The European Commission’s ("Commission") sector inquiry to investigate how competition in the e-commerce sector is working across Europe is set to start this month. Such sector inquiries are often precursors to specific competition investigations which can lead to substantial fines if any competition infringements are found.

Importance of online markets to competition authorities

The Commission, as well as the Competition and Markets Authority ("CMA") here in the UK, have emphasised that online markets are a priority. This inquiry responds to concerns that suppliers are entering into contractual arrangements that restrict distributors from freely supplying customers via the internet. Potential anti-competitive restrictions could include internet minimum advertised prices, bans on online sales or dual pricing (where products to be resold online are more expensive than those sold offline). The sector inquiry will focus on whether such contractual barriers to cross-border e-commerce exist. It is also looking at ways to end ‘unjustified’ geo-blocking i.e. restricting access to content based upon the user's geographical location.

Recent and current cases

The CMA has already been active in this area, recently finding that minimum internet advertised price restrictions in distribution agreements were anti-competitive (the Pride mobility scooters case). This focus on the online world is expected to continue. It is currently carrying out competition investigations that may lead to fines in relation to: hotel online bookings, catering equipment supplies, bathroom fittings and the clothing, footwear and fashion sector – all of which may include some element(s) of internet commerce.

Sector inquiries leading to competition investigations against specific companies

The Commission’s sector inquiry will not target any individual company at this stage with the Commission sending information requests to a large number of interested parties such as manufacturers, online retailers and online platform providers. There is the possibility, however, that information gathered during the inquiry will be used to initiate individual infringement proceedings against companies at a later stage. This has frequently happened following previous UK and EU sector inquiries. For example, there were significant fines for certain pharmaceutical companies following the Commission's last sector inquiry into the pharmaceutical industry.

Prudent to review contracts and business practices

For companies that have distribution arrangements involving online distributors, this sector inquiry, together with the Commission's and CMA's increasing interest in the online world, should encourage an urgent appraisal of contracts and business practices to ensure compliance with competition law.