Today is the day: on Monday, December 3, the Geoblocking Regulation (the Regulation) starts applying to online businesses operating across several EU Member States. For those who feel like they need a refresher, below we provide an overview of what is in the Regulation – as well as what is not.

The Regulation in a Nutshell

The Regulation lays down rules relating to access to online interfaces, access to goods and services and non-discrimination for reasons related to payment.

  • Access to online interfaces: the Regulation bans the blocking of access to website or the re-routing without the prior consent of the customer. For instance, a customer located in Ireland should be free to access the French website of a trader and should not be automatically redirected to the Irish version of the trader’s website.
  • Access to goods and services: the Regulation envisages two main scenarios.
    • Sale of products: the Regulation does not compel traders to deliver across all EU Member States. However, where a trader does not deliver its products in the customer’s Member State, customers are nevertheless entitled to delivery in the Member State of the trader, under the same conditions as local customers. Under this rule, a German consumer who wishes to buy a bike and finds the best deal on a Polish website will be entitled to delivery of the bike in Poland.
    • Sale of services, either electronically supplied (e.g. cloud services) or provided in a specific physical location (e.g. concert tickets): customers established in a different Member State than the trader must be able to purchase the service under the same conditions as local customers. Importantly, these rules do not apply to the provisions of non-audiovisual copyright protected content services (e.g. e-books or video games), which are otherwise covered by the Regulation.
  • Non-discrimination for reasons related to payment: traders must accept the same means of payments for all customers, regardless of their nationality, place of residence, location of the payment account, place of establishment of the payment service provider or the place of issue of the payment instrument within the EU, provided that a number of conditions are met (e.g. the payer fulfils authentication requirements).

Enforcement of the Regulation is ensured at Member State level, by appointed authorities. To the best of our knowledge, not all EU Member States have yet appointed such authorities – which might cause delays in enforcement.

Audiovisual Services Not Impacted – For Now

Crucially, audiovisual services are excluded from the scope of the Regulation – at least for now. The Regulation includes a two-year review clause, which explicitly aims at reconsidering the inclusion of audiovisual services. In addition, a number of other EU initiatives are targeting audiovisual services with a view to facilitate the cross-border circulation of audiovisual works:

  • Under the Portability Regulation, already in force, online content service providers must allow consumers to access their portable online content services when they travel in the EU in the same way they access them at home. The cornerstone of this Regulation is a legal fiction: for copyright purposes, the subscriber who is temporarily present in a Member State will be deemed located in its Member State of residence.
  • The EU institutions are currently in trilogue discussions concerning the review of the SatCab Directive. Based on the country of origin principle (i.e. clearance of rights in the Member State of emission amounts to clearance for the whole EU), this 1993 Directive currently facilitates the cross-border provision of satellite broadcasting services. The purpose of the review is to extend the country of origin to cover online broadcasting. But the precise scope of the review remains unclear:  while the EC proposal initially meant to include content made available through catch-up TV and live streaming, the EU Parliament and the Council then suggested to water down the proposal and to exclude movies and TV shows. It is understood that the ongoing trilogues are precisely focusing on the scoping issue.
  • Finally, DG Comp’s Pay-TV investigation continues. In a nutshell, the EC is taking issue with a geoblocking clause included in Sky’s contracts with six studios (Disney, NBC Universal, Paramount Pictures, Sony, Twentieth Century Fox and Warner Bros). According to the EC, such clauses may amount to an impermissible ban on passive sales (to be noted: in its e-commerce sector inquiry, the EC emphasized that only those geoblocking restrictions that are contractually agreed may be caught by EU competition law; those that are unilaterally imposed cannot). To date, two studios have offered commitments to settle the probe, namely Paramount and Disney. The investigation continues with regards to the non-settling parties.

More to Come Soon?

Based on the above, there is little doubt that geoblocking in the audiovisual sector will likely be on the EU legislator radar after the parliamentary elections next year. But these initiatives will probably face an uphill battle, as they will have to strike a balance between the free circulation of audiovisual works in the EU, on the one hand, and the territorial limitations inherent to the current copyright framework, on the other hand – a task that has proved impossible so far. Against this background, the upcoming review of the Geoblocking Regulation will be worth following very closely.

 

Today, in four separate decisions, the European Commission (EC) fined consumer electronics manufacturers Asus, Denon & Marantz, Philips and Pioneer €111 million for imposing fixed or minimum resale prices on their online retailers, as well as limiting the ability of retailers to sell cross-border (see press release here).

