European Union: E-Commerce Sector Inquiry: European Commission Report Identifies Restrictive Practices And Prepares For Potential Antitrust Investigations

In its ongoing sector inquiry into e-commerce in the EU, the European Commission has published a Preliminary Report of its findings. Launched in May 2015, the sector inquiry is aimed at gathering evidence on potential barriers to competition linked to the growth of e-commerce and understanding the prevalence of potentially restrictive business practices. The Commission already has published a report concerning its initial findings on geoblocking (see our April 2016 Alert on geo-blocking).

The inquiry forms part of the Commission-wide Digital Market Strategy, which outlines several actions through which the Commission envisages to create a "Digital Single Market." Ensuring better access for consumers and businesses to goods and services via e-commerce across the EU is one of the Commission's key objectives. Whereas most of the actions of the Digital Single Market strategy seek to address regulatory barriers to cross-border online trade, the sector inquiry investigates barriers created by companies.

Preliminary Report findings

E-commerce in the EU has grown steadily over the past years, the EU now being the largest e-commerce market in the world. The percentage of individuals aged 16 to 74 ordering goods or services online has continuously grown, from 30 % in 2007 to 53 % in 2015. Despite this growth, in 2015 only 15% engaged in cross-border e-commerce, shopping online from a seller established in another Member State.

As concerns consumer goods, the Report confirms that e-commerce is an important driver of price transparency and price competition, enhancing consumers' choice and ability to find the best deal. However, as a reaction to increased online price transparency and competition, manufacturers seek "tighter" control over distribution so as to better control price and quality of distribution. This is usually achieved by vertical integration, by using a selective distribution system rather than an open one, or by contractually imposing vertical restraints upon distributors.

Vertical restraints can take various forms, such as pricing restrictions, the unjustified exclusion of pure online players in selective distribution systems, restrictions to sell or advertise through certain online channels (including online marketplaces, price comparison tools, and search engines paid referencing services), and cross-border sales restrictions (e.g. imposing geo-blocking measures). Whereas unilateral business decisions generally fall outside the scope of EU competition law (except for the situation of dominance), contractually imposed restraints may constitute unjustified restrictions of competition. The Commission acknowledges that justifications may exist – the Report for example examines the "free-riding" problem, where online shops free-ride on the efforts made by brick and mortar shops – such defense of a vertical restraint must be assessed individually in each case and will not justify all restrictions.

In relation to the online distribution of digital content, the preliminary results of the inquiry show that contractual restrictions, in terms of licensed transmission technologies, timing of releases and licensed territories, are the norm in digital content markets. Moreover, the large majority of digital content providers are required by right holders to restrict access to their online digital content services for users from other Member States by geo-blocking. Another widespread practice is exclusive licensing, whereby exclusivity may be granted in different forms, such as in relation to territory, technology, and time.

However, under certain conditions such arrangements may reduce competition, for example by making it more difficult for new business models and services to emerge and for new or smaller players to enter. The Report mentions the scope and duration of licensing agreements, the parties' market power, and the structure of payments as factors to be taken into account when assessing possible restrictions of competition.

Implications of the Commission's findings

As a follow-up to the sector inquiry, the Commission announced that it may further investigate the compatibility with the EU competition rules of certain practices that it identified as potentially harming competition, such as pricing restrictions, restrictions on online sales, territorial restrictions, and restrictive licensing practices. From past experience with sector inquiries, it can indeed be expected that separate enforcement actions targeting individual companies may follow, as happened following the EC energy, pharmaceutical, and telecom sector inquiries. In each case, the Commission will assess, on a case-by-case basis, having regard to the characteristics of the specific product and geographic markets, whether the practices restrict competition and whether enforcement by the Commission or national competition authorities is necessary.

In her speech delivered the day of the Preliminary Report's publication, the Commissioner for Competition, Mrs. Vestager, stated that the EC Report "should be a trigger for companies to review their current distribution contracts and bring them in line with EU competition rules if they are not." She added that some companies started doing so in the course of the sector inquiry.

The Commission already has pending antitrust investigations in the context of access to digital content. After having issued a Statement of Objections in July 2015 to Sky UK and six Hollywood studios for alleged geo-blocking, the Commission recently accepted commitments from Paramount to their geo-blocking, while continuing its investigation against the other parties. The Commission likewise has opened an investigation in the video game sector, suspecting illegal restrictions of cross-border commerce. It is likely that other candidates for further EU antitrust assessment have already been identified.

Commission regulatory initiatives

In parallel, the Commission is preparing a legislative package to harmonize online sales conditions. After having published its initial findings on geoblocking earlier this year, the Commission proposed a Regulation addressing geo-blocking and other forms of customer discrimination, which is currently being considered by the European Parliament and Council. The proposal prohibits the blocking of access to websites and other online interfaces as well as the rerouting of customers from one country version to another.

Tackling geo-blocking is only one of the e-commerce regulatory projects on which the Commission is working in the context of the Digital Market Strategy. Other legislative proposals concern the rules on contracts for the supply of digital content and the online sales of goods, the cooperation between national authorities for enforcing consumer protection laws, the rules on cross-border parcel delivery services, the modernization of VAT for cross-border e-commerce, the cross-border portability of online content services, and the modernization of EU copyright, focusing on wider online availability of content across the EU.

What next?

The Preliminary Report is open to public consultation for two months. Stakeholders are invited to comment on the findings of the Sector Inquiry, submit additional information and raise further issues. A Final Report addressing the effects of geo-blocking on e-commerce is expected by the first quarter of 2017. In the meantime, the Commission certainly will initiate new investigations into restrictive practices it identifies.

The EC Preliminary Report of September 15, 2016, can be found here.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Charlotte Breuvart
Similar Articles
Relevancy Powered by MondaqAI
Sheppard Mullin Richter & Hampton
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Sheppard Mullin Richter & Hampton
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions