4 Sept 2015
EU Circulates Questionnaires Concerning Sale of Electronics, Clothing and Software Via E-Commerce
Exporting producers in Hong Kong keen to exploit online selling to EU customers may like to know that the European Commission was expecting responses on a questionnaire from manufacturers, wholesalers and retailers in the framework of its competition inquiry into the e-commerce sector by the end of August 2015. Hong Kong companies active in the sector should note that this inquiry could potentially lead to investigations of individual companies, and, once completed, could bring about new marketing opportunities for Hong Kong traders online.
A sector inquiry is an investigation that is carried out by the European Commission into sectors of the economy and into types of agreements across various sectors, when it believes that a market is not working as well as it should, and that breaches of the competition law rules might contribute to the malfunctioning of that market. In the course of an inquiry, the Commission may request any necessary information, in particular on agreements, decisions and concerted practices, or carry out an investigation into anti-competitive practices.
Margrethe Vestager, the European Commissioner in charge of competition policy, announced a proposal to launch a competition inquiry in the e-commerce sector in March this year. In May, the Commission officially opened an antitrust competition inquiry into the e-commerce sector by its Decision of 6 May 2015. Thereafter, in June, the inquiry started with a lengthy questionnaire being circulated to the ‘content’ industry asking questions of companies that own the rights to movies, TV shows, music and sports. The questionnaire was aimed at finding out how these companies manage the distribution of their content online and whether they limit access to that content by applying contractual or technological restrictions.
It was also indicated by the competition Commissioner and Thomas Kramler, the EU official leading the inquiry, that the initiated inquiry would be broader, going beyond ongoing investigations to look into the downloading and streaming of content such as sports and music. Thus it was explained that questionnaires would also be sent to manufacturers, wholesalers and retailers, with a focus on industries selling, among others, electrical appliances, toys, clothing and shoes (other products include computer games, e-books, DVDs, cosmetics, healthcare products, sports equipment and house and garden ware). Doing so, the European Commission has put the entire e-commerce industry under scrutiny.
Hong Kong traders in the business of marketing the abovementioned goods online to EU consumers should know that the European Commission has sent a questionnaire to retailers, wholesalers and manufacturers at the beginning of July, over the restrictions that they may be faced with when trying to sell their goods online.
The Commission is looking for input on how manufacturers sell their goods through specific suppliers and on the restrictions that retailers face when they want to sell their goods via online marketplaces (such as Amazon.de, Alibaba.com, etc.) and on price-comparison tools. These restrictions might be exclusive territorial deals, showing that a certain retailer has the sole right of selling a certain brand in a specific (or part of) a country, or selective agreements, showing that a certain retailer must comply with criteria to become an authorised seller.
The questionnaire also asks companies about other limitations they face when selling their products in EU countries, which could consist of, e.g., local laws of different EU Member States and higher costs (e.g., translation of websites, logistical costs, etc.).
The questionnaire also seeks input on whether sales contracts contain restrictive clauses, restricting advertising, sales in other countries or sales on online marketplaces and price-comparison sites, or even limit selling prices. The European Commission has requested that retailers, wholesalers and manufacturers provide the names of the suppliers and marketplaces that impose these restrictive clauses and that they provide copies of the contracts highlighting such clauses. Moreover, the questionnaire asks whether threats, phone calls or warning e-mails have been received and if they have limited sales as a result.
With this questionnaire, the Commission wants to single out suppliers that keep a tight grip on the distribution of products.
In addition, the Commission is also looking for input on possible sales restrictions linked to the location from which0 consumers buy their goods online. Customers are sometimes rerouted to a website which targets the country in which they are located, and payments may even be rejected based on a customer’s location. It is not unusual that there are price differences for the same goods when sold in different markets, even online. The questionnaire asks if this is true and asks for the reasons for such differentiation (e.g., differences in competition in a specific Member State, differences in tax regimes, agreements with suppliers, costs that differ in some countries or even differing business strategies).
By such means, the Commission hopes that it will be possible to see whether maximum or minimum prices, differences with offline prices, or even clauses that set a price floor, are imposed by suppliers and marketplaces.
Last but not least the questionnaire seeks input on how prices are modified, the payment methods being used, and incentives that are provided for promoting or advertising products.
Manufacturers, wholesalers and retailers were required to send their responses to the Commission by the end of August 2015.
In addition, the Commission has also sent out a questionnaire at the beginning of August to other players in the e-commerce sector, namely, online marketplaces (websites that act as a hub for independent traders), asking similar questions as posed to manufacturers, wholesalers and retailers. The Commission is interested in knowing how sellers operate on these online platforms and also how much freedom is given to sellers when carrying out sales.
More specifically, in this context, the Commission is asking online marketplaces about, e.g., sellers’ contractual terms, pricing practices and the handling of data. It wants to gain insight into the market to find companies that artificially carve up markets along national lines and differentiate their prices accordingly. The target of the inquiry is, after all, to lower the restrictions on the sale of goods across national borders within the EU. This target may result in greater online opportunities within Europe for Hong Kong traders.
Responses from the online marketplaces are due in mid-September. After the completion of its investigations, the Commission will publish a preliminary report by mid-2016. Thereafter, a final report will be drawn up in the first quarter of 2017.