European Union

New e-commerce rules in 2016 to outlaw geo-blocking?

We reported earlier this year how the EU Commission were taking a keen interest in 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. On the 24 September 2015, the Commission launched a public consultation on the practice and has issued a questionnaire to seek market views in order to propose remedies. It is understood that the Commission has particular concerns over several geo-blocking practises where the intent is not to provide the consumer with the right language website or other helpful information, but the intent is to block intra-EU purchasing and price comparison. Examples of such practices are:

  • The automatic re-directing of consumers to sales websites in their own countries to prevent them comparing prices across EU borders and potentially sourcing cheaper goods abroad where there are disparities in international prices.
  • Allowing the cross-border comparison of prices and international website access but then simply blocking the consumer from making the international purchase once the consumer’s foreign delivery address is discovered through their payment details.
  • Allowing international website access but denying international shipment.

The Commission has seemingly side-stepped the thorny issue of copyright and the cross-border access of digital content (such as sport and TV shows) by limiting their current consultation to non-copyright issues.

With regard to the jurisdictional effect on any future legislation, EU legislation will affect all websites in the EU and those outside the EU that are directly targeting customers in the EU, wherever they are based. US websites selling goods in the US but not targeting EU consumers, are not covered. This means that any US website which did want to sell to EU consumers and employed geo-blocking tactics will remain unaffected by any future EU legislation, something the Commission are powerless to stop.

Any new EU legislation is without prejudice to the application of competition law to these practices. Competition law as primary legislation through Treaty articles takes precedence over any Directive or Regulation. The Commission could consider geo-blocking practices as being contrary to Article 101 of the TFEU (the prohibition against anti-competitive agreements) if it considers them a barrier to the proper functioning of the single market.

If the Commission have this power through their interpretation of Treaty articles, it begs the question of why they would need secondary legislation if they considered any aspect of geo-blocking anti-competitive? The answer is a likely desire to regulate these types of clauses in a blanket way rather than having to target individual companies’ use of them through competition law.

Interested parties have until late December 2015 to respond to the Commission’s online questionnaire on the topic and a legislative response is expected in 2016.

United Kingdom

Opt–out competition law class actions come to the UK

The Consumer Rights Act 2015 which came into force on 1st October 2015, introduced provisions which constituted a major new landmark in private competition law enforcement in the UK. Aside from a myriad of changes to consumer law, of particular importance is the introduction of US style class/collective actions for competition law claims. Section 81 and Schedule 8 of the Act are set to broaden the procedural options available to claimants bringing collective actions in the Competition Appeal Tribunal (CAT) for breaches of UK and EU competition law.

It was previously possible for claimants to elect to join “opt-in” collective proceedings, in which claims are brought by a representative on behalf of a group of individuals. However, the Act promises to introduce the alternative of “opt-out” collective proceedings. Such actions will involve a representative bringing proceedings in relation to the aggregate claims of multiple unnamed individuals, who must specifically elect not to be involved in the group action if that is their wish.

Whilst there has been significant concern that this marks a move towards synchronisation with the US regime of class actions, there are marked dissimilarities between the two systems:

  1. Firstly, an opt-out action in the UK cannot be commenced without the permission of the CAT in the form of an Order.
  2. Secondly, the CAT will have jurisdiction to award damages on a purely compensatory basis, with no option to award exemplary or punitive damages.
  3. Thirdly, as before, the practice of the losing party assuming liability for the winning party’s incurred costs will be maintained.

The availability of opt-out collective actions holds great promise for claimants who may previously have been deterred from seeking damages and compensation for infringements of competition law because of the complexity and cost associated with proceedings in the CAT. The Act is likely to provoke a substantial increase in the number of claims commenced with damages awards the size of which have not hitherto been seen in competition law enforcement cases in the UK.

However there are many uncertain aspects about how the system will work in practice. For instance, the named representative alone in an opt out collective proceedings action will be liable for any costs awarded by the Court against it. This cannot be shared out among the members of the class. This is a substantial disincentive to bring an action! There is, however, a provision whereby any damages not claimed by members of the class may, at the discretion of the CAT, be paid to the representative to meet their legal costs. Litigation funders are eagerly eyeing this provision as a method of recovering their potential underwriting of any opt-out collective action. There are also issues relating to the anchoring of actions against foreign defendants, the controversial provisions relating to the mandatory payment of any residual damages of the class to the Access to Justice Foundation and the position of foreign plaintiffs.

So many aspects of the new reforms could in theory stimulate substantial claims but until the uncertain aspects of the new regime are fully clarified, litigants are likely to tread very warily into this new litigation landscape.

