During the e-commerce sector inquiry, the Commission gathered evidence from nearly 1,900 companies operating in e-commerce of consumer goods and digital content and analysed around 8,000 distribution and license contracts. The Commission published initial findings on geo-blocking in March 2016 and a preliminary report in September 2016; the detailed findings from the inquiry are set out in a staff working document accompanying the E-Commerce Report.
As noted, following completion of the sector inquiry, the Commission has concluded that there is no need to revise the Vertical Restraints Block Exemption before its expiry in 2022. The E-Commerce Report is circumspect in identifying particular e-commerce practices as problematic, but the Commission linked three investigations announced in February 2017 (into retail price restrictions, discrimination based on location and geo-blocking in relation to consumer electronics, videogames and hotel accommodations) to the e-commerce sector inquiry and noted that a number of companies in the clothing and other sectors had reviewed their online sales practices as a result of the inquiry. The Commission continues to look very closely at this sector, and further enforcement actions are likely.
In relation to consumer goods, the E-Commerce Report confirms that manufacturers increasingly sell their products directly to consumers through their own online retail shops, thereby competing with their distributors; use selective distribution systems to better control their distribution networks; and use contractual restrictions, such as pricing restrictions, marketplace (platform) bans, restrictions on the use of price comparison tools and exclusion of pure online players from distribution networks,to control product distribution. The Commission notes that “[s]ome of these practices may be justified,” while others may infringe EU competition rules by unduly preventing consumers from benefiting from greater product choice and lower prices.
The E-Commerce Report singles out several issues for discussion:
- Online market place bans. The E-Commerce Report highlights the prevalence of manufacturers’ requirements that distributors operate brick and mortar shops, thereby excluding pure online players. The Commission notes that such requirements without any apparent link to distribution quality or other efficiencies may attract further scrutiny, but restates the Commission’s view that online marketplace bans should not be considered per se illegal (an issue currently before the European Courts in the Coty case).
- Resale price maintenance. The E-Commerce Report highlights the prevalence of price tracking software, which can facilitate illegal resale price maintenance or facilitate or strengthen collusion between retailers.
- Dual pricing. The E-Commerce Report discusses the common practice of dual pricing, noting that while charging different wholesale prices to different retailers is generally unproblematic, dual pricing for a hybrid retailer is considered per se illegal.
- Geographic restrictions. the Commission notes that some geographic restrictions on distributors’ ability to sell and advertise online may not respect the rules governing prohibitions of active versus passive sales outside of distributors’ allocated territories.
In relation to digital content, the E-Commerce Report notes that the sector inquiry confirmed that digital content providers depend on the availability of licences from content copyright holders and points to certain licensing practices that may make it more difficult for new online business models and services to emerge. As in its discussion of consumer goods, the E-Commerce Report does not take firm positions on practices believed to infringe the competition rules, but highlights certain practices for discussion:
- Bundling digital content rights. The E-Commerce Report notes that digital rightholders tend to split their rights into several components and often bundle certain rights together. According to the Commission, such bundling may lead to a restriction of output in situations where online rights have been acquired but are not, or only partially, exploited by the licensee.
- Geoblocking digital content. The E-Commerce Report notes that online rights are often licensed on a national basis and that digital content providers often use geo-blocking. Interestingly, however, the E-Commerce Report does not raise any red or even yellow flags in relation to such practices, which are addressed in legislative proposals as part of the DSM programme.
- Duration of license agreements. The E-Commerce Reports notes the relatively long duration of licensing agreements and highlights the use of clauses that can facilitate the extension of such rights, but once again the report does not indicate that such practices raise competition concerns.
- Payment structures and metrics. The E-Commerce Report notes that licensing payment structures for non-premium content privilege more established content providers and raise a question whether certain licensing practices may create barriers to entry. However, the Commission does not indicate concern with any specific practice.
The E-Commerce Report notes that the competitive role of big data was not covered by the sector inquiry but observes that big data practices can raise competition concerns, in particular where marketplaces and third party sellers, or manufacturers with their own shops and retailers, are in direct competition. These issues have been addressed in a number of studies and speeches, including speeches in September 2016 and March 2017 by Commissioner Vestager.
