Return to Sender: The Right of Withdrawal for Contracts for the Supply of Digital Content

By Sebastian Pech

The Consumer Rights Directive (2011/83/EU) from 2011 provides for a right of withdrawal for distance contracts not only for digital content distributed on a tangible medium (e.g., DVD, Blu-ray), but also for digital content supplied without a data carrier, e.g., downloading or streaming. The Consumer Rights Directive was modified in 2019 by the Enforcement and Modernisation Directive ((EU) 2019/2161). The amendments were to be transposed into national law by the member states by November 28, 2021; the provisions are to be applied as of May 28, 2022.

The Directive on Contracts for the Supply of Digital Content and Digital Services ((EU) 2019/770), that also dates from 2019, governs further aspects of contract law regarding the supply of digital content to consumers, such as in particular the requirements for providing digital content in conformity with the contract, as well as remedies. The respective implementations in the member states are already applicable from January 1, 2022.

This contribution provides an overview of the right of withdrawal for contracts for the supply of digital content under the new regulations.

The right of withdrawal in a nutshell

The right of withdrawal aims to provide the consumer with an opportunity to test the goods, since unlike a retail store, a distance contract does not allow the consumer to examine the goods before the contract is concluded.

Therefore, the consumer can withdraw from a distance contract within a period of 14 days, without giving any reason (Article 9 (1) Consumer Rights Directive). As a result, the contracting parties are freed from the obligations under the contract (Article 12). In case of a withdrawal, the trader must reimburse all payments received from the consumer (Article 13 (1)), and the consumer must return the received goods to the trader (Article 14 (1)). The consumer must pay compensation for a loss of value of the goods only if it is caused by handling of the goods which was unnecessary for examining the goods (Article 14 (2)).

Distinctive aspects of contracts for the supply of digital content

Digital content differs from other products since it can be copied as often as desired without any loss of quality. In some cases, such as movies and series, digital content is often purchased for one-time consumption only. These special aspects must also be considered in the context of the right of withdrawal. Otherwise, the consumer could abuse this right by consuming the content before withdrawing or retaining a copy and thereby appropriating its economic value.

Digital content supplied on a tangible medium

Therefore, the Consumer Rights Directive provides for an exception of the right of withdrawal if the consumer unseals a sealed medium containing digital content (Article 16 (i)).

In the case that the right of withdrawal is not excluded, the consumer can withdraw within a period of 14 days after receiving the tangible medium form the trader (Article 9 (2) (b)).

Even if the value of digital content is not usually tied to the physical media holding it, a return by the consumer is in the interest of the trader. They can ensure that the consumer does not continue to use the digital content stored on the medium. Additionally, the trader can potentially resell the medium to another customer. If the medium is sealed, checking the integrity of the seal is necessary to confirm the right of withdrawal.

If the consumer has made a copy of the digital content contained on the medium, for example by installing software on his device, they could continue to use the content even after returning the medium. Therefore, in the event of withdrawal from the contract, Article 14 (2a)’s new provision forbids the consumer, e.g., through deletion of copies, from using the digital content and from making it available to third parties.

Digital content supplied on an intangible medium

In the case, that the digital content is supplied on an intangible medium, Article 16 (m) provides for an exception of the right of withdrawal when the trader has initiated the performance of contract. In addition, it is required that (i) the consumer has provided prior express consent to initiate the performance, (ii) the consumer has acknowledged that they thereby lose the right of withdrawal, and (iii) the trader has provided confirmation in accordance with Article 8 (7).

The Enforcement and Modernisation Directive has added the last requirement to inter alia confirm (where applicable) the consumer’s prior express consent and acknowledgment in accordance with Article 16 (m) that was missing in the old version of the Consumer Rights Directive.

In case the right of withdrawal is not excluded, the consumer can withdraw within a period of 14 days from the day of the conclusion of the contract (Article 9 (2) (c)).

The trader will usually have no interest in the consumer returning the downloaded data, for example by e-mail; new customers can download their copy from the master copy on the server. If the content is retrieved directly from the server, as in the case of streaming, there is no permanent storage on the consumer’s device. The decisive factor for the trader is preventing the consumer’s continued use of the content after exercising the right of withdrawal. The consumer must refrain from using the digital content and making it available to third parties in the event of withdrawal from the contract (Article 14 (2a)). If the consumer has downloaded digital content, they are obliged to delete it. In the case of direct server retrieval, the obligation to refrain from using the digital content pertains to the consumer not accessing the content any further.