The topic of vertical restraints is admittedly not new – quite the opposite, in fact. However, today’s decisions are highly relevant for businesses engaging into e-commerce, as they are the first ones to take stock of the EC’s findings in the recent e-commerce sector inquiry, in particular as far as pricing algorithms and monitoring softwares are concerned.

Background

Today’s announcement comes on the heels of the final report of the EC e-commerce sector inquiry, which the EC released in May 2017. The report flags a tendency for manufacturers to seek greater control over their online distribution networks, which in turn results in a number of antitrust issues in the online space, including:

  • The widespread use of pricing restrictions (resale price maintenance, or RPM), which affects 42% of the respondents to the inquiry. According to the EC, the online space is prone to such restrictions, due to the increased price transparency online as well as the use of pricing software that allow for the automatic adjustment of prices, based on the observed prices of competitors;
  • Geographic restrictions to sell, also known as geoblocking. According to the final report of the EC, such restrictions affect 11% of the respondents to the consumer goods section of the inquiry. They may be caught by Article 101 TFEU when adopted as part of an agreement between supplier and retailer – not when adopted unilaterally by the latter.

As a follow-up to the inquiry, the EC immediately announced the launch of several investigations into suspected anti-competitive vertical restraints in e-commerce in three sectors: consumer electronics (concluded today), video games and hotels (which are both ongoing).

First Glimpse Into RPM in the Digital Age

While the non-confidential version of the consumer electronics decisions will not be published before a few more weeks, if not months, the EC press release already provides useful practical guidance on RPM in the online space.

The RPM practices themselves took a fairly traditional form. Online retailers who would not follow the prices imposed by the manufacturers would face threats or sanctions, e.g. blocking of supplies. In addition, Pioneer backed its RPM policy with a limitation of cross-border sales in order to sustain different resale prices in different Member States.

More importantly, the effect of these RPM practices was amplified and maximized by the use of online tools:

  • Sophisticated monitoring tools allowed manufacturers to track deviations from the imposed price and to intervene swiftly in case of price decrease;
  • Since most online retailers use pricing algorithms that automatically adjust retail prices to those of competitors, the RPM practices impacted not only the distributors of the infringing parties, but the overall industry, thus leading to higher prices for consumers.

As a result of the above findings, the EC imposed significant fines: €63.5 million to Asus, € 7.7 million to Denon & Maratz, €29.8 million to Philips and €10.1 million to Pioneer. Interestingly, these fines include reductions for ‘providing evidence with significant added value and by expressly acknowledging the facts and the infringement’ ranging from 40 to 50%.  While the press release makes no reference to them, this language echoes that of the leniency and settlement procedures – which are strictly limited to cartels. To the best of our knowledge, it is the first time that the EC makes implicit use of these rules in the context of a vertical restraints.

More to Come

For the past decade, the EC largely left the enforcement of RPM in the hands of national competition authorities. These days are now over: more decisions are coming, and the EC is sending a clear signal that the risk of fine is more serious now than ever.

For businesses operating online, today’s decisions are a useful reminder that they should be extra careful when engaging with their online distributors. In this regard, while the use of pricing algorithms and monitoring softwares is lawful under EU competition law, they should never become instruments that support a RPM policy – a message that may be worth (re) conveying to your commercial teams.

 

Join Steptoe’s EU Competition team for a webinar on May 31, covering the opportunities and antitrust risks associated with bypassing distributors to sell directly to customers in Europe. In particular, we will discuss the growing trend of going “direct”, how to identify the related antitrust risks, and how to strike the right balance between direct and indirect channels. Participation is free of charge.

Date: May 31, 2018

Time: 4:00 p.m. – 5:00 p.m. CET
(Click here for the time in your area)

Click here to register.

If you are unable to participate in the live webinar but would like to receive a link to the recording, please let us know by requesting here.

Featured Speakers:

A few days after the Coty judgment,[1] the German Federal Court of Justice[2] (Bundesgerichtshof or BGH) upheld the decision of the Higher Regional Court of Düsseldorf in the Asics case,[3] confirming that Asics, the sport shoes manufacturer, may not prevent its selective distributors from cooperating with price comparison engines to promote the Asics branded products.

1. Background

From 2012 to 2015, the German subsidiary of Asics set up a selective distribution system which imposed a number of limitations on the online sales activities by authorized dealers in Germany. In particular, Asics prohibited its authorized distributors from (i) selling through online marketplaces such as Amazon and eBay, (ii) using price comparison engines, and (iii) using Asics trademark on the distributor’s online search advertisements.

