covered. The Policy differentiates between eCommerce companies that are based on Inventory Model, and those that are based on Marketplace Model. In the Inventory Model, the company owns the products it sells, and in the Marketplace Model, the eCommerce company merely facilitates transactions between buyers and sellers by providing a platform. Amazon India is an eCommerce company following the Marketplace Model, and the status of Amazon APAC as a licensee   seems closer to the Inventory Model. FDI is permitted for the Marketplace Model, but not for the Inventory Model.

Though the revised e Commerce Policy came into effect on 1st February, 2019, Amazon India does not seem to be complying with the Policy with respect to eBooks. By exclusively selling Amazon APAC’s eBooks on the platform, Amazon India is, directly or indirectly, violating the following terms:

“5.2.15.2.3 Guidelines for Foreign Direct Investment on e-commerce sector

iv) E-commerce entity providing a marketplace Will not exercise ownership or control over the inventory i.e. goods purported to be sold. Such an ownership or control over the inventory will render the business into inventory based model. Inventory of a vendor will be deemed to be controlled by e-commerce marketplace entity if more than 25% of purchases of such vendor are from the marketplace entity or its group companies.

v) An entity having equity participation by e-commerce marketplace entity or its group companies, or having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity.

ix) E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field. Services should be provided by e-commerce marketplace entity or other entities in which e-commerce marketplace entity has direct or indirect equity participation or common control, to vendors on the platform at arm’s length and in a fair and non-discriminatory manner. Such services will include but not limited to fulfilment, logistics, warehousing, advertisement/ marketing, payments, financing etc. Cash back provided by group companies of marketplace entity to buyers shall be fair and non-discriminatory. For the purposes of this clause, provision of services to any vendor on such terms which are not made available to other vendors in similar circumstances will be deemed unfair and discriminatory.

xi) e-commerce marketplace entity will not mandate any seller to sell any product exclusively on its platform only. “

All eBooks sold on Amazon India’s marketplace are sold exclusively by Amazon APAC. Amazon India does not provide any facilities to sell Kindle eBooks or eBooks in other formats to other vendors. The Kindle eBook store is exclusively controlled and owned by Amazon APAC, an Amazon group company. The eBooks sold are meant for use on only devices and applications of Amazon group companies and cannot be read on other party’s readers or applications. The eBooks are displayed on Amazon India’s marketplace along with hard copy books with information about price advantage of buying the Kindle eBook version. The hard copy books are sold by other vendors and Amazon India promotes sale of Kindle eBooks of its group company by displaying price advantage and other means.

As the eBook inventory on Amazon India is exclusively controlled by a group company, the sale of Kindle eBooks violates the FDI Policy term prohibiting inventory control. By denying eBook sale facilities and services to other vendors, Amazon India is violating the term requiring level playing field for all vendors and is behaving in an unfair and discriminatory manner. The unfair and discriminatory approach of Amazon India extends to preferential display and price comparison with hard copy books sold on the marketplace. The said unfair and discriminatory practice is aimed at benefiting Amazon APAC, its group company.

Amazon APAC’s Kindle Select program mandates exclusive publication on Amazon India and Amazon marketplaces in other countries. Once they enroll in KDP Select, authors/publishers are not permitted to publish or sell eBooks on any other website or platform, and the eBooks are made available only on Amazon India’s marketplace in India. By imposing such exclusivity through its group company, Amazon India is violating the Policy provision which prohibits mandating exclusive sale on the marketplace.

Though it may be argued by Amazon APAC that its relationship with Amazon India is at arm’s length and that it is not publishing or selling eBook licenses, and that it is merely an intermediary, such arguments will not hold substance because of the way Amazon APAC and Amazon India are conducting the business of selling eBook licenses. Amazon APAC does not operate a merely facilitating platform and actively controls every aspect of KDP. It licenses eBooks and re-licenses or sub-licenses them. It actively controls and regulates pricing and gives preferential treatment to certain authors and publishers. It controls author/publisher accounts and imposes conditions of exclusivity to gain access to certain programs.

As it stands today, only Amazon APAC can sell licenses to Kindle eBooks on Amazon India, and No other vendor can sell eBooks in Kindle or other formats. Furthermore, Amazon India provides several benefits and advantages to Amazon APAC, which makes their relationship closely knit and integrated to promote their own products and those of their group companies. In the said context, arguing that Amazon APAC is a different entity selling on Amazon India’s marketplace may not be valid owing to the nature of the relationship between the parties. If such a model is permitted, circumventing the eCommerce Policy will not be very difficult for marketplaces.

Conclusion

Amazon APAC is not complying with the copyright law in India by conducting the business of issuing or granting licenses, and the argument that it is an intermediary facilitating publication does not hold water. By permitting only Amazon APAC to sell eBooks on its marketplace and by providing it certain business advantages, Amazon India is violating the terms of the FDI eCommerce Policy. Such practices have so far ensured that no other player enters the eBook market and have created a defacto eBook monopoly in favour of Amazon APAC in India. Continuance of such non-compliance will not only prevent emergence of alternative eBook platforms, but will also have detrimental effects on   authors and creative endeavour.

Note: The phrase “sale of eBooks” in this article refers to sale of eBook licenses.

The views expressed in this article are the author’s personal views and not those of BananaIP.

References

Section 33, Copyright Act, 1957 as last amended in 2012.

Artists’ Royalty Feud Against Labels Heats Up – Enforcement Directorate Raids Five Major Labels in Money Laundering Investigation, available at: https://spicyip.com/2017/11/breaking-artists-royalty-feud-against-labels-heats-up-enforcement-directorate-raids-five-major-labels-in-money-laundering-investigation.html, visited on 7th February, 2019.

Press Note No. 2 (2018 Series) , Government of India, Ministry of Commerce & Industry, Department of Industrial Policy & Promotion available at https://dipp.gov.in/sites/default/files/pn2_2018.pdf visited on 7th February, 2019.

You may read Dr. Kalyan’s next post on Kindle eBooks, eCommerce Guidelines and Amazon Marketplace’s Non Compliance here

 

 

 

 

 

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