You underestimate how evil a watermarking algorithm can be. Rather raising the number of words changed, amazon can simply make sure one set of an official copy's edits are unique, but another set overlaps exactly with group A of other accounts, another set overlaps with group B, another overlaps with group C... such that a naive copier will still be caught, and collaborators will never be able to be completely certain they removed every watermark.
This only works if Amazon is the only content provider though. I dont know any author that sell their books exclusively via Amazon so the only thing you'd have to do is to get a copy from a different publisher.
Did the US regulators have similar concerns? If not, why not?
Because they have a different philosophy than the EU. The EU has been the leading anti-trust regulator in the world for a long time now simply because they believe it's in societies best interest to force companies to compete whereas the US believes more in the innovative power of unregulated companies and thus have a more laissez-faire attitude.
Old programmers never die, they just hit account block limit.