On 6 May 2015, the European Commission announced that it had launched a sector inquiry under Council Regulation 1/2003 into the e-commerce sector, regarding the ability of suppliers, wholesalers and resellers to sell their goods and services over the internet.
The Commission has the power to conduct inspections and even impose fines and other sanctions for competition law infringements it may find while carrying out its sectorial review.
One of the Commission’s main concerns is the lack of cross-border internet sales, meaning that although theoretically consumers can buy products online from across the EU at the best price available, they tend overwhelmingly to still buy online from domestic websites, curtailing cross border trade. Sometimes this can be put down to consumer concerns about dealing with foreign websites. On the other hand it could be the result of restrictive practices by suppliers such as geo-blocking. Geo-blocking is the practice of blocking online sales across borders by redirecting international customers back to their own domestic websites or blocking the use of foreign delivery addresses or credit cards.
Of particular significance for businesses is the Commission’s renewed focus on contractual restrictions in distribution and reseller agreements which restrict distributors and resellers from selling over third party online platforms such as Amazon and Ebay. Restrictions against sales over these platforms are placed in many agreements and banning them has traditionally been the legal norm. Suppliers relied upon paragraph 54 of the 2010 Commission Guidelines on Vertical Restraints which permits suppliers to restrict distributors use of third party platforms where customers access the distributors website through a site carrying the logo or name of the third party platform.
However, as we reported in this post, there’s a growing regulatory challenge in Germany against the wording of paragraph 54. This obvious tension between national competition regulators and Courts interpretation is unhelpful for business and a uniform interpretation of the law. Given the growth of online platforms it is likely that the Commission may well revisit its guidance and give distributors (even in the context of a selective distribution system) a general right to sell over these third party platforms.
Separately but in a complementary fashion, the UK CMA is already allegedly investigating the use of geo-blocking by companies, as reported here.
Whilst the EU’s final report is not due till 2017, any regulatory shift to promote online sales is likely to be felt before this date.