In the event of withdrawal from a contract for the supply of digital content on an intangible medium, the consumer must pay no compensation for the use of the digital content before the withdrawal. This results from Article 14 (4) (b) in combination with Article 14 (2), (3), and (5). The reason for not requiring compensation is that digital content transmitted via the Internet does not degrade. In addition, the trader can decide to exclude the consumer’s right of withdrawal with beginning of the performance of the contract in accordance with Article 16 (m).

Provision of data by the consumer in return for the supply of digital content

The new provision of Article 3 (1a) introduced by the Enforcement and Modernisation Directive states that the Consumer Rights Directive also applies to contracts for digital content supplied on an intangible medium where the consumer provides personal data to the trader instead of paying a price. Even if the consumer is not obliged to use the content in the case of “payment with data”, the consumer may still wish to be able to terminate the contract easily by means of a withdrawal, without being bound, e.g., by notice periods.

The performance of the contract or statutory provisions often requires provision of personal data (e.g., name, e-mail address) of the consumer, so that the trader cannot gain any independent economic advantage from the data provided. Therefore, Article 3 (1a) excludes these cases from the scope of the Directive, provided that the trader performs the data processing exclusively for this purpose.

According to Article 16 (m), the right of withdrawal is excluded with beginning of the performance of the contract  for  contracts that do not oblige the consumer to pay a price.

Conclusion

The Consumer Rights Directive distinguishes between digital content distributed on a tangible medium and digital content distributed on an intangible medium. Depending on the type of digital content, different regulations apply to the prerequisites and legal consequences of the right of withdrawal.

The Enforcement and Modernisation Directive contains several modifications to the Consumer Rights Directive; the extension of the scope of application to contracts in which the consumer pays in data instead of paying a price is most significant. This creates a concurrence with the Directive on Contracts for the Supply of Digital Content and Digital Services which also applies to contracts where the consumer provides personal data, instead of money, to the trader.

EU Digital Consumer Contract Law – The Directive on Contracts for the Supply of Digital Content and Digital Services

By Sebastian Pech

The Directive (EU) 2019/770 on Contracts for the Supply of Digital Content and Digital Services governs the relationship between traders and consumers within this context, and will apply from January 1, 2022. The Directive’s scope of application is broad and affects many types of contracts. This contribution provides an overview of the new regulations.

1. Background of the Directive

The Directive is intended to ensure a high level of consumer protection and legal certainty in cross-border transactions involving digital content and services (see Recitals 4–11). Therefore, the Directive follows the principle of full harmonization, which means that regulations that are introduced by the Member States should meet its threshold, and should not be exceedingly stringent or lenient (Article 4). Furthermore, the regulations set forth in the Directive are of a mandatory nature. Therefore, contractual terms between traders and consumers that differ in a way that is detrimental to the consumer are not binding for the consumer (Article 22).

The member states had to enact the Directive into national law by July 1, 2021, and the new regulations will come into force on January 1, 2022 (Article 24).

2. Scope of Application

a. Material Scope

The material scope of the Directive relates to digital content and digital services:

• Digital content means “data which are produced and supplied in digital form” (Article 2 (1)). This includes computer programs, games, music, videos, and texts in digital form, regardless of whether they are provided in a physical medium (e.g., CD, DVD, USB stick), as a download, or on a stream (Recital 19). The supply of digital content can occur through a single act (e.g., a file that is downloaded to the consumer’s device, through which the consumer has indefinite access) or on an ongoing basis for a specified period (e.g., a movie on a streaming platform, for which the consumer has access only during the term of the contract) (Recitals 56, 57).
• Digital services comprise services “that allow[…] the consumer to create, process, store or access data in digital form” as well as services “that allow[…] the sharing of or any other interaction with data in digital form, [which are] uploaded or created by the consumer or other users of that service” (Article 2 (2)). Examples of digital services are cloud storage, messenger services, online games, and social networks (Recital 19).

The definitions of digital content and digital services are intentionally broad, to cover future technical developments (Recitals 10, 19). In practice, it is not always possible to distinguish between digital content and digital services clearly. In most cases, however, this distinguishment is unnecessary, as both categories are primarily treated in the same way.

The Directive is not only applicable to contracts in which the consumer pays money to the trader, but also when the consumer provides personal data that is processed by the trader (Article 3 (1)). The only exception is if personal data are used exclusively by the trader for contractual performance (e.g., requesting an email address because the contract is performed via e-mail) or due to a legal obligation (e.g., originating from a tax law). In practice, “paying with data” is used specifically for contracts on social networks.

b. Personal Scope

Regarding the personal scope of the Directive, the contract must be concluded between a trader and consumer (B2C). Contracts between businesses (B2B) are not covered.

