PublishedAugust 14, 2015

Is the European Retail Industry Recommending Platform Regulation?

Brussels — At the end of 2013 the European Commission set up the so-called ‘High Level Group on Retail Competitiveness’. The Group consists of 20 European stakeholders active in the retail chain including multinational retailers, independent retailers, discounters and cooperatives. It also includes a European trade union, a consumer organization and an academic. On the business side, companies as diverse as Carrefour, Ikea, Lidl, HEMA, GlaxoSmithKline and Lego are part of the group. The objective of this Group sounds quite straightforward: “to assist the Commission in developing policies to improve the long-term competitiveness of the EU retail sector”.

As the competitiveness of the retail sector will increasingly be dependent on the online element in retail, the Group rightly identified the development of e-commerce as a priority area of its work. The first results of this work came out at the end of July. ‘The Group’ set out a couple of recommendations to the European Commission in a general report on retail competitiveness. There is also a separate, e-commerce-specific report which was prepared by a dedicated working group.

It is interesting to note that the currently very political and imprecise debate on ‘online platforms’ has also made it into this report. According to the High Level Group, “it appears that some platforms function as ‘gatekeepers’ and as such can, for example, restrict other players’ access to the market, in particular small retailers” (p. 13). Despite its imprecision, this is a very bold statement. It is obviously not clear who the Group exactly means with ‘gatekeepers’, but given the context of the report it seems that this allegation addresses bigger e-commerce platforms. If that’s the case, the report could hardly be more short-sighted because e-commerce platforms like open marketplaces rely on small retailers to be on their platform. Accessibility to the platform is the key ingredient of their business model. The more sellers on a platform, the bigger its attractiveness because of increased product choice and price competition.

The slightly more specific report of the working group on e-commerce seems to ‘clarify’ that online platforms in general do not seem to be the problem but only the ones with “significant market power” (p. 12 -13; i.e. platforms which hold a dominant position on a to be defined market). Accordingly, the working group recommends the full enforcement of existing competition rules on abuse of dominant position — which is exactly what DG COMP has been doing for years, including in the technology sector. Perhaps unsurprisingly, the Group does not discuss the truly interesting questions around platforms and competition law enforcement. Who is an online platform and who is not in an economy that has largely become digital? Can, for example, Carrefour reasonably expect to not count as a digital platform? How would one define the relevant market for competition law purposes? The e-commerce sector in particular is highly dynamic leaving consumers with a great variety of options — a level of options and choice they have never had in the past. Investments into new e-commerce ventures are steadily increasing. So how would the relevant market have to be defined to actually find this one digital ‘gatekeeper’?

Interestingly, this group also calls for a study by the end of 2015, examining whether the existing regulatory framework is well adapted to the balanced development of platforms. While the European Commission is certainly under no obligation to commission such a study, it would also be unnecessary at this stage. DG COMP is currently in the process of a huge fact-finding exercise in the context of the sector inquiry into e-commerce. Detailed questionnaires have been sent to various players in the retail chain which promise to generate a very deep understanding of the sector and of some business models. At the same time, DG Connect is preparing a comprehensive public consultation on ‘platforms’ which is expected to be published in September. What remains unclear is how the DG GROW-led High Level Group on Retail Competitiveness fits into this. Unfortunately, so far it seems that the Group provides a venue for certain players to make bold and unsubstantiated claims on complex issues which are expected to occupy the Commission in the coming months.

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