Yesterday, in conjunction with the release of the European Commission’s (EC) Digital Single Market Strategy, DG Competition (DG COMP) formally launched its inquiry into the e-commerce sector (see our previous briefing).  DG COMP suspects that businesses may be establishing barriers to cross-border online trade in an attempt to divide up the EU's Single Market along national borders, thereby preventing competition and uptake in e-commerce.  The practices that the EC has invoked thus far involve geo-blocking or geo-localization, which hinder consumers’ ability to shop online with traders situated outside of their state of residence.  The EC will also look at other restrictions in distribution agreements that limit the retailers’ ability to sell via online platforms or to consumers located outside of their home jurisdiction.

Who Should Be Concerned / Who Is Targeted?

Over the coming weeks DG COMP will conduct a widespread market consultation, which will take the form of extensive information requests to a range of stakeholders engaged in e-commerce in the EU.  Manufacturers, wholesalers, and e-commerce retailers of clothing, shoes, and electronics, as well as digital content providers, appear to be high on the list of likely recipients.  Under EU competition rules, the EC has the authority to compel companies to supply information, documents, or statements as part of the sector inquiry, and to sanction companies that provide incorrect or misleading information.  Companies (and their trade associations) should be well prepared to respond to the consultation, given that the substance of their responses may prove to be critical from an advocacy point of view in the subsequent stages of the inquiry.

Then What?

The EC’s e-commerce sector inquiry will gather market information in order to better understand the nature, prevalence, and effects of various business practices that may restrain cross-border trade within the EU internal market.  The EC will then review this information and assess whether some of those practices are incompatible with the EU rules on competition.  If the EC identifies specific competition concerns, which historically has invariably been the result of sector inquiries, it may open targeted investigations under either Article 101 TFEU (applying to restrictive agreements/practices) and/or Article 102 TFEU (applying to unilateral abusive conduct by dominant companies). 

Timeline

DG COMP expects to publish for consultation a preliminary report of the inquiry’s results in mid-2016.  The final report is expected in the first quarter of 2017.  While these targets may seem to give a bit of breathing space, in reality they do not.  The objectives of the inquiry, as well as its overlap with the EC’s fast and furious list of Digital Single Market Strategy deliverables, means that those involved in online commerce in the EU will need to secure resources quickly  as they will be kept busy for the next couple of years.