Germany

FCO finds ASICS clause on online-sales for authorized small and medium distributors anti-competitive

Due to a previous investigation of the German Federal Competition Office (Bundeskartellamt, “FCO”), ASICS Deutschland, the leading manufacturer of running-shoes on the German market, changed its provisions on online sales for authorized small and mid-size sellers of the company’s products. Following an investigation of provisions which restricted the online sales activities of authorized dealers by prohibiting them from using price comparison engines for their online presence as well as ASICS brand names on third party websites (to guide customers to their own online shops), the FCO found such restrictions to be unlawfully anti-competitive.

Although stating that brand-name manufacturers can legally revert to a broad spectrum of measures to protect quality-standards in the course of the distribution of their products, the FCO points out that these well-understood interests are limited by the German Act against Restraints on Competition (Gesetz gegen Wettbewerbsbeschränkungen, GWB).

In the Office’s opinion, the provisions established by ASICS did not meet the requirements set by German Competition Law. By i.e. prohibiting authorized dealers from using price comparison engines or online sales platforms and in the same time establishing own online-shops and co-operating with big online-forums such as Amazon, smaller sellers would be almost impossible to find for the online-shopping consumer. As a consequence, the respective online business would be concentrated in the hands of the manufacturers themselves and a few large retailers or leading online-marketplaces.

Further, a clause which prohibited distributors from using online marketplaces like eBay, was deemed highly questionable in the view of the competition rules.

Against this background, the FCO states the named prohibitions primarily served to control price competition in both online and offline sales by eliminating the broad range of online offer and the ensuing price reduction leads to the detriment of the consumer.

The declaratory decision of the FCO falls in a time of upcoming discussion on the legal admissibility of contractual prohibitions on the use of online marketplaces and other restrictions on online sales. Being targeted from in national as well as European competition law, this topic is going to be subject to dynamic evolution in the near future. Therefore, the mentioned decision of the FCO is one of the first brushstrokes of a process to come, the outcome of which is going to set the legal framework for many manufacturers and online-sellers in a commercially sensitive field.

Italy

Italian Competition Authority accepts commitments for alleged abuse of dominance into the plastics packaging recycling market

As previously mentioned in our article on 17th July 2014, the Italian Competition Authority (“ICA”) opened an in-depth investigation on the Italian consortium CONAI entrusted with the plastics packaging recycling in Italy, for violating Article 102 TFEU, the provision against the abuse of a dominant position.

The background of the case was that in execution of the European “extended producer responsibility” principle, Italian law established that plastics packaging producers had to be responsible for the recycling. Thus such producers were obliged to become member of CONAI and pay the membership fee unless they were able to set up an alternative recycling system approved by the Ministry of the Environment (“ME”). In order to get this approval, producers had to file an application with the ME which shall control whether the alternative recycling system met the legislative requirements.

The Italian company Aliplast S.p.A. (“Aliplast” or the “Complainant”) filed an application to have its own recycling system (named “P.A.R.I.”) authorised by the ME but -- during the relevant administrative procedure -- CONAI raised several legal challenges.

All the exceptions raised by CONAI were held groundless by the ME and the Italian administrative courts so that the ICA found that the above behaviour may be deemed as a general exclusionary strategy aimed at delaying or preventing the approval of the P.A.R.I.

The ICA held that CONAI enjoyed a dominant position in the plastics packaging recycling market as the majority of the relevant undertakings did not have an alternative recycling system -- like Aliplast -- and that CONAI tried to maintain its economic strength by impeding the entry of a new system.

Further, the ICA found that the alleged exclusionary strategy could also cause damage to the intra-Community market as: (i) the plastics packaging recycling regards all the Italian territory -- which was an important part of the European Union market -- (ii) the alleged anti-competitive conduct may negatively influence foreigner undertakings willingness to set up an alternative recycling system in Italy.

In such a scenario, as per Article 14-ter of Law No. 287/1990 (the “Italian Competition Law”), CONAI provided the ICA with commitments aimed at eliminating the alleged anti-competitive conduct. In particular, CONAI agreed to limit its presence during the administrative procedure regarding the mentioned authorization and provide for fees based on reasonable terms and conditions for undertakings managing alternative recycling systems.

On 21st September 2015, after having examined such commitments and carried out a market test, the ICA decided to make the committments binding on CONAI, not imposing any fines on it.

In our view, such decision shows the considerable pressure which an in-depth investigation can exert even on undertakings enjoying public powers, helping make the overall recycling sector more competitive and provide Italian consumer and undertakings with high cost savings.