On 15 September 2016 the European Commission (the Commission) published its Preliminary Report on the e-commerce sector inquiry (the Preliminary Report). In the Preliminary Report, the Commission provides an overview of the main competition-relevant market trends in the e-commerce sector and identifies possible competition concerns in this sector. Please click here for the Commission’s press release.
During the e-commerce sector inquiry the Commission requested information from a wide variety of stakeholders in e-commerce throughout the EU in relation to the online sales of consumer goods and the online distribution of content. The Commission has gathered evidence from nearly 1800 companies operating in e-commerce of consumer goods and digital content and has analysed some 8000 online distribution contracts.
Main findings of the Preliminary Report
The Commission recognizes that e-commerce is of growing importance and is an important driver of price transparency and price competition. However, in the Preliminary Report the Commission has identified certain business practices that may limit online competition.
In response to the growth of e-commerce, manufacturers of consumer goods have adopted a number of business practices in order to control the online distribution of their products and the positioning of their brands. Selective distribution systems that limit the sellers to pre-selected authorized sellers are more widely used as a result of e-commerce. Moreover, manufacturers increasingly sell their products directly to online consumers. The Commission also notes that manufacturers increasingly use contractual sales restrictions in distributions agreements with their distributors. According to the Commission such restrictions may hinder cross-border shopping and online shopping in general and could harm consumers by preventing them from benefiting from greater choice and lower prices.
With regard to (the distribution of) digital content the Commission points out the crucial importance of the availability of licences from the holders of copyrights in content, which is a ‘key determinant of competition in the market’. In this respect, the Preliminary Report finds that copyright licensing agreements are complex and often exclusive. These agreements often stipulate the territories, technologies and release windows that the providers of digital content can use. Whether certain licensing practices restrict competition and whether enforcement of the EU competition rules by the Commission is necessary, will be assessed by the Commission on a case-by-case basis.
E-commerce sector inquiry and Digital Single Market Strategy
The e-commerce sector inquiry was initiated on May 2015 as part of the Commission’s Digital Single Market Strategy. Earlier this year, the commission published an issues paper on geo-blocking practices in e-commerce. For more information on this issues paper, we refer to our previous blog relating to this topic.
The Commission expects to publish its final report on the e-commerce sector inquiry in the first quarter of 2017.
Online distributors and digital content providers
To avoid investigation and possible sanctions by competition authorities, online distributors and digital content providers should ascertain that their contractual arrangements are compliant with EU competition law.