3. Obligation of the Trader to Supply Digital Content or Service to the Consumer

a. Extent of the obligation

The trader has an obligation to supply the digital content or service to the consumer by making it accessible or available to them (Article 5). However, transmission to the consumer is not required, so the trader’s obligation is fulfilled as soon as the consumer can use the digital content or service, without any further action required by the trader (Recital 41).

If no time of performance has been agreed on by the parties, the trader must provide the digital content or service without undue delay after the conclusion of the contract (Article 5 (1)).

b. Burden of Proof

The burden of proof regarding whether the digital content or service was supplied in time is on the trader.

c. Remedies

In case the trader fails to supply the digital content or service to the consumer in time, the consumer is entitled to terminate the contract, after having unsuccessfully requested the trader to provide the content or service (Article 13 (1)). In certain cases, the consumer’s request is not required, for example, if the trader refuses to provide the content or service (Article 13 (2)).

In the event of termination of the contract, the trader must reimburse the consumer for any payments already made (Articles 13 (3), 16 (1)).

4. Obligation of the Trader to Supply Digital Content or Service to the Consumer in Conformity with the Contract

Furthermore, the trader has an obligation to supply the digital content or service to the consumer, in conformity with the contract (Article 6).

a. Extent of the obligation

Conformity with the contract requires that the digital content or service meets subjective and objective requirements, is integrated correctly, and does not infringe on the rights of third parties (Article 6):

• Subject requirements for conformity result from an agreement between the trader and consumer (Article 7).
• Objective requirements are determined by the circumstances of the contract and the nature of the digital content or service involved. These factors are, in particular, (a) whether the digital content or service is fit for its usual purpose, or (b) whether it possesses the usual quality for content or services of its same type, and based on what the consumer can reasonably expect, given the nature of the content or service (Article 8 (1)). The usual quality includes requirements that result from public statements (e.g., advertising statements) of the trader and/or developer of the digital content or service.

The trader may deviate from the objective requirements by agreement with the consumer. However, strict requirements are placed on such an agreement. The trader must inform the consumer specifically as to the deviations from the objective requirements, at the time of the conclusion of the contract, and the consumer must expressly and separately accept these deviations (Article 8 (5)).

• A lack of conformity to the contract can also result from an incorrect integration of the digital content or service into the consumer’s digital environment by the trader, or by the consumer, due to shortcomings in the integration instructions provided by the trader (Article 9).
• Finally, conformity to the contract requires that the use of the digital content or service does not violate the rights of third parties, especially intellectual property rights (Article 10).

The relevant point in time when the content or service must conform to the contract is determined by the type of supply:

• Where a contract provides for a single act of supply, the content or service must comply with the contract at the time of supply (Article 11 (2)).
• In the case of a continuous supply over a specific period, the content or service must conform to the contract during the entire period that it is supplied to the consumer (Article 8 (4), 11 (3)).

b. Burden of Proof

In general, the burden of proof on whether the digital content or service was supplied in conformity to the contract is on the consumer (Recital 59). However, to protect the consumer, burden of proof is shifted to the trader in certain instances. Here too, a distinction is made according to the type of supply:

• Where a contract provides for a single act of supply, the burden of proof regarding whether the supplied digital content or service conforms to the contract at the time of supply is on the trader if it is within one year from the time when the digital content or service was supplied (Article 12 (2)).
• In the case of a continuous supply over a specific period, the burden of proof regarding whether the digital content or service conforms to the contract within the period of supply is on the trader (Article 12 (3)).

c. Remedies

If the digital content or service is not provided to the consumer in conformity with the contract, the consumer is entitled to have the digital content or service brought into conformity with the contract, to receive a reduction in the price, or to terminate the contract (Article 14 (1)):

• If the consumer demands to have the content or service brought into conformity, the trader must comply with this demand within a reasonable period, and at his own cost, unless bringing the content or service into conformity will be impossible or can only be carried out at disproportionate costs (Article 14 (2), (3)).

It is left to the discretion of the trader to decide how to bring the content or service into conformity; for example, by providing a new copy of the content or service to the consumer, or by issuing an update of it (Recital 63). However, often in practice, it is not simply the individual digital content or service being supplied to the consumer that lacks conformity, but the entire series (e.g., software version); therefore, providing a new copy to the consumer will be insufficient. In addition, updating the digital content or service will often be impossible or disproportionately costly for the trader if they are not the developer of the digital content or service. Therefore, the Directive leaves it up to the member states to introduce a direct claim from the consumer against the developer of the digital content or service (Recital 13).

