EU Begins Far-Reaching E-Commerce Sector Inquiry
Today, the European Commission sent out the first wave of more than 2,000 questionnaires it has said it will send to companies in connection with its recently-announced e-commerce sector inquiry. This marks the first stage in what is expected to be a far-reaching probe into a wide range of activities and business practices related to online selling in Europe.
The purpose of the sector inquiry is to examine current e-commerce business practices with a view to “breaking down online borders in the European Union.” The Commission will examine whether companies impose—via contract or through other practices—obligations that restrict the ability of merchants and consumers to buy and sell goods and services online across the EU.
Likely targets of the inquiry have been identified as holders of content rights, broadcasters, manufacturers of goods sold online, online sellers and the companies that run online platforms such as price-comparison and marketplace websites. The e-commerce sector inquiry will run in parallel to the Commission’s ongoing antitrust investigations into the conduct of certain specific companies in digital markets relating to pay TV, video games and cross-border trade of consumer electronic goods.
What Is the European Commission Looking For?
So far, the Commission has identified potential issues such as:
- Geo-blocking practices which prevent consumers from accessing certain websites on the basis of their country of residence or credit card details;
- Restrictions in supply contracts which prevent residents in one EU Member State from purchasing goods online in another Member State. The Commission will ask whether, by charging a higher price for products destined for, e.g., France rather than Germany, suppliers may discourage sales to France; and
- Platform bans which are imposed by producers of goods on their resellers to prohibit them from using well-known online platforms (such as eBay) to sell their products. As a result, retailers are allowed to sell these products only through their own online shop.
This list is not exhaustive, and the Commission can expand it during the course of the sector inquiry.
What Does the Inquiry Involve?
The first stage of the inquiry involves information requests to a broad spectrum of market players, such as those sent out today. The requests will likely be onerous, requiring the selection and submission of large amounts of data and documents. While responding to the requests will likely not be mandatory, compliance is recommended and it will be important to provide clear and complete responses. Following unanswered requests, the Commission may also send out mandatory questionnaires, for which there could be significant financial penalties for non-compliance.
How Can this Affect Your Business?
If your company is involved in e-commerce in the European Union and active in a sector named as a target of the sector inquiry, you may receive a questionnaire from the Commission requesting information about how you deal with your customers or suppliers. Alternatively, another company with which you have dealings may receive a questionnaire and provide information about its relationship with your company.
If, in the course of the inquiry, the Commission uncovers anticompetitive practices in the e-commerce sector, it can later launch a targeted investigation into your company’s business. The potential implications of such investigations can be serious, including substantial fines. For example, a similar Commission inquiry into the pharmaceutical sector in 2008 and 2009 resulted in aggressive follow-on investigations in which the Commission fined a number of pharmaceutical companies for alleged anticompetitive agreements and practices.
How You Can Prepare
Your company may receive a request for information from the Commission sometime between June and September. Such requests typically have short response deadlines and can be time consuming to complete. We recommend a review of your company’s agreements with distributors or e-commerce websites in the EU. If your company uses or is subject to any of the practices on which the Commission is focusing (e.g., geo-blocking, platform bans), you should consider seeking the advice of legal counsel. In certain worst-case scenarios, a leniency application to the Commission might be required.
It is important to note that the Commission does not recognize in-house legal privilege, but will normally protect communications with external EU-qualified lawyers or documents created exclusively in the course of obtaining legal advice from those lawyers.
Finally, even if your company is not directly targeted by the sector inquiry, you may wish to consider submitting comments on the Commission’s preliminary report, which is expected in mid-2016, in order to help shape the EU’s future antitrust policy in the online sector.