The European Commission started a sector inquiry into e-commerce
on 6 May 2015 as a part of its Digital Single Market Strategy. On
15 September 2016 the Commission published a Preliminary Report
(Report) which provides initial findings of the sector inquiry.
During the launch of the Report, the EU Competition Commissionaire
Margarethe Vestager mentioned the freedom of online sales
strategies of the companies, and she emphasized the role of
competition authorities to check whether those practices comply
with competition laws. She also stated that companies should read
the report when reviewing their distribution contracts.
The Report provides an overview of the main market trends
recognized during the sector inquiry and identifies possible
competition concerns. With the Report, the Commission wishes to
trigger a facts-based exchange of views with stakeholders. In fact,
stakeholders are invited to comment on the findings of the sector
inquiry during the next two months.
During the inquiry, the Commission contacted more than 1800
companies operating in e-commerce of consumer goods and digital
content, and it has reviewed approx. 8000 distribution contracts.
The findings verify that e-commerce is an important drivers of
price competition through price transparency and confirms that
online sales increase consumer's choice and their ability to
find the best deals. As expected, the Report also identifies
certain business practices that may limit competition.
Concerning online sales of consumer goods, the Report finds that
while price is a key parameter of competition for retailers,
product quality and brand image are key for manufacturers.
Therefore, manufacturers adopt a number of business practices in
order to better control the distribution of their products and the
positioning of their brands. Selective distribution systems have
been widely adopted by the manufacturers in order to distribute
their sales only through pre-selected authorized sellers. In
addition, the manufacturers have been increasingly selling their
products through their own online channels. Moreover, manufacturers
progressively use other contractual sales restrictions in their
distribution agreements. The Report states that as follow up to the
sector inquiry, it may become necessary for the Commission to
examine certain clauses restricting online sales—in
particular in selective distribution agreements—more
On the other hand, resale price maintenance seems to be of the
practices that manufacturers and retailers may use in response to
the increased online price competition.
By observing a minimum retail price, both manufacturers and
retailers may minimize the impact of price erosion, thus protecting
both the level of the wholesale price the manufacturers can ask for
the product and the profit margins retailers can expect.
Moreover, the Report also draws attention to increased price
transparency through price monitoring software which may facilitate
collusion between retailers.
Concerning the digital content, the Report states that the terms
on which rights are made available to digital content providers are
one of the most important drivers of competition. However, as the
Report notes, online distribution of content and demand for online
rights does not seem to have been changed the way in which right
holders license their rights. The Report also detects that current
copyright licensing agreements are complex and often exclusive.
Regarding to territorial contractual restrictions, the Report
shows that a large majority of digital content providers are
required by rights holders to restrict access to their online
digital content services for users from other Member States by
means of geo-blocking.
Finally, the Report indicates that the Commission will assess on
a case-by-case basis, having regard to the characteristics of the
specific product and geographic markets, whether certain licensing
practices may restrict competition and whether enforcement is
necessary in order to ensure effective competition.
The Final Report of the sector inquiry is expected to be
published in the first quarter of 2017.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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