• If certain conditions are complied with, for example, when it is impossible or refused by the trader to bring the contract into conformity, the consumer can demand a proportionate reduction of the price (Article 14 (4), (5)). However, when “paying with data,” such a reduction is excluded.
• Instead of demanding to reduce the price, the consumer may also terminate the contract. If the lack of conformity is only minor, termination of the contract is not possible (Article 14 (6)) unless the consumer “pays with data” (Recital 67).

Similar to the termination of the contract due to a failure to supply the digital content or service in time, the trader must reimburse the consumer for payments already made. However, in the case of continuous supply over a specific period, reimbursement will occur only for the time during which the digital content or service was not in conformity with the contract (Article 16 (1)).

After termination of the contract, the consumer may not continue to use the digital content or service or make it available to third parties (Article 17 (1)). In practice, this will not always be easy to control. If digital content was provided on a physical medium, the consumer is obligated to return it at the request and expense of the trader (Article 17 (2)). However, the trader may also actively prevent the consumer’s ability to use the digital content or service; for example, this can be done by disabling the user’s account or through technical measures (Article 16 (5)).

Inversely, if the consumer has created or supplied the trader with digital content (e.g., user-generated content), the trader must refrain from using that content after termination of the contract and must make it available to the consumer upon request (Article 16 (3), (4)). However, in most cases, the content created or provided by the consumer will be personal data; hence, the General Data Protection Regulation (GDPR) is applicable, and not the Directive on digital content and services (Recital 38).

5. Updates and Other Modifications of Digital Content and Service

a. Updates

The trader must provide updates that are necessary to maintain the conformity of the digital content or service with the contract (e.g., security updates) and inform the consumer thereof (Article 8 (2)). This applies not only to contracts on the continuous supply of digital content or services over a specific period, but also for a single act of supply.

The relevant duration for providing updates is determined by the type of supply:

• In the case of a continuous supply over a specific period, the obligation to update runs for the entire contract term (Article 8 (2) (a)).
• Where a contract provides for a single act of supply, the period depends on how long the consumer can reasonably expect updates to be provided (Article 8 (2) (a)). Factors to be considered here are the type and purpose of the digital content or service, the circumstances, and the nature of the contract.

The Directive does not establish an independent obligation on the trader to provide updates to the consumer, but instead treats updates as a subset of the obligation to supply the digital content or service to the consumer, in conformity with the contract. Therefore, if the trader fails to provide updates, the content or service will fall short of the objective requirements for conformity. As a result, the consumer can inter alia demand to have the content or service brought into conformity by the trader (Article 14 (2), (3)). However, updating the digital content or service will often be impossible or disproportionately expensive for the trader if they are not the developer of the digital content or service. In practice, if there is no direct claim against the developer of the content or service, the consumer has only the option of demanding a reduction of the price or terminating the contract with the trader.

b. Other Modifications

In the case of continuous supply over a specific period, the trader may have an interest in modifying the content or service, without the necessity to maintain conformity with the contract. This applies, for example, to a software’s range of features or the content available on an audio or video streaming platform. Such modifications require that: (a) the contract allows and provides for a valid reason regarding the modification, (b) the modification is made without additional cost to the consumer, and (c) the consumer is informed, in a clear and comprehensible manner, regarding the modification (Article 19 (1) (a)­–(c)). These requirements apply to all modifications, regardless of whether they are favorable or unfavorable to the consumer (see Recital 75). However, if the modification negatively impacts the consumer’s access to or use of the digital content or service, the consumer must be informed reasonably and in advance of the features and time of such modification (Article 19 (1) (d)­). In addition, the consumer must also be notified of their right to terminate the contract (Article 19 (2)) and the possibility of keeping the digital content or service without modification (Article 19 (4)).

6. Right of Redress

If the trader is liable to compensate a consumer because of a failure to supply the digital content or service, or a lack of contract conformity of the digital content or service, and such issue was caused by a person in the supply chain (e.g., the developer), the trader is entitled to remedies against that person (Article 20).

7. Aspects Not Covered by the Directive

The Directive does not cover aspects of general contract law, such as the formation or validity of a contract on the supply of digital content or digital service (Article 3 (10). Furthermore, no classification is made as to the legal nature of contracts for digital content or service for example, these could be in the form of sales, rentals, or sui generis contracts (Recital 12). Furthermore, the Directive does not contain any provisions regarding the consumer’s right to damages in the case of failure to supply digital content or services and in the event of lack of conformity to the contract (Article 3 (10)). Finally, the question of what occurs if the consumer exercises their rights, as set forth in the GDPR (i.e., to withdraw consent to the processing of personal data) is not addressed (Recital 40). This becomes particularly relevant when the consumer “pays with data.”

The issues that are not covered by the Directive can be regulated by the member states, at their own discretion.

