EU Competition Law andE-Commerce: Love-haterelationship?
Giorgio Monti
22 August 2015

Three themes
1. What does EU competition law have to say
with regard to the way e-commerce isdeveloping?

2. How is the law being enforced?

3. Who is enforcing it?

Digital Single Market Strategy forEurope (May 2015)• EU industrial policy– Facilitate cross-border e-commerce– Improve telecommunications networks to facilitate
provision of on line services– Encourage investment in new technologies & publicservices• Limits to EU industrial policy– Little EU funds– Few competences to compel Member State action– Focus on: competition law, consumer law, IP law,internal market lawCompetition Law: E-commerce
Sector Inquiry (May 2015)• Motivation– Little cross-border trade– Examines private barriers to trade that may
infringe the competition rules• Complements the Digital Single Market that examines
public trade barriers• Sector Inquiries generally– Normally followed up by enforcement• Here enforcement precedes & is in parallel with theinquiry
4French NCA as a pioneer enforcer:
Pierre Fabre (2009-2014)• Cosmetics company
preventing on-line salesof its goods to preserve
brand image• Infringement of Article
101, confirmed by ECJ• Followed by several
settlements to facilitate
on-line sales in many
sectors

On-line Travel Agents: NCAs in UK,
Germany, Italy, Sweden and France
OTAs sell hotel bookings onbehalf of large hotel chains• Two largest in the EU are:booking.com and Expedia
Dispute concerns MFN
clause:• Hotels may not offer
better deals on theirrooms through other online or offline channels
6Competition concerns• Eliminates price competition between retailers
selling hotel rooms– E.g. competition between two on-line travel agents– E.g. competition between hotel’s website and OTAwebsites• Raises entry barriers for new OTA businesses whocannot compete on price– New OTA has no incentive to offer a hotel a lower
commission fee because it cannot pass on the benefit
without others also will discount7

Commitment decisions in France,Sweden and Italy (2015)• Booking.com agrees to modify MFN clause:– Hotels can set different prices for off-line sales– Hotels can agree different commissions/prices
with other OTAs
– Hotels cannot use their own website to provide
discounts to all customers, but may offer
discounts to groups or under hotel loyalty
schemes8

Prohibition by the German
Competition Authority (January 2015)• Competition Authority claimed that MFN(‘best price’) clauses restrict competition• Regional Court agrees that there is arestriction and no good justification• Test case against one OTA, followed by cases
against the others in April 2015

France: Legislative Prohibition• Loi Macron (9 July 2015)– Authorises hotels to set what prices they want totheir hotel rooms, even on-line– Overturns the balance struck by the French NCA inApril 2015
– Is closer to the German model, but applies to all
hotel-OTA relationships, even new entrants.
hoteliers in France regain their entrepreneurial freedom andwill be able to offer their customers any trade or tariffadvantage they consider appropriate (Hospitality Europe)

Alternative perspectives
Economic approach OTAs are the newentrants
 MFN prevents freeriding MFN does not prevent
non-price competition
 OTAs increase
competition amonghotels

Intense Lobbying
Complaints against OTA
come from hotelassociations(who voluntarily use OTAs)

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E-books
Commission 2012
Agreements between fourpublishers and Apple toraise the retail price of ebooks:‘Maximum’ retail pricelists
Most Favoured Nation
Clause (if a retailer offers alower price, then Apple
may also set that lowprice)
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The Story• 2007 Amazon launches ‘Kindle’• 2007 Amazon promotes ebook best sellers with very low
prices. Publishers unhappy as it reduces overall income forbooks• 2009 Apple launches iPad & wants to establish iBookstore• 2009 four publishers get Apple to agree to sell books atretail price fixed by publishers• 2010 four publishers use the Apple agreement to force
Amazon to also agree to fixed retail prices• 2011 UK Competition Authority begins investigation• 2011 Commission removes the case from the UK

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The result:A ‘commitment decision’• Collusion among Apple & 4 publishers– Apple coordinates collusion, breach of Article 101• Remedy:– Parties agree• to abandon agreement fixing maximum prices for fiveyears• To abandon MFN agreements for five years• Give retailers freedom to offer discounts for two years

Alternative approaches
United States: criminal
prosecution

France, Germany etc. haveretail price maintenance forpaper books

Publishers settle
Apple appeal denied byFederal Court of Appeal
on 30 June 2015

Cultural policy: publishers
can make profit on bestsellers to publish culturally
important books.

How can Member States
respond to ebooks?

Geo-blocking• If you buy a pay-TV service in the UK, you
cannot access it in another country of the EU– A competition problem? (agreements between
film companies and TV operators preventing
cross-border sales)• action against Sky and US film companies, July 2015

– An internal market problem? (rights of consumersaffected)– A copyright problem? (copyrights are national still)

Google (since November 2010, statement ofobjection issued April 2015)• Abuse of dominant position:– Use its market power in ‘general search’ (90% inthe EU) to move into the market for ‘comparison
shopping search’– Favourable treatment of ‘Google Shopping’website versus other competitors: higher rankings,
penalties on rivals on the ranking• Plausible theory of harm under Article 102

Google between 2010 and 2015• Commission started with a wider set of concerns– Advertising exclusivity (if you advertise on Google, you
cannot on other search engines), portability ofadvertising data…

• Repeated attempts to reach a settlement failed
under Commissioner Almunia• In April 2014 a commitment decision seemed
likely (Google promising to put three competitor
websites on page 1 of search results• New Commisioner Vestaeger opens a formal
proceeding: why the change in strategy?

The role of the Commissioner inthe work of DG Competition(Source: the Economist 2 May 2015)

What is the approach of EUcompetition law to e-commerce?
• Attack on vertical relations– Normally pro-competitive, so why bother?
• Old-fashioned approach– Market integration important for Commission– Concern about opening up e-commerce competition• Google – a ‘normal’ Art 102 case– Monopoly leveraging a well-established approach
to monopolization

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How is the law enforced• Mostly commitment decisions– No admissions of infringement – parties volunteer
to change conduct• Weak judicial oversight• Greater capacity for agency and firms to identify how tobest design business to comply with law– Administration model of antitrust enforcement• Misused in eBooks, remains possible in Google21

Who is enforcing the law?
EU-level• Legislation– Hartlapp et al Which Policy for Europe? (2014)• Internal policy conflict• Increasing politicization of College of Commissioners• Personal characteristics of Commissioners, DG officials• Competition enforcement– Can it avoid the conflicts of law-making?
– Can kick-start legislation (see telecoms, energy, postalservices, health care)– Less comprehensiveWho is enforcing the law?
National level• France– Pioneer in attacking e-commerce restrictions– Played role in reforming Commission Guidelines• Multiple NCAs tackling the same conduct––––

Hotel booking
Why no Commission intervention?
Experimentalist governance by NCAs?
Co-ordination role of Commission?
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