The consumer electronics and videogames probes come out of the Commission’s e-commerce sector inquiry, which was launched in May 2015 amidst concerns that businesses may be seeking to restrict online sales with a view to limiting price competition and cross-border trade. The Commission is yet to publish its final report in the e-commerce sector inquiry, but the preliminary report published last September made very clear that the Commission considers the competition rules are being broken and that enforcement action would follow.
It is common for a sector inquiry to result in enforcement action, and the two probes announced today might not be the only ones we see coming out of the e-commerce sector inquiry. The inquiry has also focused on clothing and shoes, toys and childcare, media (books, CDs, DVDs and Blu-ray discs), cosmetics and healthcare products, sports and outdoor equipment and house and garden, as well as digital content. For further information on the e-commerce sector inquiry, see our briefings in the recommended reading section.
The hotels probe results from customer complaints received by the Commission. It seems to be unrelated to the hotel online booking investigations carried out by several member states or the joint monitoring project into hotel online booking carried out by the Commission and around 10 national regulators.
The Commission is investigating whether manufacturers of consumer electronics such as household appliances, notebooks and hi-fi products have restricted the ability of their online retailers to set their own prices. The Commission considers that the effect of these suspected price restrictions may be “aggravated due to the use by many online retailers of pricing software that automatically adapts retail prices to those of leading competitors”.
It is a long-established principle that a retailer must be free to set its own price, whether online or offline. But the focus on automated repricing software is more recent. Last year the US Department of Justice and UK Competition & Markets Authority investigated two online sellers of posters and frames who had agreed not to undercut each other’s prices and who used automated repricing software to implement their price-fixing agreement. In the current Commission probe, there does not appear to be any suggestion that the online retailers reached agreement – either as between retailers or with the respective manufacturers – that they would use this software. Rather the inference is that certain retailers independently chose to use automated repricing software and this worsened the effect of the restrictions suspected to have been agreed between each manufacturer and retailer. It will be interesting therefore to see how the Commission approaches this.
The Commission is investigating bilateral agreements between a game distribution platform and five PC videogame publishers. The Commission suspects ‘geo-blocking’, more specifically, that the parties agreed that customers would be required to use ‘activation keys’, which would allow them to limit access to a purchased game only to customers in a particular EU Member State. This is not the first time the Commission has tackled geo-blocking as a means of restricting parallel trade – in a major investigation, the Commission has also probed geo-blocking of films by Sky and six major Hollywood film studios.
The Commission is investigating agreements between the largest European tour operators and certain hotels. The Commission suspects that these companies discriminated against customers based on their nationality or country of residence, effectively preventing customers from taking advantage of better terms offered by tour operators in other Member States.
In recent years, enforcement in relation to pricing and parallel trade restrictions has been left to the national competition authorities. Whilst we have seen an increase in the levels of enforcement across several Member States, it has been patchy and inconsistent. This is not helped by the fact that the Commission’s guidelines on ‘vertical’ restrictions are now 7 years old and do not fully address the increasingly important new sales channels and technologies. These probes by the Commission may represent the first step towards a more harmonised approach. Additionally, it would be helpful to see clearer guidance from the Commission so that businesses can ensure they stay on the right side of the line.