The European Commission just published a report on the e-commerce sector. Make sure your distribution agreements are in line with EU competition rules!

competition

The European Commission recently published a report on potential competition concerns in the e-commerce sector. Why not take the opportunity to check your own distribution agreements to make sure they are not anti-competitive?

The European Commission has been busy conducting a sector inquiry into the European e-commerce sector since May 2015 and recently presented a preliminary report on its findings. The report covers both online sales of consumer goods and digital content and aims at identifying potential competition problems on the European e-commerce market. The report describes set-ups and arrangements that may limit online competition and it thereby provides a great opportunity to review your distribution agreements to make sure they are in line with EU competition rules.

The report describes potentially problematic distribution agreements. For example, suppliers should not interfere with the retailers’ ability to set prices to customers by setting minimum or fixed prices. On the other hand, bans on using online marketplaces like Amazon are not automatically considered problematic; the sector inquiry shows that they do not aim at restricting where or to whom distributors sell but merely how distributors sell the products online. There is no carte blanche for such bans however and they can, inter alia depending on the parties’ size on the market, be prohibited. As regards the increased price transparency of online sales through price monitoring software, the Commission notes that it may facilitate collusion on a retail level, thus restricting competition.

In relation to digital content, the sector inquiry shows that geo-blocking, i.e. business practices preventing online shoppers from purchasing products or accessing digital content (such as specific films on Netflix) because of their location or country of residence, is very common, in particular in licensing agreements on TV series, films and sports. If a non-dominant company unilaterally impose geo-blocking, it falls outside competition rules. It may nevertheless be prohibited if it is a contractual arrangement.

In the framework of the sector inquiry, the Commission has reviewed approximately 8000 contracts and has thus gained an insight into the practices of many companies. Given that the e-commerce sector is high on the agenda and the Commission is already investigating companies, now is a good time to check that your practices are in line with competition law – to be able to focus on your business and avoid being subject to enforcement action. As always, such a competition assessment needs to be carried out on a case-by-case basis, taking into account the context of the specific product or service.

For further information, please contact Viveca Fallenius.

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