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European Commission Investigates Online Sales Practices
On 2 February 2017, the European Commission (EC) announced three separate investigations into online sales practices in the EU. It will assess whether various practices involving agreements between manufacturers and distributors are anti-competitive and in breach of EU competition law.
These investigations provide immediate guidance to companies engaged in similar practices and should also ultimately provide hard case guidance. They are major developments in the evolving analysis of the application of competition law in the EU to e-commerce restrictions.
The investigations concern respectively alleged resale price restrictions (RPM), alleged discrimination on the basis of location and alleged geo-blocking (in which companies prevent consumers from purchasing digital content based on the consumer's location or country of residence). As the EC pointed out in its press release announcing the investigations, the preliminary results of the EC's competition sector inquiry on e-commerce show that the use of these restrictions is widespread throughout the EU.
In the RPM investigation, the European Commission is investigating whether four manufacturers have breached EU competition rules by restricting the ability of online retailers to set their own prices for widely used consumer electronics products such as household appliances, notebooks and hi-fi products.
The discrimination case concerns hotel accommodation agreements between large European tour operators and hotels. The agreements in question may contain clauses that discriminate between customers, based on their nationality or country of residence — as a result, customers would not be able to see the full hotel availability or book hotel rooms at the best prices.
The geo-blocking case concerns bilateral agreements between a video game distribution platform, and five PC video game publishers. The investigation focuses on whether the agreements in question require that "activation keys" (used to confirm that a game is not pirated) allow access only to a purchased game in particular EU member states.
UK CMA Investigates Online Sales Practices
On 9 February 2017, the UK Competition and Markets Authority (CMA) announced that it is investigating yet another case of alleged online resale price maintenance (RPM).
The CMA, in common with many of the other national competition law regulators in the EU, has been very active in investigating restrictions on online sales, including RPM. The CMA fined two other companies for online RPM in May 2016: one in the bathroom fittings sector and one in the commercial refrigeration sector.
In this latest case, the CMA has provisionally found that a lighting supplier has broken competition law by restricting retailers’ freedom to discount online. It is alleged the company stopped retailers from setting their own prices online and forced them to sell at — or above — a minimum price.
This case concerns a relatively small company in the UK, but it has long been clear that the CMA is keen to investigate businesses and markets of all sizes. Companies should therefore ensure that their commercial practices and agreements, including past practices and agreements, are compliant with UK (and EU) competition law. Competition law compliance programmes need to be in place and need to cover online selling.
Competition Law Compliance Guides Published by the UK CMA
Continuing its excellent work on promoting competition law compliance, the UK CMA published on 24 January 2017 an updated competition law risk short guide.
This follows the first case of a UK director being disqualified after his company broke competition law. In December 2016, a managing director of an online poster supplier gave an undertaking not to act as a director of any UK company for five years after his company was found to have been part of an online price-fixing cartel. (See our January 2017 European Competition Law Newsletter.)
Alongside the updated risk guide, the CMA has also published a one-page 60-second summary looking specifically at director disqualification with advice for company directors.
These are very useful documents to use alongside the tailored competition law compliance programme which every company, large or small, that is active in the EU should have in place.
Unusual Cartel Fined in the EU
On 8 February 2017, the EC announced fines of EUR68 million on three companies which participated in a purchasing cartel. EU Competition Commissioner Vestager, in remarks on the fines, said this type of cartel, although “unusual,” is treated just as seriously as a standard cartel which impacts downstream customers.
The four companies involved were recycling companies which had, from 2009 to 2012, colluded to reduce the purchase price paid to scrap dealers and collectors for used car batteries in Belgium, France, Germany and the Netherlands. (One of these companies was not fined because it revealed the cartel to the EC under the EC’s leniency programme.) According to the EC, automotive batteries are the most recycled consumer product in the EU.
The companies exchanged information and agreed on target prices, maximum prices and volumes to buy from suppliers. They also tried to limit the bargaining power of suppliers by exchanging information on the prices these suppliers offered or on final prices to which they had agreed with them.
The methods adopted were those seen in many standard cartels. The majority of the anti-competitive contacts took place on a bilateral basis, mainly through telephone calls, emails or text messages exchanged between senior managers. The companies sometimes made an effort to keep the nature of their contacts secret by using code language, including references to the weather.
The companies involved are all large and sophisticated and presumably had competition law compliance programmes in place. The case therefore shows that all companies need to focus relentlessly on implementing compliance procedures. Internal audits, which typically form part of this implementation, are particularly useful since they can catch anti-competitive practices and, as appropriate, allow the subsequent use of leniency programmes.
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