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Competition Update – 15 May 2017

Home Insights Competition Update – 15 May 2017

Contributed by:

Contributed by: Sarah Keene, Troy Pilkington, Hannah Loke and Hamish Saunders

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Published on: May 15, 2017


European Commission: E-commerce sector inquiry and Data Economy

The European Commission (EC) has released its final report on the e-commerce sector inquiry aimed at identifying business practices that restrict competition. This follows the launch of the inquiry in May 2015 in the context of its Digital Single Market strategy and the release of the preliminary report in September 2016.

The EC has also released the mid-term review of its Digital Single Market strategy that focuses in part on developing a data economy.  

E-commerce sector inquiry

The EC’s final report concluded that certain practices in e-commerce markets could reduce competition and result in limited consumer choice and higher prices online. The EC’s main findings related to the impact of e-commerce on consumer goods markets and digital content.

The EC was concerned that the use of selective distribution systems, where only pre-selected authorised sellers can sell manufacturers’ products, could have an anti-competitive impact. The EC also focused on the use of contractual restrictions for product distribution. Specifically, it was concerned about the use of pricing restrictions by manufacturers; marketplace (platform) bans; restrictions on the use of online price comparison tools; and exclusion of pure online players from distribution networks.

The EC determined that the availability of licences from copyright holders is essential for competition in the market between digital content providers. In particular, bundling rights for online transmission with rights in other transmission technologies was considered to be potentially anti-competitive, as new entrants would be prevented from delivering online services, particularly when online rights were acquired but not used. Further, the EC noted that the duration of licensing agreements and payment structures and metrics could create barriers of entry for new competitors.

The EC has stated that it will consider opening further antitrust investigations based on the inquiry. Already the EC has opened three separate investigations into anti-competitive behaviour in the holiday accommodation, PC video games distribution, and consumer electronic pricing practices markets.

We expect that the Commerce Commission would refer to this document as a resource to assist its thinking in relation to the e-commerce sector in New Zealand if it were examining online markets in a merger approval or investigation process. However, as the EC's final report also notes, whether practices have a pro-competitive impact is highly fact dependant and will depend on a case-by-case assessment.

The full report can be found here.

Data economy

The e-commerce inquiry report was released in the context of the EC’s growing focus on the importance of the data economy as part of its Digital Single Market strategy.

Specifically, the European Union (EU) is concerned with non-personal data that is industrial, or machine-generated by companies. While the EU’s existing General Data Protection Regulation fully regulates the processing of personal data, it does not cover the flow of non-personal data.

In this context, the EC is examining the impact of data localisation restrictions on businesses. Data localisation refers to the storage of data in a datacentre that is physically located in the same country as where the data was generated. The EC aims to remove data localisation restrictions that would provide benefits to consumers in the form of cheaper and better cloud services. 

The next steps for the EC are to create policies to make machine-generated data more accessible for businesses, in order to boost innovation. Suggested policies include creating guidance on data sharing; allowing access to data for public interest and scientific purposes; and creating default contract rules for the sharing of data. Further, the EC notes that the portability of non-personal data could also foster innovation and stimulate competition. It recognises the importance of interoperability of services, and of appropriate sector-specific technical standards.

The recently released mid-term review of its Digital Single Market strategy states that the EC is preparing a legislative initiative on accessibility and reuse of public and publicly funded data (Spring 2018). Given the current government focus on big data it will be interesting to see what those initiatives produce.

The mid-term review of the EC's Digital Single Market strategy can be found here.

This publication is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice. If you require any advice or further information on the subject matter of this newsletter, please contact the partner/solicitor in the firm who normally advises you, or alternatively contact one of the partners listed below.

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