E-commerce is the latest sector to be targeted by the European Commission which is about to launch a probe into how companies do business across borders.
E-commerce is the latest sector to be targeted by the European Commission investigatory division, which earlier this year announced plans to launch a sector inquiry in response to concerns about how technology can limit competition and trade between member states. Whilst this could spell financial trouble for companies, consumers may benefit from more choice and better prices should the inquiry result in changes to the way ecommerce is governed.
Why is the European Commission concerned about ecommerce?
Online retailers commonly impose geographical barriers that prevent customers from one country from purchasing from another country’s website. For consumers, this can mean paying more for the same item than a customer buying from another country.
The European Commissioner in charge of competition policy, Margrethe Vestager, stated “It is high time to remove remaining barriers to e-commerce, which is a vital part of a true Digital Single Market in Europe. The envisaged sector inquiry will help the commission to understand and tackle barriers to e-commerce to the benefit of European citizens and business.”
A well-functioning e-commerce sector is an important aspect for economic growth. E-commerce can reduce transaction costs, bring down prices and broaden consumer choice. The growth of e-commerce in the EU reflects these benefits, with about 50 per cent of the EU population having shopped online in 2014. However, only 15 per cent of the population shopped online from a trader of goods or a provider of services based in another Member State.
While there could be a variety of factors contributing to the slow growth in cross-border e-commerce, such as diverse consumer preferences and language barriers, the European Commission has suggested that there are indications of private barriers to competition.
What companies will be targeted?
Approximately two thousand companies are expected to be approached by the European Commission’s DGCompetition and will receive questionnaires. According to the European Commission’s press release sectors such as clothing, shoes and accessories, consumer electronics and electrical household appliances, and digital content are involved. Therefore, the inquiry is relevant to every business that sells or facilities the sale of goods or services online in the EU. The scope of the inquiry will cover not only physical goods and services but also media content given consumers’ desire to watch different country programmes when travelling abroad in Europe.
What powers will the Commission have to investigate?
The European Commission has the power to request information and to carry out investigations at company premises. For example, it can:
• Enter business premises (including vehicles) and domestic premises, if these are used by the business or documents relating to the business are kept there.
• Examine the company’s books and other business records.
• Take copies of, or extracts from, the books and business records.
• Seal any business premises and books or records during an investigation (normally for no more than 72 hours).
• Ask for oral explanations on-the-spot about facts and documents.
How can companies best prepare for the European Commission’s e-commerce sector inquiry?
This type of investigation by the European Commission will involve a large information gathering phase; an information processing and review stage and the need to produce relevant information to the Commission. Further competition infringement investigations may follow where there is evidence that the EU’s competition rules may have been infringed. Companies that receive questionnaires from the European Commission should first seek expert legal and technology advice to understand the depth of the investigation and identify the most strategic approach to responding. Importantly, companies which receive a questionnaire from the Commission can be fined if they supply incorrect or misleading information.
Companies subject to an information request will have to rapidly identify within the corporate infrastructure the requested documents in order to comply with the request and do so within tight deadlines. As there are severe penalties for not providing the requested documents in these tight deadlines, it is crucial that companies begin to put their houses in order to prepare for such a request.
In the context of requests for information by authorities, identifying and mapping the companies data infrastructure early on can help target the documents needed and make them available rapidly for review by the company and its law firm. Technology is available to help find key documents faster by indexing data sets and rapidly searching across the documents. On this note, technology will play a significant role in assisting companies to sift through the volumes of data to respond to the authority’s tight deadlines. Document review tools equipped with sophisticated features such as “predictive coding can help automatically identify relevant documents based on intelligence learned from human reviewers. This type of technology is the best weapon to use to ensure deadlines are met at minimal cost. It enables companies undergoing investigation to reduce the time spent searching for requested information and helps them avoid fines for the late submission of data.
No one should expect a quick conclusion to the probe, but companies should be prepared as it is expected that there is the possibility that participants will start receiving the questionnaires imminently.