EU takes on distribution sector, eyes online sales

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European antitrust regulators on Tuesday (28 July) unveiled a proposal for new rules on distribution deals between manufacturers and retailers, which would make it easier for Internet companies to sell goods and services online.

The proposed rules would replace existing guidelines exempting companies from strict EU competition rules in some circumstances. The guidelines will expire in May 2010.

The changes take into account the growing popularity of buying goods and services over the Internet and the buying power exerted by big retailers, said the European Commission, whose role it is to be competition watchdog for the 27-country European Union.

“Competitive and efficient distribution are essential for consumer welfare and for our economy,” Competition Commissioner Neelie Kroes said in a statement.

Experts said the proposed rules clarify the existing framework for online retailers such as Ebay and Amazon.com, which are at loggerheads with brand owners seeking to protect their image and exclusivity.

Ebay has said that luxury goods group LVMH and some other brand names want to keep a tight rein on distribution of their goods outside their own sales channels.

“The most important element in the proposed guidelines is the promotion of Internet sales,” said antitrust lawyer Jose Rivas at law firm Bird & Bird.

“What the Commission proposes to do, broadly speaking, is to promote Internet sales. It specifies that any Internet sale is passive sales and that any attempt to prevent passive sales would be a violation of competition rules,” he said.

Passive sales refer to unsolicited requests from buyers, while active sales occur when sellers make conscious efforts to sell their products and services.

Bird & Bird has represented both brand-name companies and firms with Internet sales.

The proposed rules still contain a lot of ambiguities that could work in favour of some companies, said Thomas Vinje, antitrust lawyer at Clifford Chance.

“The Commission is still pursuing the line that every distributor must be free to use the Internet to advertise or to sell products but some aspects of the proposed approach to online sales do not appear to reflect commercial reality,” Vinje said.

“In practice, it will be very easy for distributors to punch holes in limits on their territorial distribution rights, and thus to sell goods outside their allocated territories by using the Web to target countries outside their territories.”

Clifford Chance has clients that deal in brand names and online sales.

The proposed changes exempt manufacturers and retailers from antitrust rules only if their market share is below 30%. Currently, only providers of goods and services enjoy this exemption. 

The Commission said interested parties had until 28 September to comment on its proposals.

(EURACTIV with Reuters.)

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