E-commerce sector in the spotlight

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EU announces sector inquiry

On 26 March 2015, Competition Commissioner Margrethe Vestager announced in a keynote speech at a major conference hosted by Germany’s Federal Cartel Office (FCO) an EU-wide inquiry in the e-commerce sector. The European Commission will be asked to approve the proposal in May, with initial results expected mid-2016.

This is the latest in a string of investigations into online distribution and e-commerce, at both Commission and Member State level. Interest extends beyond Europe as well – the International Competition Network (of competition enforcers) is also conducting a survey of its 130 member agencies worldwide on e-commerce issues, with the initial report due to be published in May 2015.

Commissioner Vestager’s initiative complements the priority focus on the digital economy of the European Commission under Jean-Claude Juncker. The competition inquiry was announced the day after the European Commission outlined its broader plan to reform Europe’s digital economy.

Purpose of the Inquiry

The exact scope of the sector inquiry is not yet known. However, Commissioner Vestager indicated that it would focus on “the barriers to the cross-border sale of goods and digital content erected by private companies, especially in their distribution contracts” and “on the areas where e-commerce is most used”. It will also seek to strengthen and make more uniform the action that the Commission and national authorities take against restrictions of online sales; provide guidance to companies active in the sector; and encourage companies to set up compliance programmes and other preventive measures.

The investigation responds to indications that some companies may be taking measures to limit and undermine cross-border trade to increase prices through technical and contractual restrictions. Commissioner Vestager expressly cited practices such as redirecting of consumers and geo-blocking, attributing such restrictions to contractual arrangements between manufacturers and content owners and their distributors.

Ongoing Investigations

The decision to announce the e-commerce sector inquiry in Germany is no coincidence: the German antitrust regulator has been heavily involved in leading the trend towards e-commerce enforcement throughout the EU. In particular, the FCO has conducted investigations into online restrictions by Amazon.com, ASICS and Online Travel Agent (OTA) HRS. These cases have focused on issues ranging from prohibitions against online retail, to more complex price parity provisions (so-called “Most Favoured Nation” clauses, or MFNs), which restrict sellers from discounting goods or services.

Other Member States have examined similar issues. Despite a common focus there is a divergence of approach – Germany prohibited rate parity restrictions in the HRS hotel sector case, while France, Italy and Sweden are expected to accept commitments by Booking.com to address similar issues. The UK Competition and Markets Authority (known then as the Office of Fair Trading) also accepted commitments from OTAs, but this decision was overturned on appeal.

E-commerce has also been in focus at the EU level recently, including in respect of MFN provisions imposed by Apple in the e-books sector. Most recently, the Commission conducted dawn raids into online electronics retailers. Google’s search practices also remain under the microscope, with three rounds of Google-offered commitments failing to quell antitrust concerns.

Next Steps

Once the proposal has been approved by the Commission, questionnaires will be sent to firms operating in the EU e-commerce market, including holders of content rights, broadcasters, manufacturers, merchants of goods sold online, and companies that operate online platforms.

Sector inquiries allow the Commission to undertake a far-reaching review of potential issues across a sector. They frequently result in individual investigations into specific issues identified in the inquiry – for example, Lundbeck was fined €92m after a recent inquiry into the pharmaceutical industry. It is conceivable that follow-up antitrust cases may occur in the e-commerce sector after the review concludes.

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