8. Conclusion

The Directive establishes specific regulations for consumer contracts regarding digital content and services. These apply not only to contracts where the consumer pays a price, but also when they provide personal data to the trader.

The Directive leaves not only certain aspect to be regulated by the Member States, but also specific aspects to be clarified by the courts, such as the question regarding the duration of the trader’s obligation to update, for contracts of a single act of supply.

It is also uncertain whether, in practice, consumers will be able to enforce the rights that they are entitled to, particularly regarding claims against the trader to have brought the content or service into conformity if the trader is not the developer of the digital content or service.

Therefore, it remains to be seen whether the new regulations will achieve the goal of the Directive: to ensure a high level of consumer protection and legal certainty in cross-border transactions involving digital content and services.

European Commission Fines Qualcomm EUR 242 Mio. for Predatory Pricing

By Maria E. Sturm

On July 18, 2019, the EU Commission, the European antitrust supervisory body, fined Qualcomm Inc. for using predatory prices between 2009 and 2011. The EU Commission argued as follows:

1. It explained that Qualcomm had a dominant position in the world market. This dominance is based on:
2. Its market share of 60% and
3. The high entry barriers: competitors are confronted with significant initial investments for research and development in this sector, as well as with obstacles regarding intellectual property rights.
4. While it is not illegal to hold a dominant position, the EU Commission accuses Qualcomm of abusing such a position by using predatory prices for UMTS-chip sets. To prove this, the EU Commission used a price-cost test for the chipsets in question. In addition, it claimed to have qualitative evidence for anti-competitive behavior. Qualcomm used this problematic pricing policy when its strongest competitor, Icera, tried to expand on the market in an effort to hinder Icera from building up its market presence.
5. Finally, the EU Commission argues that Qualcomm’s behavior could not be justified by potential efficiency gains.

 

History

This Commission decision is the latest, but presumably not the final point of a long case history. Already in 2015, the Commission has initiated a formal investigation and issued Statements of Objections against Qualcomm. In 2017, the Commission requested further information from Qualcomm. As Qualcomm did not respond to this request, the Commission made a formal decision which Qualcomm claimed to be void. Qualcomm filed for annulment of the decision and an application for interim measures. The latter was dismissed on July 12, 2017.  Art. 278 TFEU establishes the principle that EU actions do not have a suspensory effect, because acts of EU institutions are presumed to be lawful. Thus, an order of suspension or interim measures is only issued in exceptional circumstances where it is necessary to avoid serious and irreparable harm to the applicant’s interests in relation to the competing interests. The cumulative requirements are:

1. The applicant must state the subject matter of the proceedings.
2. The circumstances must give rise to urgency.
3. The pleas of fact and law must establish a prima facie case for the interim measures.

Qualcomm mainly brought forward two arguments for the urgency of the matter:

1. The amount of work and cost for answering the questions would be too burdensome. In response, the Court stated that the damage would be only of a pecuniary nature. Such damage normally is not irreparable, because it can be restored afterwards. Qualcomm did not argue that its financial viability would be jeopardized before the final judgment would be issued, that its market share would be affected substantially, or that it was impossible to seek compensation.
2. The enormous amount of work for the employees of the financial department would make it impossible for them to perform their regular tasks. However, Qualcomm mentioned itself that the burden would weigh particularly heavily on a limited number of employees in the financial department only. The Court held that if only some employees of only one department would be affected, the argument is not strong enough to justify urgency.

 

Latest decision

The latest decision in this case was issued on April 9, 2019, about Qualcomm’s claim for annulment. Qualcomm brought forward six pleas against the EU Commission, but all of them were dismissed:

 

1. Infringement of the obligation to state reasons.

According to relevant case law, statements of reasons must be appropriate to the measure at issue and must disclose the reasons clearly and unequivocally. The Commission must show that the request is justified. The undertakings concerned must be able to assess the scope of their duty to cooperate and their right to defense must be safeguarded. However, the EU Commission is not obliged to communicate all information at its disposal, as long as it clearly indicates the suspicions. Since the Commission clearly indicated the products and the customers involved, as well as the suspicions of infringement, it fulfilled its obligation to state reasons.

 

2. Infringement of the principle of necessity.

There must be a correlation between the request for information and the presumed infringement and the Commission must presume reasonably that the information will help determine whether the alleged infringement has taken place. Qualcomm accused the Commission of having expanded the scope of the investigation and contended that the required information was not necessary. Concerning the first point, Qualcomm mainly referred to the Statement of Objections and said the Commission must terminate its preliminary investigations before issuing such a document. However, according to the Court, the Statement of Objections is only procedural and preliminary, the Commission is thus free to continue with fact-finding afterwards. Concerning the second point, the Court grants the Commission broad powers of investigation, including the assessment of whether information is necessary or not. In particular, the Commission needed the information required from Qualcomm to avoid factual errors in calculating the price-cost test. The Commission had to request the information to keep up with its obligation to examine carefully and impartially.

