September 19, 2016

The Commission’s preliminary report on its e-commerce sector inquiry confirms the fast growth of e-commerce in the EU and identifies business practices that might restrict competition and limit consumer choice.

The Commission launched the e-commerce sector inquiry in May 2015 in the context of its Digital Single Market Strategy. One of the main areas of the Digital Single Market Strategy is to ensure better access for consumers and businesses to goods and services.  The sector inquiry complements the Commission’s legislative proposals in this regard.  The objective of the sector inquiry was to allow the Commission to identify possible competition concerns in European e-commerce markets.

During the inquiry, the Commission gathered evidence from nearly 1,800 companies operating in e-commerce of consumer goods and digital content and analysed around 8,000 distribution contracts. The Preliminary Report presents the Commission’s initial findings regarding these issues.

The Report identifies business practices that may raise competition concerns. The Commission says that it may open case specific investigations to ensure compliance with EU rules on restrictive business practices and abuse of dominant market positions.

The Report indicates that more than half of EU adults ordered consumer goods or services online in 2015, with the figure rising to more than eight in ten people in some Member States. E-commerce has been shown to be an important driver of price transparency and price competition, increasing consumer choice.  The Report also identifies certain business practices that may be limiting online competition.

The Report finds that manufacturers have responded to the growth of e-commerce by adopting a number of practices in order to better control the distribution of their products and the positioning of their brands. Selective distribution systems are being used more widely and manufacturers are increasingly selling their products online directly to consumers.

Manufacturers are also increasingly using contractual sales restrictions in their distribution agreements. The report found that:

• over two in five retailers face some form of price recommendation or price restriction from manufacturers;
• almost one in five retailers are contractually restricted from selling in online marketplaces;
• almost one in ten retailers are contractually restricted from submitting offers to price comparison web sites; and
• over one in ten retailers report that their suppliers impose contractual restrictions on cross-border sales.As for digital content, the availability of licences from copyright holders is essential for digital content providers and a key determinant of competition in the market.In March 2016, the Commission published its initial findings on geo-blocking, which found that the practice was wide spread in e-commerce throughout the EU especially for digital content. More than 60% of the licence agreements submitted by rights holders are limited to the territory of a single Member State. Almost 60% of responding digital content providers have contractually agreed with right holders to geo-block.The Preliminary Report is now open to public consultation for a period of two months. Stakeholders are invited to comment on the findings of the sector inquiry, submit additional information and raise further issues. The Commission expects to publish the Final Report in the first quarter of 2017. To read the Commission’s press release in full and for a link to the Preliminary Report, click here.
• If geo-blocking is the result of agreements between suppliers and distributors it can restrict competition in the single market in breach of EU antitrust rules. The Commission says that any competition enforcement measure against geo-blocking 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.
• The report finds that copyright licensing agreements are complex and often exclusive. The agreements foresee what territories, technologies and release windows digital content providers can use.
• All these types of contractual sales restrictions may, under certain circumstances, make cross-border shopping or online shopping in general more difficult and ultimately harm consumers by preventing them from benefiting from greater choice and lower prices in e-commerce.