The Commission’s cross-border sales crusade seems far from over. The EUR 7.8 million fine imposed on distribution platform owner Valve and five PC video games publishers for geo-blocking practices is the most recent notch in the Commission’s belt. Food producer Mondelĕz may be next on the Commission’s hit list: a formal investigation into possible cross-border trade restrictions was opened recently.
Companies should be aware of the Commission’s determination to encourage cross-border trade within the EU’s single market, with the Geo-Blocking Regulation as a complementary tool in this quest. Licensing and distribution systems, as well as commercial conduct, may thus need double-checking for possible territorial restraints. Dominant companies should take extra care in their conduct towards resellers, particularly in regard of price, volume, labelling or packaging, to ensure cross-border trade is not restricted.
Valve’s online PC gaming platform “Steam” allows users, upon authentication, to download or stream PC video games. According to the Commission, the PC video games publishers requested Valve to set up geographical restrictions and to provide geo-blocked Steam activation keys for the publishers to include in their PC video games to be sold by third party distributors in certain Member States. As a result, PC video games were prevented from being activated in response to unsolicited consumer requests from outside a particular Member State. In addition, the Commission found that the licensing and distribution contracts concluded bilaterally between four of the PC video game publishers and several of their PC video games distributors contained clauses preventing the cross-border (passive) sale of PC video games.
This is not the first time that the Commission has tackled territorial sales restrictions in distribution and non-exclusive licensing agreements (see our March 2020 newsletter). So far, the Commission has left distributors and licensees untouched in its fining decisions for these restrictions. Interestingly however, a fine was imposed on Valve in this case. The reason for this could be that the Commission perhaps considered (i) Valve, as a platform operator, not to be a distributor in the more traditional sense of the word and (ii) Valve to have played a more ‘active’ or ‘facilitating’ role than ‘more traditional’ distributors in earlier cases. However, this is currently anyone’s guess, since the actual fining decision has not yet been published.
Reward for cooperation
The PC video games publishers obtained fine reductions of up to 15% for their cooperation under the Commission’s non-cartel cooperation practice, by expressly acknowledging the facts and competition law infringements, and providing additional evidence. Valve, on the other hand, chose not to use this option and was fined under the ordinary antitrust procedure. Even so, companies should take to heart that the Commission’s practice of rewarding cooperation in non-cartel antitrust cases is becoming a frequently-used option in cross-border sales restriction procedures.
Coffee, cookies and chocolate
The Commission has initiated a formal antitrust investigation to determine whether food producer Mondelĕz, either on a unilateral basis or through agreements, has restricted parallel trade for chocolate, cookies and coffee within the EU.
The Commission is taking a closer look at the following practices: (i) restrictions on the EU sales territories in which a trader can sell its products, (ii) limitations on volumes or pricing directed at customers involved in cross-border trade, (iii) promotional actions for customers not engaging in cross-border trade, (iv) language restrictions on packaging and (v) refusal to supply certain traders, with a view to restricting imports into certain markets. These potential parallel trade restrictions are reminiscent of the earlier AB InBev case (see our June 2019 newsletter).
The investigation may be the first of a whole series of investigations into parallel trade restrictions in the retail sector. The Commission noted in its November 2020 study on territorial supply constraints in the EU retail sector, that traders in certain fast-moving goods categories are confronted with numerous parallel trade restrictions, such as refusals to supply, differentiation of product packaging and content, and destination obligations when purchasing from multinational branded goods producers.
It is full steam ahead for the Commission in its cross-border trade enforcement, whatever the type or form of the restriction or the sector involved. Forewarned is forearmed: companies should double-check their commercial contracts and conduct for potential territorial restraints.
This article was published in the Competition Newsletter of February 2021. Other articles in this newsletter: