Yesterday, the European Commission published its final report on the competition sector inquiry into e-commerce, which was launched in May 2015. The sector inquiry is part of the Digital Single Market Strategy of the Commission and its objective was to identify possible competition concerns in European e-commerce markets. The Commission gathered information from nearly 1900 stakeholders from all 28 EU Member States and collected around 8000 distribution and license agreements. The sector inquiry covered e-commerce in consumer goods and digital content.
Potential new antitrust investigations and broaden dialogue with national competition authorities
The results obtained from the inquiry will enable the Commission to target EU antitrust enforcement actions in European e-commerce markets, which will include opening further antitrust investigations. In fact, in February 2017, the Commission already launched three separate investigations into holiday accommodation, PC videogames distribution and consumer electronics pricing practices that, according to the Commission, may limit competition. As mentioned above, it is likely that the Commission will open more investigations, similar to those already launched at the beginning of this year.
The report highlights the fact that consistent interpretation of EU competition rules on e-commerce related practices is fundamental for businesses when devising their distribution strategies in Europe. On the basis of the sector inquiry findings, the Commission will therefore broaden the dialogue with national competition authorities within the European Competition Network on e-commerce-related enforcement to achieve a more coherent and consistent interpretation.
Sector inquiry as “leverage” to adapt business practices
The Commission declared that the simple fact of having performed the sector inquiry has already encouraged e-commerce companies to review their commercial practices on their own initiative. This happened for instance for some companies active in the clothing industry but also companies active in other retail sectors.
Main findings on consumer goods
The report confirms that the growth of e-commerce over the last years 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 10 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 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.
The Commission mentioned that some of these practices can be justified, for example in order to improve the quality of product distribution. Others, however, may unjustifiably prevent online consumers from benefiting from a wider choice of products and lower prices. According to the Commission, this justifies the fact of undertaking actions to ensure compliance with EU competition rules.
Finally, it is important to note that the results of the e-commerce sector inquiry do not appear to question the principles of the Commission’s approach to selective distribution as reflected in the current rules for vertical agreements between companies operating at a different level of the distribution chain