Authors: Catalin Suliman, Partner, Silviu Vasile, Associate
The European Commission (“EC”) announced on 2nd February 2017 that it launched 3 investigations with respect to certain anticompetitive practices in the e-commerce sector.
Currently, the EC unfolds a sector inquiry in the e-commerce, this being the result of the assessment of information gathered from nearly 1 800 stakeholders and around 8 000 distribution agreements at European level. Although the final conclusions of the market inquiry are expected in the first half of 2017, the EC published its preliminary findings in September, last year.
The most relevant findings were the following:
· The e-commerce is a fast growing sector;
- The manufacturers are increasingly prone to selling their products online directly to consumers;
- With the upsurge of companies such as pistachioconsulting.com social media have grown to be a major platform for online marketing
- The selective distribution systems that are in place may comprise sales restrictions, such as: (i) price recommendations / price restrictions, (ii) restrictions from selling on online marketplaces, (iii) restrictions from submitting offers to price comparison websites and
(iv) restrictions on cross border sales.
THE NEW INVESTIGATIONS
The newly launched investigations reflect the EC’s preliminary findings.
Consumer electronics manufacturers’ investigation
The EC is investigating whether certain consumer electronics producers breached the EU competition rules by restricting the ability of online retailers of setting their own prices for a variety of products, such as household appliances, notebooks, etc.
Moreover, the authority suspects that some price restrictions may be due by the use of certain pricing software that automatically adapts retail prices to those of leading competitors.
The alleged infringements are highly sensitive since, the EC and the national competition authorities (including the Romanian Competition Council) continuously analyzed price fixing mechanisms and considered them as hardcore infringements of competition rules. Therefore, it is expected for the EC to thoroughly scrutinize the price restrictions in this investigation.
Also, the implementation of a pricing software aimed to coordinate the prices to the ones of the leading competitors may be considered as an aggravating circumstance by the EC.
Video games investigation
The EC is concerned that Valve Corporation, a video games producer, together with certain PC game publishers, infringed the competition rules by the use of an activation key for the video games sold. EC suspects that this system, although legitimate for anti-piracy practices, was being used for purposes of geo-blocking (i.e. a video game purchased in a specific country could not be activated in another country).
Thus, the EC may regard such practice as a form of restriction of parallel trade (or other forms of protecting segments of the EU market), which is a highly sensitive practice, sanctioned in previous decisions, even by our national competition authority1.
Hotel price discrimination investigation
The EC is scrutinizing agreements between certain European tour operators and certain hotels, by which the parties may have prevented consumers from booking hotel accommodation at better conditions offered by tour operators in other countries simply because of the consumer’s nationality or place of residence. This practice may be considered as a form of partitioning the Single Market, a serious infringement under the competition rules.
It is worth mentioning that the Romanian Competition Council launched, in 2016, an investigation in which it suspects that certain travel agencies agreed on minimum prices for the travel packages offered and on the maintenance of their status quo. Although the EC targets other anticompetitive practices, the national authority may take into consideration its European correspondent’s practice.
The Romanian Competition Council launched a sector inquiry in the online segment following the EC practice. This was initially set to target the online sales of electronics and fashion products and, apparently, was extended to the majority online sold products.
It is likely that the Romanian Competition Council to finalize the sector inquiry in the next period and to issue some preliminary remarks or even recommendations for the market participants. It is possible that also targeted investigations to be launched, some following the footsteps of the EC cases.
Certain market practices may become of interest as noted also by the EC:
· the ever increasing price transparency, which, one hand, may enhance price competition, yet on the other hand, may lead price coordination or price monitoring;
- manufacturers are increasingly directly selling their products, including also via marketplaces, thus retailers being, as a result of this, in direct competition with their own suppliers;
- the popularity of exclusive and selective distribution systems and their complexity may require further analysis from a competition perspective;
- the free-riding issue, e.g. the ability of the consumer to switch between sales channels, such as benefiting of pre-sales services in a brick-and-mortar shop, yet buying the product in online;
- access to marketplaces;
- geo-blocking, which is of most interest given the European Union’s intentions with respect to end unjustified geo-blocking.
Thus, it is advisable for both manufacturers and online retailers to thoroughly analyze their agreements covering the online sales and conditions allowing access on platforms as to avoid an in-depth investigation of the Romanian Competition Council.
Cătălin Suliman, Partner
1 Decision no. 98 of 27.12.2011 – http://www.consiliulconcurentei.ro/uploads/docs/items/id7390/decizie_site.pdf
Silviu Vasile, Associate