New EU rules let brand owners block online sales

laptop_cellphone_isp.jpg

The European Commission unveiled revised antitrust rules on Tuesday (19 April) allowing luxury brand owners to block online retailers without a bricks-and-mortar shop from distributing their products.

In a bid to counter criticism from online retailers such as eBay, Amazon and consumer groups, who claim the provision could restrict user choice, the European Union competition watchdog said it would monitor developments.

"The Commission will be particularly attentive to concentrated markets to which price discounters either online only or traditional may not have access," the EU executive said in statement.

Brand owners – often in the high-end or luxury goods market – had argued for the requirement to deter so-called free-riders, competitors who may benefit from their marketing that luxury brands carry out without bearing the same costs.

Industry body European Alliance, which represents three-quarters of global luxury brands, said the regulation showed the Commission recognised the importance of the luxury goods industry, which employs 800,000 people, directly and indirectly, in Europe.

"This new regulatory framework will allow us to continue the significant investment our sector makes for our online presence well as in our physical outlets," said Guy Salter, a spokesman for the organisation.

EBay said the updated rules did away with many unfair restrictions currently facing online companies and that it would work with EU governments to "expose any attempts to unfairly limit online sales".

The new, 10-year "vertical restraints block exemption regulation" will come into force in June, with a one-year transitional period, the EU regulator said.

It replaces existing guidelines exempting distribution agreements between manufacturers and distributors from strict EU competition rules if they comply with certain criteria. The Commission said approved distributors were free to sell on the Internet without limitations on quantities, customers' location and restrictions on prices, provided both manufacturer and distributor were not overly dominant in the market.

"The rules adopted today will ensure that consumers can buy goods and services at the best available prices wherever they are located in the EU, while leaving companies without market power essentially free to organise their sales network as they see best," said Competition Commissioner Joaquin Almunia.

(EURACTIV with Reuters.)

Positions

"The Commission recognises that many products need not be sold in brick and mortar stores and has introduced important tests that will prevent potential new abuses by suppliers who may attempt to unjustifiably exclude online-only distributor," online retailer eBay said in a statement. 

Announcing the EU's new rules, EU Competition Commissioner Joaquin Almunia said "a clear and predictable application of the competition rules to supply and distribution agreements is essential for the competitiveness of the EU economy and for consumer welfare".

Background

Although eCommerce in Europe doubles every three years, sales remain primarily at national level due to low consumer trust in cross-border purchases. The European Commission and the European Parliament are carrying out legislative reviews of the EU's eCommerce Directive to address shortfalls (see EURACTIV LinksDossier).

An EU survey in late 2009 on the consumption and sale of online goods across borders also concluded that Europeans are turned off by online shopping, mainly as a result of payment difficulties and a lack of trust in online consumption (EURACTIV 23/10/09).

Further Reading

Subscribe to our newsletters

Subscribe

Want to know what's going on in the EU Capitals daily? Subscribe now to our new 9am newsletter.