European Commission's e-commerce focus intensifies with three new investigations

07 February 2017

Victoria Moorcroft, Ariane Le Strat

On 2 February 2017 the European Commission announced that it had commenced investigations in three e-commerce markets; consumer electronics, online video game distribution, and hotel bookings. The issues it is looking at are all areas that it highlighted as potential concerns in its e-commerce enquiry: resale price maintenance; geo-blocking; and price discrimination based on nationality and customer residence. We've summarised what we know to date on these investigations below. 

After launching the e-commerce sector enquiry (on which we have written previous updates here) it seemed inevitable that the Commission would also commence direct infringement action on vertical action at some point. With the opening of these three cases it has started the process. Indeed, more infringement action is anticipated, whether before completion of the enquiry (currently expected late Spring), or afterwards (particularly if the Commission sees no discernible change in behaviours it has highlighted as problematic in its Final Report,). Enforcement action is a novel, but expected, step by the Commission.  It has largely shied away from taking enforcement action in respect of vertical agreements in recent years, tending instead to leave it to national competition authorities, some of whom have been very active. The German and French authorities have been notably busy, but some probes such as hotel booking engines have been very much pan-European, leaving a question as to why the Commission hadn't chosen to exercise its own jurisdiction. 

Two of the new investigations seem fairly uncontroversial: resale price maintenance and discriminating on the grounds of nationality seem (on the fact of the press release at least) to be based on well-established legal principles. The investigation in respect of video games is perhaps more significant; the need to license content on a national basis has long been reinforced by content owners and they will undoubtedly be watching the progress of that investigation closely. 

Interestingly, for now the Commission has avoided the more controversial, and hotly debated, restrictions relating to platform bans and cross-platform Most Favoured Nation clauses. These are very much in flux, and in relation to marketplace bans, a case is pending before the Court of Justice, so perhaps it is waiting for some certainty before taking on such cases. For the time being at least, the Commission is maintaining the position (in its interim report in the ecommerce enquiry and before the court) that marketplace bans are not automatically anti-competitive. An assessment must be undertaken of their effect on competition, and that is likely to vary depending on the products in question and the nature and extent of the ban.

The investigations:

  • The consumer electronics investigation

    The Commission is investigating whether four electronic goods suppliers (namely Asus, Denon & Marantz, Philips and Pioneer) have breached EU competition rules by limiting the ability of online retailers they contract with to set their own prices for consumer electronics products.  

    The interesting part of the press release is that the Commission has highlighted concerns that these suspected price restrictions could have had a wider impact on the market due to the increasing use of pricing software by online retailers, which automatically adapt prices to be in line with their leading competitors.  This ties in with the work the Commission is looking to undertake on pricing algorithms and their effect on competition.
     

  • The Video Games investigation

    The Commission is investigating bilateral agreements between Valve Corporation (owner of Steam – an online game distribution platform) and 5 PC video game publishers: Bandai Namco, Capcom, Focus Home, Koch Media and ZeniMax.

    The Commission are focusing their investigation on geo-blocking practices – where companies prevent consumers from purchasing digital content because of the consumer's location.  The investigation is considering whether the agreements in question require or have required the use of activation keys for the purpose of geo-blocking.

    Activation keys can be used in order to restrict access to a purchased game to consumers in particular EU Member States. This could breach EU competition rules as it may restrict parallel trade within the Single Market and prevent consumers buying cheaper games available in other Member States.

    Notably this is geo-blocking through an agreement, a practice which the Commission found in its enquiry to be relatively uncommon across the EU.  Most geo-blocking is done unilaterally by companies, leading to the legislative proposals currently being considered to limit the extent to which geo-blocking is possible (see our article here).

  • The Hotel Pricing investigation
    The Commission has started investigating agreements regarding hotel accommodation made between large tour operators such as REWE, TUI, Thomas Cook and hotels (Melia Hotels). This is the latest investigation in a sector which has been under the competition law spotlight for a few years now.

    The Commission is investigating whether such agreements discriminate between customers on the basis of their location. The agreements may contain clauses that discriminate between customers from different countries by not showing the best prices to customers in or from certain countries.
This may breach EU competition laws by preventing hotel rooms from being booked at the prices available in other Member States simply because of nationality or place of residence. Again, it is worth highlighting that the reason this behaviour is caught by competition law is that it is part of an agreement. Unilateral price discrimination by non-dominant companies could not be caught by the competition rules.