 

3. Infringement of the principle of proportionality.

Qualcomm argued that the information requested was disproportionate, because it was not legally obliged to keep documents for longer than three and a half years and that they did not organize their documents systematically. Here, the Court said that at least from the moment when Qualcomm learned about the Commission’s investigation, it should have been more careful and should have kept documents. Moreover, undertakings who keep their documents in an organized and systematic order cannot be penalized for that. Therefore, the unsystematic organization falls under Qualcomm’s responsibility. Furthermore, a significant workload is not per se disproportionate. One must consider it in relation to the investigated infringement. An alleged predatory pricing requires complex analyses of a large amount of data and is not disproportionate because of its nature.

 

4. Reversal of the burden of proof.

This plea is, according to the Court, based on a misreading. Qualcomm was asked to neither audit financial accounts nor prove that they have conducted their business in accordance with the law.  Rather, it was only asked to issue information for the Commission to conduct the price-cost test and internal documents pertaining to the relevant period.

 

5. Infringement of the right to avoid self-incrimination.

Qualcomm claims that the Commission’s requests were beyond the scope of simply providing information. According to Regulation No 1/2003, undertakings cannot be forced to admit that they have committed an infringement, but they are obliged to answer factual questions and to provide documents, even if this information may be used to establish against them. Therefore, they do not have an absolute right of silence. On the contrary, in order to ensure the effectiveness of Regulation No 1/2003, the Commission is entitled to request all necessary information concerning relevant facts to prove the existence of anticompetitive conduct.

 

6. Infringement of the principle of good administration.

Qualcomm claimed the required information was excessive and that the Commission abused its investigative power by prolonging a flawed investigation. According to the relevant case law, the principle of good administration requires EU institutions to observe the good guarantees afforded by the legal order. Those guarantees include the duty to examine carefully and impartially all the relevant aspects of the individual case. Here, the Court held that the Commission requested the information in question precisely to comply with its duty to examine carefully and impartially the arguments put forward by Qualcomm regarding the Statement of Objections.

On June 18, 2019, Qualcomm lodged an appeal for the annulment of the General Court’s judgment. The case is to be continued.

Selective Distribution and Online Marketplace Restrictions: the EU Coty Prestige case

By Giuseppe Colangelo

The online sales phenomenon – and all the issues deriving from vertical restraints – has attracted significant attention in recent years in several EU Member States. This attention arises mainly from a question regarding the extent to which restrictions limiting the ability of retailers to sell via online marketplaces are compatible with competition rules.

The findings of the recent E-commerce Sector Inquiry [COM (2017) 229 final] indicate that absolute marketplace bans should not be considered to be hardcore restrictions within the meaning of Article 4(b) and Article 4(c) of the Vertical Block Exemption Regulation (330/2010). However, as recalled by the Commission, this approach has been affirmed pending the CJEU’s decision in the Coty Prestige case.^[1] Indeed, the Higher Regional Court of Frankfurt am Main essentially asked the EU Court of Justice (CJEU) whether a ban on using third party platforms in a selective distribution agreement is compatible with Article 101(1) TFEU and whether such a restriction constitutes a restriction of competition by object.

No wonder Coty was so anticipated. The judgment is expected to shape the future of EU e-commerce affecting online markets, the luxury industry and Internet platforms.

The request for a preliminary ruling has been submitted in the context of a dispute between a supplier of luxury cosmetics (Coty Germany) and its authorized distributor (Parfümerie Akzente), concerning the prohibition, under the selective distribution agreement, of the use of third-party undertakings for Internet sales. In particular, Parfümerie Akzente distributes Coty goods both at its brick-and-mortar locations and over the Internet. In the latter case, sales are carried out partly through its own online store and partly via the Amazon platform.

According to Coty, the selective distribution system is required in order to support the luxury image of its brands. In this respect, the selective distribution agreement, as it pertains to Internet sales, provides that the authorized retailer is not permitted to use a different name or to engage a third-party undertaking which has not been authorized. The dispute at issue arose when Parfümerie Akzente refused to sign amendments regarding Internet sales activity. They prohibited the use of a different business name and the recognizable engagement of a third-party undertaking which is not an authorized retailer of Coty Prestige. Thus, according to these amendments, the authorized retailer is prohibited from collaborating with third parties if such collaboration is directed at the operation of the website and is affected in a manner that is discernible to the public.

