The EU Digital Single Market: competition matters and a wider perspective

Written on 7 May 2015

On 6 May 2015 the European Commission published its “Digital Single Market Strategy for Europe”. The Commission’s proposals are aimed at producing a true digital single market, one with – in President Juncker’s optimistic words – “pan-continental telecoms networks, digital services that cross borders and a wave of innovative European start-ups”.

Read more below about how the Commission is using competition laws to achieve these aims. 

The EU Digital Single Market Strategy is an area we will continue to monitor closely. Click here to read our latest updates and keep up to date with the developments as they happen.

The Commissioner’s focus

The unwavering focus of Margrethe Vestager, the EU Competition Commissioner, on the digital economy is reflected in the on-going competition law investigations into geo-blocking of pay TV and internet distribution of consumer goods. The Competition Commissioner sees her competition powers as the main weapons to dismantle artificial barriers to cross-border trade created by companies (both through contractual restrictions and by unilateral conduct), while the rest of the Digital Single Market project addresses regulatory barriers.

Addressing the unlawful use of geo-blocking is a key driver underlying the competition investigations, although it is not yet clear how this will be reconciled with the regulatory barriers that geo-blocking often reflects – including the protection of intellectual property and legislative differences between Member States (for example, rules on violent content differ significantly across the EU). The Commission will make proposals aimed at addressing copyright differences across the EU by the end of 2015. However, the Commission can expect robust lobbying from stakeholders on this issue as the e-commerce market investigation gets underway. For more on the Commission’s proposals on copyright and geo-blocking, see here.

E-commerce market investigation

The e-commerce market investigation will widen the scope of the Commission’s inquiry, enabling it to examine all restrictions (arising both through unilateral conduct as well as in the form of contractual restrictions) to genuine cross-border trade. This investigation (which targets electronics, clothing and shoes) places not just digital content but the wider digital economy in the spotlight and is one that all companies operating in the digital economy need to follow closely. In particular, there will be opportunities to engage with the Commission to ensure it properly understands the challenges of doing cross-border business online and to influence how competition law should be applied to the digital economy in the future. Companies at all levels of the supply chain, covering both physical as well as digital products, can expect to hear from the Commission in the coming weeks and will need to consider their responses carefully. If you do not receive a questionnaire but wish to make representations to the Commission, please speak to us.

Other contractual barriers to online cross-border trade are also in the spotlight. The Commission has already carried out several dawn raids into suspected restrictions on online selling of physical goods. The Commission is also keen to examine the use of differential pricing between Member States, particularly where this is coupled with geo-blocking. We expect other online vertical restraints, including resale price maintenance and restrictions on grey imports and the use of third party online platforms, to come under scrutiny in the coming months. Now is the time to look at your online sales policies and assess your exposure to competition law risk.

From digital content to the online sale of physical goods, it is clear that the Commission has restrictions of free trade across the EU firmly in its sights.

“The single market concept lies at the heart of the entire EU project. Attempts to partition the market along national boundaries are treated very seriously by the Commission – as evidenced by its on-going investigations into geo-blocking of TV and video game content, as well into the online sale of electronic goods.” Simon Neill, Partner, Osborne Clarke, London.

“Online distribution can enhance competition, but should never compromise quality. E-commerce is now in the spotlight of public enforcement and private litigation. As national courts have largely invalidated the 2010 EU Commission guidelines on third-party internet platforms, brand-name manufacturers and retailers need to adapt their compliance and distribution strategies.” Dr.  Thomas Funke, Partner, Osborne Clarke, Cologne.