EU Wants To Regulate Restrictive, Illegal, E-Commerce Practices

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EU Wants To Regulate Restrictive, Illegal, E-Commerce Practices

On 15 September 2016, the European Commission published a preliminary report of its e-commerce sector inquiry which was launched in May 2015. The Commission's antitrust officials began to investigate whether unfair restrictions may be halting the emergence of an EU-wide online market.

The inquiry has - at least preliminarily - found that European consumers are struggling to buy goods and to access content over foreign websites because of "geo-blocking" - the practice of blocking purchasers based in other countries, among other possibly illegal practices.

The study covered over 1,800 companies active in e-commerce that sell a variety of products online, ranging from consumer electronics to garden furniture, asking for details about any potential obstacles to buying and selling across borders, and looking into nearly 8,000 distribution contracts for reference.

The Commission had sent out thousands of questionnaires to companies to obtain such information.

The report has verified that more than half of EU adults have ordered consumer goods or services online in 2015, and that the figure is expected to further grow in the coming years.

The aim of the inquiry was to determine whether and when the competition authorities should intervene with regard to e-commerce practices. The Commission found that e-commerce plays a relevant role in price transparency and price competition. The conclusion that has been reached for now, arising from the inquiry thus far, relates to two main fields: goods (such as consumer electronics and other consumer items) and digital content.

As concerns "physical" goods, the Commission sought to identify the key features that impact distribution strategies and that may give rise to potential barriers to competition.

It set the focus on, among others, price transparency, increased direct retail activities, and the expansion of selective distribution, as key factors.

Price transparency leads to an increase in price competition at the retail level. Over the last 10 years, many manufacturers have set up their own online shops. This has apparently resulted in many retailers having to compete against their own manufacturer-suppliers. There has also been a remarkable expansion of selective distribution with the risk of introducing certain contractual clauses that may, according to the Commission, go beyond what is necessary to achieve the goals of selective distribution. Selective Distribution is one kind of distribution which falls between intensive and exclusive distribution.

The Commission has found, according to the responses provided, that retailers are subject to restrictions like (i) different forms of price recommendation, (ii) contractual restrictions on sales in online marketplaces, (iii) contractual restrictions on providing offers or any relevant data to price comparison websites, and (iv) restrictions on sales across borders. Such restrictions, when inserted into contracts, may, according to the Commission, render online sales difficult.