In response to the action brought by Coty to prohibit Parfümerie Akzente from distributing products via Amazon, the German court of first instance found that, in accordance with Pierre Fabre ruling (C-439/09), the objective of maintaining a prestigious image of the mark could not justify the introduction of a selective distribution system which restricts competition. Further, according to the national court, the contractual clause at issue constituted a hardcore restriction under Article 4(c) of the Regulation. It did not meet the conditions for an individual exemption, since it has not been shown that the general exclusion of Internet sales via third-party platforms entails efficiency gains that offset the disadvantages for competition that result from the clause. Moreover, the court considered such a general prohibition unnecessary, since there were other equally appropriate but less restrictive means, such as the application of specific quality criteria for the third-party platforms.

In these circumstances, the Oberlandesgericht Frankfurt am Main requests a preliminary ruling asking: (i) whether selective distribution networks aimed at preserving the image of luxury goods are caught by the prohibition laid down in Article 101(1) TFEU; (ii) whether, in the same context, Article 101(1) precludes a contractual clause which prohibits authorized distributors from using, in a discernible manner, third-party platforms for Internet sales, without consideration of whether there is any actual breach of the legitimate requirements of the manufacturer in terms of quality; (iii and iv) whether Article 4(b) and (c) of the Regulation must be interpreted as meaning that such a third-party platform ban constitutes a restriction by object of the retailer’s customer group or of passive sales to end users.

The questions reflect the diverging interpretations of Pierre Fabre by the national competition authorities and courts. Thus, the case provides the CJEU with the opportunity to clarify the meaning of Pierre Fabre.

 

Sidestepping Pierre Fabre

By answering the first question, the CJEU recalls that since Metro (C-26/76 and C-75/84), the Court has recognized the legality of selective distribution networks based on qualitative criteria. Notably, according to the conditions set by the case law to ensure the compatibility of a selective distribution network with Article 101(1) TFEU, resellers must be chosen on the basis of objective criteria of a qualitative nature, which are determined uniformly for all potential resellers and applied in a non-discriminatory manner; the characteristics of the product necessitate such a selective distribution network in order to preserve its quality and ensure its proper use; the criteria defined must not go beyond what is necessary.

In the context of luxury goods, it follows from the case law that, due to their characteristics and their nature, those goods may require the implementation of a selective distribution system in order to preserve their quality and to ensure that they are used properly. Indeed, as highlighted by the Copad judgment (C-59/08), the quality of luxury goods is not just the result of their material characteristics, but also of their allure and prestige. As prestige goods are high-end goods, the aura of luxury they emanate is essential in that it enables consumers to distinguish them from similar goods and, therefore, an impairment to that aura is likely to affect the actual quality of those goods. For these reasons, the characteristics and conditions of a selective distribution system may  preserve the quality and ensure the proper use of luxury goods. The CJEU in Copad held that the establishment of a selective distribution system which seeks to ensure that the goods are displayed in sales outlets in a manner that enhances their value contributes to the reputation of the goods, and therefore contributes to sustaining the aura of luxury surrounding them.

Therefore, once the Metro criteria are met, a selective distribution system designed primarily to preserve the luxury image of those goods is compatible with Article 101(1) TFEU. This outcome is not challenged by Pierre Fabre. The assertion contained in paragraph 46 of that case (“The aim of maintaining a prestigious image is not a legitimate aim for restricting competition and cannot therefore justify a finding that a contractual clause pursuing such an aim does not fall within Article 101(1) TFEU”) is confined to the context of that judgment and consequently does not alter the settled case law. Notably, that assertion is related solely to the goods at issue (“the goods covered by the selective distribution system at issue in that case were not luxury goods, but cosmetic and body hygiene goods”) and to the contractual clause in question in Pierre Fabre (a general and absolute ban on Internet sales). Therefore, the selective distribution system in its entirety was not at issue.

The same line of reasoning guides the CJEU’s answer to the second question, which is related to the lawfulness of a specific clause prohibiting authorized retailers from using, in a discernible manner, third-party platforms for Internet sales of luxury products.

The contractual clause must be evaluated in light of the Metro criteria. The CJEU recalls that it indisputable that the clause at issue: i) pursues the objective of preserving the image of luxury and prestige of the contractual goods; ii) is objective and uniform; iii) is applied without discrimination to all authorized retailers. Therefore, the lawfulness of the third-party platforms prohibition is a matter of proportionality. Hence, an assessment is required as to whether such a prohibition is appropriate for preserving the luxury image of the contractual goods and whether it goes beyond what is necessary to achieve that objective.

