European Commission: antitrust regulator must ensure companies comply to competitive practices

The Preliminary Report confirms the growing significance of ecommerce and indicates that more than half of EU adults have ordered consumer goods or services online in 2015. The report also finds that over half of retailers track competitors’ prices and the vast majority respond to competitors’ price changes.

The Preliminary Report identifies though certain business practices that may limit online competition. The report should be a reason for companies to review their current distribution contracts and bring them in line with EU competition rules if they are not.

Manufacturers have responded to the growth of ecommerce by adopting a number of practices in order to better control the distribution of their products and the positioning of their brands. Selective distribution systems in which the products can only be sold by pre-selected authorized sellers are used more widely and manufacturers increasingly sell their products online directly to consumers.

Manufacturers also increasingly use contractual sales restrictions in their distribution agreements. The report finds that: over two in five retailers face some form of price recommendation or price restriction from manufacturers; almost one in five retailers are contractually restricted from selling on online marketplaces; almost one in ten retailers are contractually restricted from submitting offers to price comparison web sites; over one in ten retailers report that their suppliers impose contractual restrictions on cross-border sales.

The availability of licences from the holders of copyrights in content is essential for digital content providers and a key determinant of competition in the market. The report finds that copyright licencing agreements are complex and often exclusive. The agreements foresee what territories, technologies and release windows digital content providers can use.

In March 2016, the Commission published its initial findings on geo-blocking, which found that the practice was wide spread in ecommerce throughout the EU especially for digital content. More than 60% of the licence agreements submitted by rights holders are limited to the territory of a single Member State. Almost 60% of responding digital content providers have contractually agreed with right holders to geo-block.

If geo-blocking is the result of agreements between suppliers and distributors it may restrict competition in the Single Market in breach of EU antitrust rules. Any competition enforcement measure against geo-blocking would have to be based on a case-by-case assessment, which would also include an analysis of potential justifications for restrictions that have been identified.

The Preliminary Report is now open to public consultation for a period of two months. Stakeholders are invited to comment on the findings of the sector inquiry, submit additional information and raise further issues. The Commission expects to publish the Final Report in the Q1 of 2017.