The European Commission has formally announced its anticipated inquiry into the e-commerce sector.

The Inquiry forms part of the Commission’s strategy for the Digital Single Market (“DSM Strategy”) and is intended to assist the Commission in identifying what hampers competition in e-commerce when sales straddle national borders. View the Commission’s press release and a copy of the DSM Strategy paper.

What is the Commission looking at?

The Inquiry will focus on vertical restraints in arrangements between suppliers and their resellers, including pricing (resale price maintenance/price parity arrangements/price discrimination, whether across territories or channels), contractual or technical territorial restrictions (including geo-blocking), passive sales restrictions and platform bans. Vertical restraints have traditionally been dealt with more frequently at Member State level by National Competition Authorities (“NCAs”), although the Commission is moving towards more active enforcement in this area.

The Inquiry is being run in close cooperation with NCAs, and the Commission is keen to ensure that consistent approaches to vertical agreements are adopted throughout Member States, which it views as particularly important given the cross-border nature of e-commerce. The retail sectors highlighted for particular scrutiny are those where e-commerce is more widespread (clothing, shoes and accessories, consumer electronics, travel services and digital content), although this does not mean that other areas will be excluded.

What are the likely outcomes of the Inquiry?

The purpose of the Inquiry is to understand more about the e-commerce sector and the issues it faces from a competition law perspective. It is a fact finding exercise and it is not intended to make any declarations of the law, or formulate theories of harm at this stage.

There are no plans to revise the current legislation and guidance in relation to the treatment of vertical agreements under EU competition law. However, as a result of its findings, recognising that market realities have shifted since the adoption of the legislation and guidelines, the Commission may choose to clarify the law through additional guidance, or by launching new cases. As a consequence, there is likely to be greater cooperation between the Commission and NCAs and stronger enforcement in the future.

At the same time, in connection with its on-going DSM Strategy, the Commission may introduce additional, complementary legislation addressing other factors that limit cross-border trade, including a commitment to introduce legislation by 2016 to limit so-called “geo-blocking” (i.e. restricting access based on the location of the user).

The Inquiry is likely to report back in mid-2016 with initial recommendations for consultation, before publishing its final report in 2017.

What happens next?

It is anticipated that the Commission will send out three rounds of requests for information (“RFIs”) to various stakeholders in all 28 Member States, including merchants, on-line retailers, content service providers and market places/price comparison sites. The RFIs will include some general, open questions, but are expected to be very data heavy. They are expected to be issued over the course of the summer, with the final round in early autumn 2015.

If you receive an RFI, it will not be mandatory to respond. However, the Commission can choose to issue a formal request in the form of a decision. Failure to comply with such a request (or the provision of false or misleading information) could lead to the imposition of penalties. Actively engaging with the process provides an opportunity to comment on the issues being considered and to shape the Commission’s thinking in this area.