Type: Client Alerts
Following a number of European Commission sector inquiries (which included investigations into the energy, financial services and pharmaceuticals sectors), the competition authorities at both European and national levels have now turned their attention to markets affecting the retail sector. This is illustrated by the recent inquiries by the commission into e-commerce and by the UK Competition and Markets Authority (CMA) into the modelling agencies sector.
Investigations of this type look for outright price-fixing, resale price maintenance and restrictions on sales. It is common for sector inquiries to be followed by individual investigations and so retailers will no doubt want to follow these investigations closely.
The commission’s examination of the e-commerce industry has to be viewed in the context of its Digital Single Market (DSM) strategy. Hundreds of questionnaires were sent to manufacturers, retailers and online platforms to assess whether antitrust intervention is necessary to address barriers to cross-border sales. The Commission is expected to produce a preliminary report in mid-2016. This will be followed by a public consultation and the final report is planned to be published in the first quarter of 2017.
Next month, the CMA is to conclude its main investigation into the modelling sector and decide on further steps. It has been reported that a handful of leading UK model agencies are being investigated over allegations of price fixing. As retailers and brands need multiple shots of their clothing to be used online, the issue of how much models cost has become increasingly important. An infringement decision in this case could lead to damages claims from retailers.
Of particular relevance to retailers is the issue of how brand owners can protect their brands and when this can justify restrictions on sales. Germany’s Supreme Court is soon to review whether a backpack maker can ban online retailers from selling its goods over Amazon.com. While brand owners often argue that they need to protect their brand value and consumer experience, this does not sit well with the EU’s ambition to further open up online markets.
The task of protecting one’s brand is made more difficult in light of the differences that exist between different national competition law regimes and the fact that trademark and copyright laws are affected by national (in addition to European) legislation. Regulators and judges often differ in their approach to how far restrictions on sales can go before they infringe competition laws. While the EU is seeking to encourage online sales across Europe, the issue of brand protection gives many UK retailers cause for concern, which ultimately is an inhibiting factor for increasing cross-border sales.
It follows that the retail sector will need to keep an eye out for how the sector inquiry and any related investigations develop.
Client Alert 2016-048