On 23 September, Policy & Regulatory Report (PaRR) organized a full-day conference on competition law and antitrust trends. Hanne Melin of eBay Inc. participated in the session on “Vertical Restraints –Perfecting Distribution”.

Melin was joined on the panel by Nelson Jung of the Office of Fair Trading, Matthew Bennett of CRA, and Zhan Hao of AnJie Law Firm. A lively discussion on topics such as online selling, resale price maintenance, and the OFT’s recent cases in online travel booking and mobility scouters was moderated by Laurent Godfroid.

Throughout the discussion, the speakers came back to the undisputed fact that business and markets are in constant flux, which is certainly a challenge for both legislators and law enforcers. Legislation must balance the requisite legal certainty with the need for flexibility. Law enforcers must be sure to apply legal principles to today’s reality with tomorrow’s possibilities in mind. 

Also market participants are challenged as the Internet, technology and consumers are reshaping retail and payments. It certainly demands a fundamental rethink of distribution strategies to ensure consistency across touch points, to seize omni-channel opportunities, and delight customers wherever and whenever they choose to interact with you.  This is proving difficult as shown by the on-going antitrust investigation in Germany of Adidas’ and Asics’ distribution networks.

New and different distribution channels and formats will continue to emerge: “I believe that you’re going to see more change in how consumers shop and pay in the next three years than we’ve seen the last 20 years”, predicts eBay CEO John Donahoe. The innovations will for sure challenge status quo, they may increase market transparency, and they may help distribute information through the entire commerce value chain. This is what we see happening right now with online marketplaces and the uptake of mobile commerce. Resistance and prohibitions are not the answer to market transparency and the democratization of information.

It was agreed by the panelists that with today’s fast moving markets, legislation may be out of touch within just a few years. Indeed, as described in this article by Tod Cohen and Melin, the reality taken for granted during the review of the EU’s Vertical Restraints Regulation and Guidelines in 2009 is today vitally different. 

For good, the Regulation and Guidelines adopted in 2010 set out four, what Melin called, “out-of-bound marks” that are capable of ensuring a balance between legal certainty and flexibility when it comes to innovation in retail:

1. Retailers hold a right to use the Internet to “reach a greater number and variety of customers”. This is a right to efficiently use the Internet as a sales and marketing channel. Importantly, for small retailers, simply setting up a website will not translate into an efficient use, whereas setting up a shop on an online marketplace might.
2. The principle of equivalence stipulates that qualitative criteria imposed on the operations of a retailer must be equivalent for the online and offline parts. It’s common sense that the criteria need not be identical but comparable.
3. Case law dating back as far as 1982 tells us that distribution agreements that treat different distribution formats discriminatory are anticompetitive. So same treatment – non-discrimination – is required of, e.g., sales in a shopping mall and in a stand-alone store.
4.  There is a duty to individually assess a retailer’s compliance with qualitative trading conditions. A supplier can’t simply a priori exclude a certain type of retailers or distribution channel based on a general assessment.

Suppliers, retailers and consumers all play a part in “perfecting distribution”. It is exciting how the Internet and mobile devices are changing the dynamic between all market participants and putting the consumer closer to the center. This is a positive development and law enforcers need to ensure that innovation can continue to improve markets, spur economic activity, and benefit consumers. This requires them taking an active role; indeed, the European Parliament has recently and repeatedly called for immediate action to end practices that ban retailers’ right to sell on online marketplaces.