New EU guidance on e-commerce

Both before and after Brexit, UK businesses operating in the EU e-commerce market will need to follow the Commission’s guidance to avoid acting unlawfully.

What has happened?

The European Commission has completed its inquiry into the e-commerce of consumer goods in the EU and published a report of its findings – this can be seen by clicking here.

The report sets out the Commission’s main concerns about competition in the market and the policies that the Commission will follow to ensure that consumers and businesses will have better access to goods and services through e-commerce.

The Commission has reported that the growth of e-commerce over the last decade has had a significant impact on companies’ distribution strategies and consumer behaviour.

The Commission has found that:

• Price transparency has increased with on-line trade. Consumers can instantaneously obtain and compare price and product information on-line and switch from on-line to off-line retail channels. Consumers can not only find the best deal online but also free-ride – use the pre-sale services of bricks and mortar shops before buying on-line.
• Manufacturers and retailers try to create a level playing field between on-line and off-line sales channel to address free-riding and maintain incentives for retailers to invest in high quality services.
• Price competition both on-line and off-line has increased as a result of consumers’ ability to compare the price of products across several on-line retailers. This may have beneficial effects for consumers but may have an adverse effect on competition on quality, brand and innovation, essential for the long-term viability of businesses.
• Increased price transparency, particularly the use of pricing software to adjust prices based on the observed prices of competitors, enables manufacturers to monitor and influence retailers’ price setting and trigger automatic price co-ordination.
• Alternative online distribution models such as online market places make it easier for retailers to access customers, which may not accord with the distribution and brand strategies of manufacturers.

As a result of these market trends:

• A large proportion of manufacturers have decided to sell their products directly to consumers through on-line retail shops;
• Manufacturers and suppliers are making an increased use of selective distribution systems to better control distribution networks through the quality of distribution and price.

The Commission is concerned that:

• the use of selective distribution systems;
• restrictions on selling and advertising on-line;
• pricing restrictions or recommendations;
• restrictions on selling on on-line market places; and
• geographic restrictions on selling and advertising on-line

may lead to the infringement of competition law.

What might happen next?

The Commission is likely to:

• target enforcement of the EU competition rules at the most widespread business practices that have emerged or evolved as a result of the growth of e-commerce and that negatively impact competition and cross-border trade; and
• broaden dialogue with national competition authorities, including the Competition and Markets Authority, on e-commerce related enforcement of competition law to ensure the consistent application of EU competition rules to e-commerce related business practices.

As the UK’s competition rules mirror those of the EU, the Competition and Markets Authority will be seeking to ensure that undertakings operating in the e-commerce markets for consumer goods do not infringe the competition rules.

What does this mean for me?

Businesses selling consumer goods online are at greater risk of investigation for infringing competition rules.

How can Ward Hadaway help?

A simple audit of your e-commerce operations will identify whether your business is involved in any activities that may infringe competition law. We can advise you how to operate on e-commerce markets and achieve your commercial objectives while minimising the risk of infringing the competition rules.

We have considerable experience in the application of competition law to e-commerce. In conjunction with our expertise in commercial law, Ward Hadaway is able to provide e-commerce businesses with advice on optimal e-commerce trading arrangements.

For further information, please get in touch.