A growing number of consumer goods suppliers prevent their authorized distributors from offering their goods for sale on open online marketplaces such as eBay, and often enforce these prohibitions aggressively. In fact, according to the European Commission’s preliminary report on the e-Commerce Sector Inquiry, marketplace bans are one of the main tools that brands use to restrict competition, along with imposing pricing restrictions and dictating the countries in which their products are sold.
The use of marketplace bans is a widespread anti-competitive practice in many consumer product markets, with over half of European sellers (53%) now affected by platform bans[1]. In some industries, nearly all leading brand manufacturers have imposed a marketplace ban on their retailer.
For distributors, online marketplaces offer a unique opportunity to get easy access to a large customer base, and access to technology and innovation – such as cutting-edge artificial intelligence and machine learning tools - they otherwise would not be able to use.
In fact, online marketplaces significantly help smaller distributors to compete with the larger online shops, some of which are operated by the brand manufacturers themselves. This is why smaller distributors usually wish to sell via open online marketplaces but lack the bargaining power to stand up against their powerful suppliers. Unable to harness the marketing, audience, and brand power of marketplaces, these SMEs often lack the resources to reach a greater number and variety of customers through their own website.
For consumers, online marketplaces allow transparent and easily accessible comparisons on products they are looking for and provide additional consumer protection features like customer ratings.
Recent research shows that 88% of shoppers expect their favourite brands to be available through online marketplaces such as eBay, and 61% of shoppers expect to find the best prices through these sites[2]. However, as a consequence of marketplace bans, consumers are restricted from buying their favourite products at competitive prices via their preferred and trusted online and mobile commerce channels, and may pay higher prices because they cannot use marketplaces to efficiently compare prices.
Marketplace bans also have a negative impact on cross-border trade and the core EU Digital Single Market Strategy objective of boosting online commerce opportunities for SMEs.
In its preliminary report on the e-Commerce Sector Inquiry, the European Commission recognizes the importance of online marketplaces for small businesses and cross-border trade. The report also rightly shows that marketplace bans prevent a significant number of small business entrepreneurs from selling products on online marketplaces and that these bans harm consumers by limiting choice, increasing prices and hindering cross-border trade.
The EU Commission has invited all stakeholders to submit their comments not later than 18th November 2016. All comments should be sent to the following e-mail address:
http://ec.europa.eu/competition/antitrust/sector_inquiries_e_commerce.html
We believe e-commerce should be open for all and call on the Commission to step up its enforcement actions against these anti-competitive practices.