1. The wider context: The Digital Single Market strategy
On 6 May 2015, the Commission adopted the Digital Single Market strategy.1
The Digital Single Market strategy2 outlines several key actions under three pillars by means of which the Commission envisages to create a Digital Single Market. One of these pillars relates to ensuring better access for consumers and businesses to goods and services via e-commerce across the EU.
Under this pillar the Commission has already undertaken and will further undertake several actions, including legislative proposals in the following areas: (i) harmonised EU rules on contracts for the supply of digital content and for the online and other distance sales of goods3 and the cooperation between national authorities responsible for the enforcement of consumer protection laws,4 (ii) efficient and affordable cross-border parcel delivery,5 (iii) unjustified geo-blocking,6 (iv) simplified VAT rules7 and (v) copyright modernisation.8 The Commission is also assessing the role of online platforms and intermediaries.9
Under this pillar of the Digital Single Market strategy, the Commission decided on 6 May 2015, on the basis of the EU competition rules, pursuant to Article 17 of Regulation 1/2003,10to launch a sector inquiry into trade of consumer goods ("goods") and digital content in e-commerce in the EU.11
While most of the actions of the Digital Single Market strategy essentially seek to address regulatory barriers to cross-border online trade in goods and services, the sector inquiry into e-commerce investigated barriers created by companies.12
The sector inquiry focused on distribution agreements for goods and services that may create barriers to e-commerce. With respect to online platforms, the sector inquiry gathered information on conduct of companies active in e-commerce (notably marketplaces and price comparison tools). It does not relate to conduct of online platforms more generally. The sector inquiry therefore complements the Commission's legislative proposals and the initiatives on online platforms under the Digital Single Market strategy.
2. The reasons for launching the sector inquiry
E-commerce in the EU has grown steadily over the past years. Today the EU is one of the largest e-commerce markets in the world. Based on Eurostat data, the percentage of individuals aged between 16 and 74 having ordered goods or services over the internet, has continuously grown from 30 % in 2007 to 55 % in 2016.13
The proportion of online buyers varies from Member State to Member State, but it is growing steadily everywhere. The highest percentage of online buyers can be found in the United Kingdom (where 87 % of the total population aged between 16 and 74 made purchases online) and the lowest in Romania (where 18 % of the total population aged between 16 and 74 made purchases online).14 There is a positive correlation between the percentage of customers engaging in online shopping and the internet penetration rate.15
Figure A. : Internet users who bought or ordered goods or services for private use over the internet in the previous 12 months, 2012 and 2016 (% of internet users) - Source: Eurostat16
Figure A. below presents the estimated evolution of online and total retail sales in the EU between 2000 and 2014. During that period, the estimated average annual growth rate in the online sales of goods was approximately 22 %, despite the 2008 economic crisis and the drop in overall retail sales between 2007 and 2012. At the same time the proportion of companies engaging in online sales did not grow significantly between 2004 and 2014.17
Figure A. : Estimated evolution of the total and online retail sales in goods, 2000-2014 (in billion EUR) - Source: Duch-Brown and Martens18
E-commerce in the EU is geographically concentrated: the United Kingdom, Germany and France concentrate more than 60 % of EU online sales.19
The proportion of individuals aged between 16 and 74 in the EU, who ordered goods or services over the internet for private use reached 66 % in 2015.20Despite the growth of e-commerce, in the same year 18 % shopped online from a seller established in another Member State.21
Figure A. : Domestic and cross-border online shopping, EU-28, 2008-2016 (% of people aged 16 to 74) - Source: Eurostat22
Eurostat data reveal that in 2014 in the EU 19 % of companies engaged in online sales, but only 8 % of them made online sales to customers located in other Member States.23 In 2014, 85.4 % of online sales of companies stem from domestic sales and 10.3 % stem from EU cross-border sales.24
A mystery shopping survey conducted on behalf of the Commission at the end of 2015 found that only 37 % of websites allow cross-border EU customers to reach the stage of successfully entering payment card details, i.e. the final step before completing a purchase.25
