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EU Commission Publishes Final Report on E-commerce Sector Inquiry

11-May-2017 | Source : AG-IP News | Visits : 7465
BRUSSELS - The European Commission's final report on the e-commerce sector inquiry identifies business practices that may restrict competition. It allows the Commission to target its enforcement of EU antitrust rules in e-commerce markets and has already prompted companies to review their practices.

Commissioner Margrethe Vestager in charge of competition policy said: "Certain practices by companies in e-commerce markets may restrict competition by unduly limiting how products are distributed throughout the EU. Our report confirms that. These restrictions could limit consumer choice and prevent lower prices online. At the same time, we find that there is a need to balance the interests of both online and 'brick-and-mortar' retailers. All to the benefit of consumers. Our findings help us to target the enforcement of EU competition rules in e-commerce markets".

One of the main goals of the Commission's Digital Single Market strategy is to ensure better access for consumers and businesses to goods and services. The e-commerce sector inquiry complements the Commission's legislative proposals in this regard. The objective of the sector inquiry was to allow the Commission to identify possible competition concerns in European e-commerce markets.

The report published today presents the Commission's definitive findings, taking account of comments received on the preliminary report of September 2016 and confirming to a large extent the preliminary report's conclusions.

The insight gained from the sector inquiry will enable the Commission to target EU antitrust enforcement in European e-commerce markets, which will include opening further antitrust investigations. In February 2017, the Commission already opened three separate investigations into holiday accommodation, PC video games distribution and consumer electronics pricing practices that may limit competition.

Furthermore, the sector inquiry has prompted companies to review their commercial practices on their own initiative. This can help consumers to purchase products more easily cross-border and benefit from lower prices and a wider choice of retailers. The Commission is aware and welcomes that companies in the clothing industry – Mango (belonging to Punto Fa), Oysho and Pull & Bear (both belonging to Inditex), and Dorothy Perkins and Topman (both belonging to Arcadia) – but also other retail sectors (the coffee machine producer De Longhi and photo equipment manufacturer Manfrotto) have reviewed their practices.

Consistent interpretation of EU competition rules on e-commerce related practices is essential for businesses when devising their distribution strategies in the EU. On the basis of the sector inquiry findings, the Commission will broaden the dialogue with national competition authorities within the European Competition Network on e-commerce-related enforcement to achieve this. More enforcement by the Commission will also provide guidance to stakeholders on specific e-commerce related practices. 

Main Findings

Consumer goods

The report confirms that the growth of e-commerce over the last decade and, in particular, online price transparency and price competition, had a significant impact on companies' distribution strategies and consumer behavior. The final results of the sector inquiry highlight the following market trends:

    A large proportion of manufacturers decided over the last ten years to sell their products directly to consumers through their own online retail shops, thereby competing increasingly with their distributors.
    Increased use of selective distribution systems, where the products can only be sold by pre-selected authorized sellers, allows manufacturers to better control their distribution networks, in particular in terms of the quality of distribution but also price.
    Increased use of contractual restrictions to better control product distribution. Depending on the business model and strategy, such restrictions may take various forms, such as pricing restrictions, marketplace (platform) bans, restrictions on the use of price comparison tools and exclusion of pure online players from distribution networks.
Some of these practices may be justified, for example in order to improve the quality of product distribution. Others, however, may unduly prevent consumers from benefiting from greater product choice and lower prices in e-commerce and therefore warrant Commission action to ensure compliance with EU competition rules.
Digital content
The results of the sector inquiry confirm that the availability of licenses from content copyright holders is essential for digital content providers and a key factor that determines the level of competition in the market.
The report points to certain licensing practices which may make it more difficult for new online business models and services to emerge. Any assessment of such licensing practices under the EU competition rules has however to consider the characteristics of the content industry.

One of the key findings of the sector inquiry is that almost 60% of digital content providers who participated in the inquiry have contractually agreed with right holders to "geo-block".
Content providers can engage in geoblocking for objectively justified reasons, such as to deal with VAT issues or certain public interest legal provisions. The Commission has already proposed legislation to ensure that consumers seeking to buy products and services in another EU country, be it online or in person, are not discriminated against in terms of access to prices, sales or payment conditions, unless this is objectively justified for a specific reason. The Commission has also made proposals on the modernization of the EU copyright rules to notably increase the access to audiovisual content online across borders, while taking into account the important role that territorial exploitation of audiovisual content plays for the financing model of the European audiovisual sector. Both proposals are currently being negotiated with the European Parliament and the Council.
Any competition enforcement in relation to geo-blocking would have to be based on a case specific assessment, which would also include an analysis of potential justifications for restrictions that have been identified.
The Commission launched the e-commerce sector inquiry in May 2015 in the context of its Digital Single Market strategy. During the inquiry, the Commission gathered evidence from nearly 1900 companies operating in e-commerce of consumer goods and digital content and analyzed around 8000 distribution and license contracts.

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