E-Commerce: The EU Commission Releases Its Preliminary Report in the E-Commerce Sector Inquiry

After gathering information from nearly 1800 stakeholders from all 28 EU Member States and collecting around 8000 distribution agreements, the EU Commission published on 15 September a preliminary report on the findings of its ongoing competition sector inquiry into e-commerce.[1]

The inquiry was launched by the Commission in May 2015, after finding that despite the growing significance for e-commerce across EU countries over the last years (approximately 50% of the population of the Union shopped online in 2014), cross-border online trade remained limited.

While such limitations may have been attributable to language barriers, consumer preferences or differences in legal frameworks between Member States, the Commission sought to investigate the sector based on indications that companies active on the e-commerce market may be engaged in anticompetitive agreements.

Unsurprisingly, the first results of the inquiry indicate most of the digital barriers were raised by companies themselves, mainly through geo-blocking practices.[2]

What are the main contractual sales restrictions identified by the Commission?

The e-commerce market of consumer goods has been subjected to the unbridled development of selective distribution agreements which represent a privileged field for cross-border sales restrictions.

Indeed, half of the retailers that replied to the sector inquiry reported that they were affected by at least one contractual sales restriction, whether in the form of price recommendations or price restrictions, restrictions from selling on online market places, restrictions from submitting offers to price comparison websites or restrictions on cross-border sales.

In the e-commerce of digital content, geo-blocking practices appear to be even more widespread: seven out of ten respondent digital content providers reported having implemented at least one type of geo-blocking measure, and the large majority of respondents have contractually agreed with holders of the copyrights in the content to geo-block access to their online digital content services for users from other Member States.

These practices could be all the more harmful because rights holders tend to have relatively long-term licensing agreements with digital content providers (sometimes even more than 10 years).

What are the next steps?

Should the final results of the e-commerce inquiry reveal serious anticompetitive concerns, the Commission may open further case investigations to ensure compliance with EU rules on restrictive practices and abuse of dominant positions (Articles 101 and 102 of the Treaty on the Functioning of the European Union).

Any competition enforcement measure 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.

Meanwhile, the preliminary report is open to public consultation for a period of two months and the Commission expects to publish the final report in the first quarter of 2017.

[1] The Commission can conduct inquiries into sectors of the economy where there are indications that competition is restricted or distorted.

[2] Geo-blocking practices prevent consumers from accessing certain websites on the basis of their residence, or credit-card details.