There are also significant differences between Member States when it comes to the proportion of customers in a particular Member State that shop online from retailers located cross-border. For example, while 70 % of residents of Luxembourg engage in cross-border online shopping, only 2 % of residents of Romania do the same. As a general trend, the relative (population-weighted) intensity of cross-border e-commerce is inversely related to population size: customers in smaller Member States are more active in cross-border purchases than those of larger ones.26
Figure A. : Cross-border internet purchases by individuals, 2016 (% of people aged 16 to 74)
Source: Eurostat27
Digital content in the EU accounted for 32 % of online trade by individuals buying online in 2014.28 A total of 40 % of individuals used the internet to access media content online in 2014, up from 21 % in 2007.29
A Eurobarometer report30 indicates that in 2014, around half of the EU citizens responding to the survey accessed or downloaded audio-visual content and music online, with 30 % of them doing so via subscriptions or individual transactions. However, only a third of them could find the audio-visual content they wanted. While a minority of customers reported trying to access online digital content cross-border (8 %), this proportion is substantially higher for younger people (17 %) and is growing, as they look for digital content which is available outside their Member State of residence. According to the same report, more than 50 % of customers have experienced problems when trying to access digital content cross-border.
Different studies point to a wide range of reasons, both on the side of customers and on the side of the retailers that may explain the modest growth of cross-border e-commerce in the EU. For instance, according to a Eurobarometer report, the most common difficulties companies encounter when selling online are related to cost. Retailers are concerned that delivery costs are too high (51 %), that guarantees and returns are too expensive (42 %), or that dispute resolution is too expensive (41 %).31 According to the same report, for almost one third (32 %) of retailers slow internet speeds are a problem, and for 15 % of retailers, the complications or costs of dealing with foreign taxation is a major problem. Additional reasons for not engaging in cross-border sales are lack of knowledge of applicable laws and lack of foreign language skills.
When it comes to customers, they are more confident in making domestic online purchases (61 %) than they are in purchasing online from retailers in other Member States (38 %).32 Surveys and studies invoke different reasons for this difference. Concerns regarding delivery and return possibilities, as well as doubts about misuse of payment card information and personal data may deter customers from shopping online from retailers in another Member State.33 This adds to the more subjective obstacles to cross-border sales, such as language differences and customer preferences.
Similarly to private persons, when companies purchase online, they are mostly concerned that delivery costs are too high (57 %), that resolving complaints and disputes cross-border is too expensive (53 %), and that their data are not well protected in another Member State (44 %).34
However, there are also indications that companies establish barriers to cross-border online trade through contractual provisions or concerted practices that limit the ability of retailers or service providers in one Member State to serve online customers located in another Member State. For example, according to a 2015 Eurobarometer report35, 16 % of companies that sold online in 2014 or tried to do so indicate that the existence of restrictions imposed by their suppliers on selling to customers located in another Member State is a problem (and for 6 % it is a major problem).
The growth of e-commerce provides for a number of challenges for companies in terms of their distribution strategies.
New distribution methods and models emerge online. Smartphones and mobile apps are increasingly used for e-commerce. New apps also allow customers to scan product codes, compare prices and purchase products online. Based on Euromonitor data, mobile internet retail amounts to more than one-third of total e-commerce.36
Companies and customers increasingly use platforms, in particular marketplaces and other intermediaries/price comparison tools.37 An increase in online sales puts challenges to existing distribution networks, in particular to brick and mortar retailers. Some companies react to these challenges with recourse to vertical restraints.
Over the last decade certain National Competition Authorities have been particularly active in assessing contractual restrictions in e-commerce. For instance, in 2012 the French Authority conducted a sector inquiry into e-commerce38; while the German, French, UK and other National Competition Authorities carried out several investigations39 into different types of contractual restrictions used in e-commerce.
These cases indicate that certain contractual restrictions used in e-commerce have given rise to concerns and warrant closer scrutiny from the Commission in order to ensure effective competition across the EU and to contribute to a consistent interpretation of the existing rules.