Continue Reading I Want to “Run” Free: Authorized Dealers Cannot Be Prevented from Using Price Comparison Websites

Following an inquiry in July 2017, the House of Lords’ European Union Committee published on February 2, 2018, a report titled – ‘Brexit: competition and State aid’ – on the future of the UK’s competition law regime after Brexit.

The House of Lords report provides a detailed account of the most pressing issues that the UK’s competition law regime is facing ahead of Brexit. It also shows the high levels of uncertainty that businesses operating between the EU and the UK face.

This uncertainty suggests that businesses should – at least for now – adopt a cautious approach, for example, when formulating their distribution and acquisition strategies in the UK.

Whatever the statutory changes to the UK’s competition law regime after Brexit are, EU law will still remain an important factor to consider when taking business decisions, especially because of the geographical proximity and close trading relationships between the UK and the EU. This means that going forward businesses need to have guidance.

Steptoe has years of experience in successfully advising businesses on their strategic decisions in the EU and the UK. Our experienced lawyers can help your business to successfully navigate the demands and potential opportunities of Brexit.  Continue Reading House of Lords Report on Brexit and Competition: What Does it Mean for Businesses?

Steptoe has been following the Coty case closely and is the reason why we held the first debate only 24 hours after the Court of Justice made its judgment. Therefore, we have been pleased to contribute to the developing debate by publishing our article on the Coty case for Kluwer’s Competition Law Blog.

Click here to visit their blog and to read our article.

24 hours after the delivery of the eagerly awaited Coty judgement, the Steptoe EU Competition team is pleased to invite you to an in-person event to debate with lead stakeholders on the consequences of this judgment for the online resale of branded goods in the EU.

The event will be held at our premises in Brussels on December 7 from 5:00 pm to 6:00 pm and it will also be video live streamed for those who cannot attend in person.

More information in this link.

(Participation is free of charge)

Are platform bans anti-competitive? While brand owners, distributors, platforms and the antitrust community are clinging to the edge of their seats waiting for the final determination from the European Court of Justice (CoJ) in the Coty judgment awaited on December 6, 2017, we are reporting on an interesting development in France on this topic.

On September 13, 2017, the French Supreme Court (Cour de cassation) delivered its judgment in the Caudalie case. The judgment overturns a previous ruling of the Paris Court of Appeal (Cour d’appel de Paris) which found that platform bans may be restrictive of competition. Check out our briefing to learn more about the judgment, as well as its practical implications (spoiler alert: Caudalie does not settle the debate on platform bans).

Please join our Brussels antitrust team this week, for two events focused on hot topics in EU distribution law.

On October 25, we will host the fourth in a series of webinars tackling recent enforcement developments affecting the distribution of goods and services in Europe. This webinar will provide practical insights on most favoured nation clauses (MFNs), in particular how such clauses have been stigmatized by enforcers in Europe, and whether and to what extent there is scope to include such parity mechanisms in your distribution and supply contracts. Participation is free of charge. Sign up here to join us.

On October 26, Steptoe partner Yves Botteman will participate in the ERA conference on hot issues on anticompetitive practices in the online world. Yves will share his views on how the digital age is reshaping the European approach to price and non-price restraints. Among other topics, he will discuss the upcoming Coty judgment, which should shed light on the admissibility of marketplace bans imposed on selective distributors; limitations on cross-border sales (in particular contractual geoblocking); as well as new forms of price limitations, such as minimum online advertised prices. To join the conference, either in person or via livestream, please click here.

Find more interesting content in our Antitrust News & Briefs on the Steptoe website, where we provide you with more in-depth analyses on current antitrust & competition developments in the EU and the US. See below for some of our most recent publications.


Intel: ‘A Whole New World’

The European Court of Justice just came back to business with a bang. On September 6, 2017, it finally unveiled its long-awaited judgment in the Intel exclusivity rebates case. Click here to read more.


AG Wahl Delivers Opinion in the Coty Case

On July 26, AG Wahl delivered his opinion in the Coty case, addressing the legality of contractual third party platforms bans. Click here to read more.


Online Distribution: Are You Ready?

Following the conclusion of the e-commerce sector inquiry in May 2017, the European Commission has aggressively opened probes into online restrictions imposed by suppliers of branded goods and services. Click here to read more.