E-commerce faces increased competition law scrutiny in coming months

EU Antitrust Commissioner, Margrethe Vestager, announced on Thursday, 26 March that she intends to launch a market investigation into e-commerce in the EU. She also confirmed that the Commission is investigating geo-blocking of video games downloads, which prevents consumers in one EU Member State from buying content from another.

These announcements came hot on the heels of the UK CMA’s annual plan, which identified the digital economy as a strategic focus. Both authorities see removing barriers to online trade as fundamental to open competition and this is certainly an area to watch in the coming months.

The Commission’s market investigation

Margrethe Vestager has been clear from the outset that the goal of a digital single market for the EU would be high on her list of priorities. She said today that, although 50% of EU citizens shop online, only 15% bought from a seller in another Member State – demonstrating that barriers still exist to true cross-border trade.

The investigation will concentrate on private – particularly contractual – barriers to cross-border trade. Vestager specifically mentioned geo-blocking of content and goods, whereby customers in one country are blocked from buying from another, often on the basis of their IP address. However, she did recognise that natural barriers do arise as a result of language and legislative differences, as well as customer preference.

By way of background, the Commission typically instigates a market investigation where it suspects that a market may be failing. Such investigations often result in individual company investigations further down the road – as we are already seeing in the EC’s ongoing investigation into territorial restrictions in Pay TV and video games. Vestager has also stated that the market investigation may contribute to wider legislative changes as part of the launch of the Digital Single Market. Preliminary results are expected mid-2016.

The UK focus

Like the European Commission and many national competition authorities, the UK’s Competition and Markets Authority (CMA) has been looking at online competition in several sectors. Online resale price maintenance and price parity have been hot topics across Europe, with the investigations into hotel rate parity agreements running in multiple Member States.
Unsurprisingly perhaps, the areas identified by the strategic assessment in the CMA’s annual plan closely mirror the key developments seen at the Commission and across Europe, namely:

• Restrictions in competition in online distribution of goods – including resale price fixing and online sales restrictions; and
• The role of gatekeepers, and antitrust issues raised in internet ecosystems. 

The CMA has also identified growth areas which may require greater scrutiny as they evolve:

• The commercial use of personal data;
• The sharing economy (peer to peer/collaborative markets); and 
• Online and online-related areas forecast for significant growth – including cloud computing and the Internet of Things. 

Commentary

E-commerce and the digital economy is seen as not only the key to true cross-border trade, but also as the most effective way of maximising competition and transparency for consumers. However, established competition law precedent is not always readily applicable to rapidly evolving technology and emerging markets – or to the intersection with other legislation such as data protection and copyright. These latest developments can therefore be seen as part of a significant period of focus and change as regulators work to tackle the challenges of the digital market.