Competition inquiry in e-commerce: brands welcome a fact-based report

September 2016 Competition inquiry in e-commerce: brands welcome a fact-based report

Today The European Commission published the interim report of its competition inquiry in the e-commerce sector. It aimed to gather data on the functioning of e-commerce markets to identify potentially unjustified restrictions of competition.

Competition rules are there to ensure a level playing field between the various e-commerce players for the ultimate benefit of the European consumer: brand owners should be able to ensure that their products are sold in a manner that reflects their brand quality and image and with an adequate level of customer service, while retailers should not face undue restrictions when selling products over the internet in Europe.

AIM welcomes Commissioner Vestager’s recognition that some restrictions can help to stop physical shops from disappearing and that limits on where products can be sold can help to keep up the exclusive image that people look for in certain brands.

Following the publication of the report, Alain Galaski, Director General of AIM, said: “The internet offers to brands fantastic opportunities to interact with consumers in novel ways, helping e-commerce in its rapid growth. And consumers have access today to more products and services in more channels and stores online and offline at more price points than ever before. The interim report of the Commission offers a good basis for further discussions on ways this new omni-channel world can deliver high consumer value.  Brands are a dynamic part of that debate and that market development.”

In the consultation, brand manufacturers will welcome the clarifications brought by the inquiry on the key features of the market and their impact on distribution strategies:

  • Competition and prices: online and offline competition does not take place only on price. Product quality, brand image and novelty are important elements of competition between brands, which adopt a variety of business strategies to control the quality, values and image of their brands online as well as in stores.
  • Restrictions against free riding: the necessity for market players to mitigate the effects of free-riding and preserve the investments in pre-sale and post-sale services of consistent quality is the most important consideration explaining some of the restrictions.  
  • Distribution activities by manufacturers: The requirements of quality distribution in an omni-channel environment are also leading many manufacturers to open their own online shops or to turn increasingly to selective distribution networks in cooperation with independent retailers.

We take note of the assessment made by the European Commission of the compatibility of a number of brand distribution practices with competition rules and some restrictions which will be further investigated.  In the case of consumer goods these restrictions appear much less prevalent than alleged by some of the online traders. Brand strategies that don’t suit the business interests of one or the other large online platforms can be pro-competitive and pro-consumer.

Link to the preliminary report of the European Commission. 

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