On 2 February 2017, the EU Commission simultaneously launched three investigations into the e-commerce sector. What is significant about this latest development is that it shows that e-commerce is a clear priority area in antitrust enforcement, and that the Commission is willing to attack perceived anti-competitive practices head-on.
The investigations focus on (1) video games, (2) hotel price discrimination and (3) consumer electronics manufacturing.
The video games inquiry is directed at the largest PC game distribution platform, Steam, and its agreements with multiple video game publishers and is focused on geo-blocking practices. Geo-blocking is the practice of blocking cross-border online sales by redirecting international customers back to their own domestic websites or preventing the use of foreign delivery addresses or credit cards. The alleged geo-blocking in question relates to game activation keys released by Steam in order to unlock games electronically. In this case, the activation keys are themselves geo-blocked, which means that a game purchased through Steam in (for example) Poland could only grant access to users in that country. Although a novel and modern form of geo-blocking, the Commission believes that this restricts cross-border sales and could amount to a breach of Article 101 of the TFEU, the prohibition of anti-competitive agreements.
The second of the Commission’s investigations also relates to geo-blocking and another practice that it is allegedly designed to hinder cross-border trade. The hotel price discrimination investigation looks at agreements between a hotel chain and the largest European tour operators. The restrictions in this case are alleged price discriminations between customers located in different EU Member States. The result of these restrictions, if proven, is that customers in some Member States would not have access to the same rates offered by tour operators to other Member State nationals. The effect of this behaviour would be a partitioning of the Single Market.
The third investigation, whilst similarly focused on e-commerce, does not relate directly to location and geo-blocking but instead addresses an automatic pricing mechanism. The allegation is that several manufactures of electronic notebooks and hi-fi systems have restricted the ability of online retailers to set their own prices by insisting upon online pricing mechanisms that automatically adapt prices to those of leading competitors. The Commission’s view is that such a practice, if confirmed, would restrict intra-EU price competition by preventing the sellers from setting prices lower than their competitors’ (even though, ironically, the intention behind the practice may have been to stay competitive).
The Commission has launched these investigations before the final report of its e-commerce sector inquiry has even been published (expected later in 2017). In September 2016, the Commission published a preliminary report which has now been followed by a public consultation. (We reported upon the Commission’s initial findings in our previous post. Therefore, these three Commission investigations do not in any way represent a conclusion of the Commission’s focus in this sector. The final report from the inquiry is still awaited and recommendations and new legislation could follow. These current investigations are likely to have come from the Commission’s exploration into this sector and the practices they uncovered.
More investigations may be coming and all companies selling online, particularly those with an EU cross-border presence, would be well-advised to review their current contractual arrangements, especially if they contain any kind of geo-blocking or price restriction.
The Commission’s press release can be found here.