Jean-Claude Juncker, the President of the European Commission ("Commission") in October 2014 promised "ambitious legislative steps towards a connected digital single market". The Commission started to put this aim into practice by publishing its Digital Single Market Strategy ("Strategy") on 6 May 2015.
The Strategy contains several key actions under three pillars and the Commission will set out to make a number of relevant legislative proposals in this regard. As a first step to implement the Strategy, also on 6 May 2015, the Commission launched an inquiry into the e-commerce sector ("Inquiry") in order to identify possible competition concerns affecting the European e-commerce sector. While the Strategy essentially addresses the regulatory barriers to the cross-border online trade in goods and services, the Inquiry will focus on barriers set up by companies.
The following focuses on selected aspects of these two initiatives that may have a significant impact on your business.
Digital Single Market Strategy
- Pillar I: Better access for consumers and businesses to digital goods and services across Europe: A key focus is on removing key differences between online and offline commerce. This in particular relates to the fight against what the Commission perceives to be "unjustified geo-blocking", i.e. instances where access to websites based in other Member States is denied or where the possibility for making a purchase/the commercial terms differ between Member States. The Commission's finding in the Strategy that such geo-blocking may in certain instances be the result of agreements between competitors to share the market is of undoubted relevance to the unfolding Inquiry. In relation to the distribution of audio-visual content, the Strategy provides for a modernisation of copyright laws to facilitate the licensing of rights for online distribution across the EU.
- Pillar II: Creating the right conditions and a level playing field for advanced digital networks and innovative services to flourish: A focus of Pillar II is to secure high-speed infrastructure for digital and content services. The Strategy highlights problems such as isolated national markets and sets out to make necessary proposals for reform of the Telecoms Single Market package. Furthermore, the Strategy identifies concerns regarding the operation of online platforms such as search engines, e-commerce platforms, etc. and provides for the launch of a comprehensive assessment of the role of such platforms before the end of 2015. The extent to which this analysis may dovetail with the Commission's investigation of Google or its on-going antitrust probe into alleged restrictions of online sales remains to be seen.
- Pillar III: Maximising the growth potential of the digital economy: This includes aspects such as Cloud computing and the Big Data sector, through measures such as a European "free flow of data" initiative, ensuring interoperability, standardisation, etc.
E-commerce Sector Inquiry
- The focus of the Inquiry is on supply and distribution agreements, in particular barriers to online sales within Europe and territorial restrictions placed on resellers.
- The Commission informally indicated that it will send out approximately 2,000 requests for information ("RFIs") to companies across the EU, with 500 of these going to top retailers. RFIs are part of the Commission's initial fact finding exercise and they are expected to be fairly data intensive. Companies which receive an RFI are likely to be given around one month to respond.
- An interim report and public consultation document is anticipated to be issued by the Commission by mid-2016 with the final report published in 2017.
What do we recommend?
It is patent that the Strategy is ambitious in scope and in the range of legislative changes it contemplates. Similarly, the Strategy is ambitious in terms of timing, as the envisaged timeframe for the completion of key measures is 2015/2016. At the same time, the Strategy leaves open a number of points that will need to be fleshed out (e.g., when is geo-blocking "unjustified", etc.). For companies affected, the proverbial devil may well be in these as yet undefined details.
Similarly, in relation to the Inquiry, Commissioner Vestager has stated that the Commission, should it find evidence of anti-competitive practices, "will not hesitate to take enforcement action under EU antitrust rules". Sectors particularly under the spotlight include electronics, clothing, shoes and digital content. Manufacturers, wholesalers as well as e-commerce retailers can be affected. Companies (potentially) subject to the investigation would be well advised to ensure they audit their practices for full compliance with competition laws, seeking any expert competition advice they may require.