E-commerce sector inquiry finds geo-blocking is widespread throughout EU

Geo-blocking occurs when retailers and/or digital content providers prevent online shoppers from purchasing consumer goods or accessing digital content services because of the shopper’s location or country of residence.

The Commission has published initial findings on the prevalence of geo-blocking. The replies from more than 1400 retailers and digital content providers from all 28 EU Member States show that geo-blocking is common in the EU for both consumer goods and digital content. 38% of the responding retailers selling consumer goods and 68% of digital content providers replied that they geo-block consumers located in other EU Member States. For consumer goods, geo-blocking mainly takes the form of a refusal to deliver abroad. Refusal to accept foreign payment methods, and to a lesser extent, rerouting and website access blocks are also used. While a majority of such geo-blocking results from unilateral business decisions of retailers, 12% of retailers report contractual restrictions to sell cross-border for at least one product category they offer. In relation to online digital content, this is mainly done on the basis of the user’s internet protocol address that identifies and gives the location of a computer / smartphone. 59% of the responding content providers indicated that they are contractually required by suppliers to geo-block.

In some cases, geo-blocking appears to be linked to agreements between suppliers and distributers. Such agreements may restrict competition. In contrast, if geo-blocking is based on unilateral business decisions by a company not to sell abroad, such behaviour by a non-dominant company falls clearly outside the scope of EU competition law.

Dawn raids in sector of kraft paper and industrial paper sacks

On 15 March, Commission officials carried out dawn raids at the premises of several companies active in the sector of kraft paper and industrial paper sacks. The inspections took place in several Member States. The Commission has concerns that the companies concerned may have violated Article 101 of the Treaty on the Functioning of the European Union, which prohibits anti-competitive practices such as price fixing and customer allocation.

EU Policies and Guidance

Commission publishes Report on functioning of Insurance Block Exemption Regulation

The Insurance Block Exemption Regulation (“IBER”) exempts certain types of cooperation in the insurance sector from EU antitrust rules under certain conditions. The IBER came into force on 1 April 2010 and will expire on 31 March 2017. Before that date, the Commission will need to decide on whether to renew the IBER in its current form, modify it or let it lapse.

The IBER provides exemptions for agreements between insurers relating to (a) joint compilations, tables and studies and (b) co-insurance or co-reinsurance pools.

The Commission’s preliminary view is that it is no longer necessary to maintain sector-specific block exemptions in this field. The Commission’s preliminary findings are outlined in the following two paragraphs. With regard to joint compilations, tables and studies, the functioning of the insurance industry no longer appears to require a block exemption. This is because the Guidelines on horizontal cooperation adopted in December 2010 offer guidance on how to assess the admissibility of this type of cooperation. If required, the Commission could also provide complementary specific guidance. This would be more flexible than a block exemption and could more easily be adapted to changing circumstances.

With respect to co-(re)insurance pools, the IBER currently seems to be of limited use and relevance. Both a study undertaken for the Commission and the information gathered in the IBER review so far show that only a limited number of companies benefit from the exemption. The study identified fewer than 50 institutionalised pools that are potentially covered by the IBER exemption. The review also showed that insurers share risks in various forms and that there is an important and growing trend away from institutionalised pools towards alternative and more flexible ways of co-(re)insuring risks.

Minority shareholdings and EU merger control

Margrethe Vestager gave a speech recently entitled “Refining the EU merger control system”. Ms. Vesgater referred to the White Paper on merger control which suggests to look at situations where a minority shareholding gives one company influence over another and stated “that type of influence could certainly affect competition”. However, Ms. Vestager went on to say that shareholdings change hands all the time and only a tiny handful of those deals are likely to raise issues. Ms. Vestager stated that the Commission have asked a team of experts how the system works in the countries that have it. Ms. Vestager concluded that “we’d need to see compelling evidence that the system could work at European level – without creating a lot of complexity – before we took any more steps in this direction. And what I’ve seen so far hasn’t convinced me that this is a change we absolutely have to make to our system”.

General Block Exemption Regulation guide updated

The Commission has published the second part of its guide on the General Block Exemption Regulation (“GBER”), that exempts unproblematic state aid measures from prior Commission scrutiny. This second part deals with questions and answers to Articles 36 to 58 of the GBER. The guide is meant to help Member State authorities and aid beneficiaries to apply the GBER to their specific situation.

News (Ireland)

Commission seeks further information regarding Apple tax in Ireland It has been reported recently in the Irish press that the Commission has sought extra information from the Irish tax authorities relating to the ongoing investigation into Apple’s tax arrangements in Ireland. When asked about the timing of a decision in this matter, it is reported that Margrethe Vestager recently commented “Don’t hold your breath”.

Practice Note

What is a full function joint venture?

Section 16(4) of the Competition Act 2002, as amended (the “Act”), provides that the creation of a joint venture to perform, on a lasting basis, all the functions of an autonomous economic entity shall constitute a merger within Section 16(1)(b) of the Act. The Commission have analysed the concept of full functionality in the Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004.

Full function character essentially means that a joint venture must operate on a market, performing the functions normally carried out by undertakings operating on the same market. In order to do so the joint venture must have a management dedicated to its day-to-day operations and access to sufficient resources including finance, staff, and assets in order to conduct on a lasting basis its business activities within the area provided for in the joint venture agreement.

A joint venture is not full function if it only takes over one specific function within the parent companies’ business activities without its own access to or presence on the market. This is the case, for example, for joint ventures limited to R&D or production. Such joint ventures are auxiliary to their parent companies’ business activities.

The strong presence of the parent companies in upstream or downstream markets is a factor to be taken into consideration in assessing the full function character of a joint venture.

The joint venture must be intended to operate on a lasting basis. Commission decisions have found that a period of three years was not sufficient for this purpose but a period of eight years was.