Retail pricing and geo-blocking come under scrutiny from the European Commission

Published on 2nd Feb 2017

The European Commission today launched three separate investigations to assess whether certain online sales practices breach EU antitrust rules by preventing consumers from enjoying cross-border choice and being able to buy consumer electronics, video games and hotel accommodation at competitive prices.

As we have highlighted in previous updates, the Commission’s Digital Single Market Strategy has opened up the discussion on a number of regulatory barriers that it considers hinder cross-border e-commerce. The three investigations opened today by the Commission aim to tackle the specific issues of retail price restrictions, discrimination on the basis of location and geo-blocking. The preliminary results of the Commission’s competition sector inquiry on e-commerce show that the use of these restrictions is widespread throughout the EU. They are also widely used in other parts of the world, where vertical restraints may be treated more leniently under a rule-of-reason approach. In this respect, the Commission’s approach could be viewed as an attempt to resolve trade policy issues with an antitrust toolkit.

Consumer electronics manufacturers 

The Commission is investigating whether EU competition rules have been breached by restricting the ability of online retailers to set their own prices for widely-used consumer electronics products such as household appliances, notebooks and hi-fi products.

The effect of these suspected price restrictions may have been aggravated due to the use by some online retailers of pricing software that automatically adapts retail prices to those of leading competitors. With the investigation of automated price setting mechanisms, the Commission is pioneering into largely uncharted territory.

Video games 

In the video games sector, the Commission’s investigation concerns geo-blocking practices, where companies prevent consumers from purchasing digital content (in this case PC video games) because of the consumer’s location or country of residence.

After the purchase of certain PC video games, users need to confirm that their copy of the game is not pirated in order to be able to play it, via an activation key. The investigation focuses on whether the agreements in question require or have required the use of activation keys for the purpose of geo-blocking. In particular, an activation key can grant access to a purchased game only to consumers in a particular EU Member State. The Commission is investigating whether this reduces cross-border competition or cross-border commerce within the EU.  This action comes simultaneously with the Commission’s efforts to balance its Digital Single Market Strategy against legitimate copyright concerns.

Hotel price discrimination 

The Commission is also investigating some agreements concluded between tour operators and hotels. The Commission claims the agreements in question may contain clauses that discriminate between customers, based on their nationality or country of residence, which would result in customers not being able to see the full hotel availability or book hotel rooms at the best prices. In recent years, hotel booking portals have been investigated by several national competition authorities, particularly in relation to most-favoured-customer-clauses.

If you have any questions related to geo-blocking, e-commerce or competition law, please contact one of our experts below.

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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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