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OFT rubber-stamps Amazon acquisition

31 October 2011

Amazon has been much in the news this last week. After the announcement of its first big purchase for its new publishing arm at the Frankfurt Book FairWorld's largest trade fair for books; held annually mid-October at Frankfurt Trade Fair, Germany; First three days exclusively for trade visitors; general public can attend last two., which sent tremors through the publishing world, it is now consolidating its position on e-books. The deal in question may have garnered the book for Amazon because of the high ebook royalty offered. But the question is going to be whether the company can get the book into the book trade - or will Amazon sales be enough?

In the UK there has been much surprise at the way that the Office of Fair Trading has nodded through Amazon's acquisition of The Book Depository, as TBD had only a 2% to 4% share of the online market. It is an extraordinary decision though, as Amazon already has 70% to 80% of the online market and any observer might think this was quite enough as it is a clear monopoly without even adding in the TBD figure.

The Bookseller thundered: 'The OFT's rubber-stamping of this deal means the best chance to investigate Amazon in 15 years has slipped past. UK book retailers, and publishers, are now threatened by a competitor with almost limitless pockets, intent on customer acquisition at almost any cost. Amazon's range of secretive activities across the book trade threatens to gravely weaken one of UK's most important creative industries, and the government does nothing.'

Amazon has also announced rather poor results. Its profits have dropped by 73% in its third quarter, with much worse margins, because of investment in its Kindle e-readers. Rather disconcertingly to investors, the company also suggested that it might make anything from a $200m(£125m) loss to a $250m (£156.3m) profit in its third quarter. Even with these figures though Amazon shares are still up almost 20% over the past year, so it does look unstoppable.