European e-retailers face pricing hurdles

September 15, 2016 04:59 PM

(Bloomberg)—European Union antitrust watchdogs warned they may probe restrictions on online sales after finding that manufacturers impose limits on how websites sell products and how much they can charge.

More than two in five retailers face some sort of price recommendation or restriction from manufacturers, the European Commission said. Websites can also be stopped from selling on online marketplaces, such as those run by Inc. (No. 1 in the 2016 Europe 500) or eBay Inc., or prevented from sending offers to price comparison websites, according to a report Thursday in Brussels.

The digital economy is a focus for EU antitrust chief Margrethe Vestager, who is investigating Alphabet Inc.’s Google over an online shopping search tool, phone software and advertising. She’s probing Hollywood studios over restrictive contracts with pay-TV provider Sky Plc that may block sales outside the U.K. and has also cited concerns over how companies increasingly collect and use vast amounts of data.

Digital content

In Thursday’s report, the EU also flagged concerns over online licenses for digital content, saying the current rules may harm the ability of new services to start or expand across the EU. Netflix Inc. and others usually have to seek separate licenses to show content in each European market.

Almost 60% of digital content providers are required by contracts with copyright-holders to use so-called geo-blocking to prevent content being viewed outside one country, the EU said. Regulators will "assess on a case-by-case basis" whether certain licensing practices restrict competition, they said in the report.

While rules allow customers to buy goods anywhere across the EU’s 28 nations, retailers often refuse to sell abroad or even refuse to allow their websites be viewed outside their home country. The EU says this unfairly blocks sales and is trying to weed out any limits that would violate antitrust law.

Manufacturers’ contracts sometimes seek to prevent retailers selling abroad because they want to set different prices in different countries, the EU said.

They also sometimes try to keep prices similar in online and offline stores by setting recommended retail prices. "Concerns could arise" if these prices go so far as to form a pact between a brand and a store that fix prices, according to the report.

Retailer raids

The issue has been a concern to Vestager for months. Metro AG’s Redcoon and Media-Saturn (No. 20 in the 2016 Europe 500) units were raided by EU investigators last year in a probe into suspected online-sales restrictions that also involves Samsung Electronics Co. and Royal Philips NV.

Retailers are increasingly competing directly against their own suppliers as manufacturers run their own sales websites, most often in the cosmetics and healthcare industry.

The EU is seeking views on the report before publishing a final version early next year. It gathered information from 1,800 companies and analyzed some 8,000 distribution contracts. Previous wide reports into the pharmaceutical or energy industry triggered a rash of antitrust probes.

Vestager said in a speech today that many companies have already tweaked distribution contracts to bring them in line with EU competition rules.

Amazon said in May that it looked forward to EU action to knock down barriers to people shopping across borders. Sellers on Amazon websites are prevented by wholesalers and manufacturers to selling to another country.

"We’d also like the commission to remove selective distribution controls that are imposed on everyday items from some brands. From trainers to TVs, we think customers should have the choice about when and where they choose to shop," Amazon said in the blog post.




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