The new EU Commissioner for competition, Margrethe Vestager, announced on 26 March that she intends to launch a sector inquiry into e-commerce. The stated purpose is to investigate the reasons why there is still relatively little cross-border online trade in the EU. Only one in seven EU citizens is said to have made online purchases from a supplier located in another Member State. The probe is not limited to online sales of goods - online distribution of content (such as video, music, games or apps) is also part of the review. The Commission has explained that it proposes to consider whether companies are restricting cross-border sales and “artificially” partitioning the EU market along national borders:

  • Vertical distribution agreements between manufacturers or content holders and online retailers will be a focus area of the inquiry. The Commission will try to identify possible unjustified restrictions on cross-border online sales in distribution agreements.
  • The Commission has indicated that it proposes to investigate so-called “geoblocking”, whereby content (films, music) is made available to users online in some Member States, but blocked in others. 
  • Practices of charging different prices to users in different Member States may be another area of review. 
  • Even in the absence of restrictive clauses in distribution agreements, some of those practices could violate competition law if the company is found to hold a dominant position in certain segments.

What to expect

The sector inquiry will be formally launched in May and will likely be conducted over a period of at least one year. Sector inquiries generally serve a fact-finding role for the Commission, to determine whether further action is required. 

Companies involved in e-commerce across the EU can expect to receive extensive questionnaires. The Commission’s powers of investigation also include unannounced inspections at companies’ premises, a tool which the Commission has used in previous sector inquiries.

The Commission’s previous sector inquiries, which concerned the energy, pharmaceutical and financial industries, each resulted in formal antitrust proceedings being opened against individual companies. In the e-commerce space, the Commission has existing investigations in relation to cross-border distribution of satellite and online pay TV content, consumer electronics products, and video games.

Context

The sector inquiry forms part of the Commission’s broader initiative to promote a digital single market (DSM), one of its key focus areas. It is an illustration of the new approach under President Juncker which seeks to unite different portfolios under common themes and encourage cooperation between Commissioners. On 25 March, the Commission’s VicePresident for the digital economy, Andrus Ansip, outlined the broad contours of an action plan, including three pillars:

  • Cross-border e-commerce.
  • The creation of a single telecoms market which provides stronger incentives to invest in high-speed infrastructure.
  • Big data.

The sector inquiry, announced by the competition Commissioner on the following day, concerns the first pillar.

The interplay between different portfolios is further reflected in Commissioner Vestager’s remarks that information gathered in the sector inquiry will also inform other Commission initiatives in this area. For example, it is understood that the Commission is investigating the reasons for high prices in cross-border parcel services. Where competition law tools do not seem suitable but policy concerns nonetheless arise, the Commission may envisage regulation as an alternative tool to promote cross-border sales. Commission officials see the sector inquiry into the energy sector as a positive precedent. However, concerns have also been voiced that the e-commerce probe may delay progress towards the digital single market, because the Commission might wait for the inquiry results before taking legislative action.

Against the background of a perception that Europe’s digital economy is increasingly falling behind the US, the Commission is seeking to tackle perceived barriers to the expansion of digital businesses in Europe. This is a common theme underlying the proceedings against Google, investigations against hotel booking platforms at national level and the Commission’s e-commerce inquiry. Big data, including access to platforms and ownership of data, is likely to be the next area that will be tackled. Companies with activities in the digital space should follow these initiatives carefully to explore potential opportunities and risks. Companies must be aware that their digital business models will be in the spotlight of competition enforcers over the coming years. In her speech, the Commissioner stressed that she hopes the inquiry will encourage executives to stay “on the right side of the law by setting up compliance programmes and other preventive measures.”