E-Commerce and Antitrust Law: European Commission gets serious

On 2 February 2017 the Commission launched formal proceedings against certain companies which are engaged in the distribution of consumer electronics, videogames and hotel accommodation. The Commission is reviewing various business practices of the companies which the Commission suspects may have a restrictive effect on cross border trade and competition.

The proceedings are the first results of the Commission’s eCommerce Sector Inquiry, which was launched in May 2015 (see our respective news article) and whose preliminary findings were published in September 2016 (see Report).

Consumer Electronics

The investigation in this sector is directed against the companies Asus, Denon & Marantz, Philips and Pioneer. The Commission suspects that the companies concerned may have restricted retailers’ possibilities to independently set their retail sales prices by applying minimum sales price clauses as well setting territorial restrictions in their distribution agreements.

In the view of the Commission, the potentially anticompetitive effects of the clauses under scrutiny may exacerbated by the fact that many online retailers use pricing software which compares the retailer’s prices with the prices applied by major competitors and makes automatic adjustments.

Videogames

The Commission’s investigation focuses on the potential restriction of trade with videogames within the European Economic Area by geo-blocking practices. More precisely, the Commission is reviewing certain clauses in distribution agreements between the video game publishers Bandai Namco, Capcom, Focus Home, Koch Media and ZeniMax and the video game distribution platform “Steam”, which is operated by Valve Corporation. the clauses under scrutiny required that videogames purchased via Steam could only be used if the customer registers with the platform and enters an activation code. This activation code is intended to assure that the user doesn’t use a pirated copy. The Commission now plans to review whether the activation code might have (also) been used to ensure that customers were able to activate games purchased in a specific country. If so, this might be qualified as an anticompetitive restriction of so-called “parallel trade”.

Geo-blocking was already focus of an inquiry in context of the “Digital Single Market Strategy for Europe” (see our report here) as well as a proposal for a regulation presented by the Commission in May 2016 (see our report here).

Hotel accommodation

After having received specific customer complaints, the Commission will also review agreements concluded between the hotel group Meliá Hotels and the tour operators Kuoni, REWE, Thomas Cook and TUI. This investigation will focus on contractual clauses which might have the effect that, depending on their current location or residence, end customers are shown different information on room pricing and availability on the tour operators’ online portals. If so, this might be qualified as discriminating on grounds of origin or nationality and thus as a partitioning of the market in violation of antitrust law.

What’s next?

The initiation of formal proceedings does not mean that the business practices under scrutiny indeed violate European antitrust laws. The Commission’s review may by all means come to the conclusion that the respective clauses pursue admissible goals and do not have a restrictive effect on competition. Investigations by the Commission take time and thus a decision may be expected in one to two years’ time at the earliest.

In its press release the Commission called the investigations into the consumer electronics and video games sectors the “first” to follow from its eCommerce Sector Inquiry and the topics identified therein as potentially raising competition concerns. Thus, further investigations might be expected. The Commission’s remark should be sufficient for companies to review their business practices in online trade.