Short Reads

European Commission announced launch of e-commerce sector inquiry (and may conduct inspections)

European Commission announced launch of e-commerce sector inquiry (and may conduct inspections)

European Commission announced launch of e-commerce sector inquiry (and may conduct inspections)

01.04.2015

On 26 March 2015, the Commission announced that it is seeking to launch an industry-wide review of business practices in e-commerce, known as a "sector inquiry".

What is this about?

Sector inquiries are investigations that the Commission carries out into sectors of the economy when it believes that a market is not working as well as it should and it suspects that breaches of the competition rules might be a contributory factor. If it finds grounds on the basis of the information obtained during the inquiry, the Commission may decide to open specific investigations into possible breaches of the competition rules. This is what the Commission did on the basis of the results of sector inquiries into the energy, financial and pharmaceutical sectors.

Why is this relevant?

In the context of previous sector inquiries, the Commission has conducted unannounced inspections at the premises of companies. Note that these inspections are not necessarily focused on companies for which the Commission already has positive indications of wrong-doing. Instead, inspections have been used more broadly to ensure immediate access to relevant information. In this context, companies active in industries where e-commerce is important (see below) should ensure that they are optimally prepared for possible inspections. Checking-up on dawn-raid manuals and compliance efforts can be part of that exercise. Also, the Commission is likely to send out questionnaires to industry participants. A sector inquiry can reveal evidence of infringing conduct which can lead to severe fines.

For whom is this relevant?

Sector inquiries, including the one announced, are characterized by their wide scope. The rise of e-commerce is of course affecting many industries including FMCG, electronics and leisure. Industries and companies that are particularly experiencing increasing pressure on existing business models as a result of online trade, may be involved in the sort of behaviour that can be problematic under the competition rules (see below).

What types of behaviour is the Commission looking for?

The Commission as well as national competition authorities have been expressing concerns for a while about efforts of suppliers to restrict the freedom of online distributors to freely use the internet to reach customers. The Commission has indicated that there are signs that “some companies may be taking measures to restrict cross-border e-commerce”. Furthermore, the sector inquiry "will focus on private – and in particular contractual – barriers to cross-border e-commerce in digital content and goods". This suggests that any direct or indirect efforts by suppliers that hamper online distributors from freely supplying customers throughout the EU will receive particular attention. However, any other e-commerce-related behaviour violating the competition rules discovered in the context of a sector inquiry can lead to fines. This includes agreements that a distributor shall limit its proportion of overall sales made over the internet and agreements that the distributor shall pay a higher price for products intended to be resold by the distributor online than for products intended to be resold offline.

What should I do?

If you operate a distribution network which includes online distributors, the upcoming sector inquiry can be a good reason to re-assess your contracts and business practices from a competition law compliance-perspective. At the same time and as noted above, it may be prudent to assess your dawn-raid readiness.
The sector inquiry is expected to commence in the next few months.

Team

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