Competition authorities intensify online sales review
10 December 2015
This article was co-authored by, Adam Collinson, Charlotte Walker-Osborn and Aysha Fernandes
As part of its sector-wide e-commerce inquiry, the European Commission has issued questionnaires to manufacturers of branded electronics, clothing and household appliances about how distribution agreements are drafted and producers set their policies for online sales. The Commission has previously sent requests for information to retailers and content owners of movies, TV, music and sports.
As part of the questionnaire, producers must provide copies of distribution agreements, including those containing exclusive territory clauses. Through compiling this evidence, the Commission hopes to gain an insight into manufacturers’ relationships with retailers and marketplaces, the level of sales generated through different channels (online stores, marketplaces and shops) and the type of clauses deemed necessary within distribution agreements. Companies will have until January 2016 to provide their feedback.
The sector inquiry was launched on 6 May 2015 so that the Commission could identify competition concerns affecting European online markets. The Commission believes that there is potential evidence of barriers within the online sector through, amongst other things, employing distribution agreements which restrict retailers from selling goods to customers in other EU countries.
Competition and Market Authority’s review of consumer law compliance in cloud storage
The UK Competition and Markets Authority (CMA) has opened a consultation into the cloud storage industry, amid consumer complaints about price rises and reductions to unlimited storage capacity deals. They are also investigating concerns over loss or deletion of consumer data.
The CMA aims to assess how widespread such practices are, whether they breach consumer protection law and what impact they have on consumers. Any breaches uncovered will result in follow-up action under the CMA’s consumer powers, which could include enforcement action or the provision of guidance to businesses or consumers.
With an estimated 40% of UK adults using cloud storage services to store personal files, music and photos in order to free up memory space on laptops or smartphones, the cloud storage sector is growing in size and importance and consists of major technology firms as well as small independent providers. Responses to the review are welcomed from businesses, consumers and industry experts prior to the closing date of 15 January 2016. The initial findings and report are expected around May.
The investigation gives cloud suppliers an opportunity to comment and influence the findings. Additionally, cloud suppliers are advised to check they are content their online cloud provision for consumers are fully compliant. Moreover, it will be important to consider the impact of any findings and guidance when it comes out next year.
Price comparison website investigation
In addition, the CMA has announced that it will carry out an analysis of price comparison websites in the New Year, which it believes are particularly significant in improving competition across a number of sectors.
Price comparison websites have become an important tool for dealing with market-wide competitive concerns identified by the CMA in its markets work. For example, they formed part of the packages of remedies coming out of the Private Motor Insurance and Payday Lending market investigations. The CMA now hopes to deliver broader improvements to the operation of these sites so that consumers are able to find the best deals. The Treasury hinted that new legislation may be necessary to increase transparency and innovation, as well as to rebuild consumer trust.
These reviews form part of Chancellor George Osborne’s better deal plan which aims to drive and maintain competition in order to make household and company bills more affordable, and also encourage the CMA to consider whether there are enabling steps that can be taken to support local authorities in promoting competitive local markets due to report in 2017.
Dawn raid at online sales platform
On 1 December 2015, the CMA carried out a dawn raid at the headquarters of Trod Limited, a UK retailer of toys and sports products, as well as the domestic premises of one of its officers. The dawn raid marked the start of an investigation into suspected anti-competitive arrangements relating to UK online sales of licensed sport and entertainment merchandise. The investigation will enable the CMA to gather and analyse information before deciding in around April 2016 whether to proceed with the investigation.
The dawn raid was coordinated with searches carried out by the West Midlands Police on behalf of the US Department of Justice in connection with a separate criminal investigation into the sale of posters and wallpaper, which concern both individuals and businesses.
With a number of investigations ongoing or in the pipeline, and in particular the execution of dawn raids, it is clear that both the Commission and the CMA have a focus on online sales and e-commerce and are not afraid to tackle issues across a range of industries. The CMA’s approach is very broad, covering both competition and consumer issues, and extending beyond e-commerce and into other consumer use of online products.
Few businesses will be totally uninvolved in the markets concerned. For some businesses, the investigations may represent a risk, and they should review their practices and consider whether changes are needed so as to minimise the risk of adverse consequences such as enforcement action and fines. Other businesses may benefit from the more competitive markets that should result from these investigations. Either way, businesses should consider the potential impact on them and whether their interests may be best served by proactively seeking to influence the outcome of the various reviews.
 See MLex article, EU seeks manufacturers’ input on potential e-commerce curbs, published on www.mlex.com on 27 November 2015 (Author: Lewis Crofts).