Antitrust laws in the digital era: A good time for a self-audit in your supply chain
BY ZEPOS & YANNOPOULOS
Even casual observers have undoubtedly noticed the explosion of e-commerce that has taken place over the last decade. Supply chains all over the world have been reshaped, probably forever. What’s more, one of the Covid-19 pandemic’s side effects has been to bring online sales channels to new prominence. According to recent research, in 2020, e-commerce turnover in Greece doubled to 15 billion euros. As expected, this shift has resulted in increased scrutiny by competition authorities worldwide. One such authority is the notably proactive Hellenic Competition Commission, whose press release in March 2020 served as a stark reminder of its vigilance: When it comes to competition rules on supply contracts and distribution agreements, there are lines that cannot be crossed.
In the European Union, agreements between operators at different levels of the supply chain offer a “safe harbor” from competition law scrutiny, although certain practices are still prohibited. The competition rules on such “vertical” relationships are set out in a 2010 piece of EU legislation and respective guidelines, which are currently under revision. Most likely, the revised rules will address the latest digital developments.
Certain vertical practices have always been an enforcement priority for competition authorities, indicatively: a) resale price maintenance, imposed either contractually or de facto on the distributor; b) prohibition on passive sales – whereby a supplier prohibits wholesalers and/or retailers from responding to unsolicited requests for the supplier’s products – or prohibition on parallel imports within the EU; c) prohibition on cross-selling amongst members of a selective distribution system; d) exchanges of commercially sensitive information between different suppliers under the coordination of a common commercial agent, known as “hub-and-spoke” arrangements.
In our digital era, practices that require careful redesign also include restrictions regarding distributors’ freedom to sell through particular online channels (e.g. marketplaces or price comparison websites).
In order to ensure a sufficiently competitive landscape – particularly in e-commerce – competition authorities have also started to explore alternative policy tools, such as “sector inquiries.” This tool, as used by the European Commission and the Hellenic Competition Commission, helps authorities ascertain the level of competitiveness in a specific market by requesting companies at different levels of the supply chain to provide detailed information on their activities. The broad scope of this process means that if the authorities uncover agreement provisions or practices that are liable to breach competition rules, they can initiate proceedings against the individual companies.
Looking into the future, some authorities (e.g. the UK Competition and Markets Authority) are going hi-tech, using price-monitoring tools to detect unlawful pricing coordination, including between suppliers and wholesalers/retailers (which would amount to resale price maintenance). Increasingly, competition law fora are discussing the implications of using artificial intelligence and algorithms when it comes to pricing.
Clearly, competition law scrutiny with respect to practices in the supply chain is picking up steam. If you are a supplier, the timing couldn’t be better: Take a careful look at your relationships with your distributors to ensure that you are maximizing growth or protection of your brand while remaining compliant with existing antitrust laws. Just as important – and often overlooked – is the need to increase staff awareness across all business units; very often, competition law is breached by an eager employee keen on improving his/her company’s results.