As regards the appropriateness of the prohibition at issue, the CJEU considers the contractual clause justified by the need to preserve the luxury image of the products in light of three arguments. Indeed, the third-party platforms ban is coherent with the aim of: i) guaranteeing that the contract goods will be exclusively associated with authorized distributors; ii) monitoring the qualitative criteria according to which the products are sold (the absence of a contractual relationship between the supplier and third-party platforms prevents the former from being able to require compliance with the quality conditions imposed on the authorized retailers); iii) contributing to the high-end image among consumers (those platforms constitute a sales channel for goods of all kinds, while the chief value of a luxury good lies in the fact that it is not too common).

With regard to the question of whether the prohibition goes beyond what is necessary to achieve the objective pursued, the clause at issue is clearly distinguished from the one sanctioned in Pierre Fabre, since it does not contain an absolute prohibition on online sales. Indeed, authorized retailers are allowed to distribute the contract goods online via their own websites and third-party platforms, when the use of such platforms is not discernible to consumers.

The CJEU also relies on this argument to answer the third and fourth questions raised by the referring court. Even if the clause at issue restricts a specific kind of Internet sale, it does not amount to a restriction within the meaning of Article 4(b) and (c) of the Regulation, since it does not preclude all online sales, but only one of a number of ways of reaching customers via the Internet. Indeed, the contractual clause even allows, under certain conditions, authorized retailers to advertise on third-party platforms and to use online search engines. Moreover, it is not possible ex ante to identify a customer group or a particular market to which users of third-party platforms would correspond. Therefore, the content of the clause does not have the effect of partitioning territories or of limiting access to certain customers.

In summary, in line with the position expressed by the Commission in the Sector Inquiry, the CJEU states that absolute marketplace bans should not be considered as hardcore restrictions since, contrary to the restriction at stake in Pierre Fabre, they do not amount to prohibition on selling online and do not restrict the effective use of the Internet as a sales channel.

 

Some open issues

Despite the clarity of the CJEU’s findings, there is a matter of interpretation related to the potential limitation of the judgment solely to genuine luxury products. Indeed, the CJEU also distinguishes Coty from Pierre Fabre on the grounds that the latter did not concern a luxury product: “the goods covered by the selective distribution system at issue in [Pierre Fabre] were not luxury goods, but cosmetic and body hygiene goods. … The assertion in paragraph 46 of that judgment related, therefore, solely to the goods at issue in the case that gave rise to that judgment and to the contractual clause in question in that case”.

In that respect, the wording of the CJEU is unfortunate. First, the proposed exclusion of cosmetic and body hygiene products from the luxury landscape is far from convincing. Further, the uncertainty about the scope of the ruling may generate litigation over the prestige of some goods, since national enforcers may adopt different approach and manufacturers would seek protection against online marketplace sales for products whose luxury features are questionable. Indeed, the CJEU does not define the notion of luxury, but relies on Copad, stating that the quality of such goods is not just the result of their material characteristics, but also of the allure and prestigious image which bestow on them an aura of luxury. That aura is essential in that it enables consumers to distinguish them from similar goods.

A few days after the Coty judgement, the German Federal Court of Justice, in evaluating ASICS’s online restrictions, stated that sports and running shoes are not luxury goods.^[2] Previously, on 4 October 2017 the District Court of Amsterdam, referring to the Opinion of Advocate General Wahl in Coty, reached a different conclusion about Nike shoes and ruled in favor of Nike in an action against a distributor (Action Sport), which had not complied with the selective distribution policy.^[3]

A narrow interpretation of the Coty judgement would be at odds with the settled case law, which holds that it is the specific characteristics or properties of the products concerned that may be capable of rendering a selective distribution system compatible with Article 101(1) TFEU. As pointed out by the Advocate General, the CJEU has already made clear that irrespective even of whether the products concerned are luxury products, a selective distribution system may be necessary in order to preserve the quality of the product. In the same vein, according to the Commission’s Guidelines, qualitative and quantitative selective distribution is exempted regardless of both the nature of the product concerned and the nature of the selection criteria as long as the characteristics of the product necessitate selective distribution or require the applied criteria. It is the properties of the products concerned, whether they lie in the physical characteristics of the products (such as high-quality products or technologically advanced products) or in their luxury or prestige image, that must be preserved.

However, the mentioned ambiguity does not seem to have a significant impact in practice. Indeed, whether or not an online marketplace ban should be considered as hardcore restrictions within the meaning of Article 4(b) and (c) of the Regulation does not depend on the nature of products. Since, according to the CJEU’s finding, absolute marketplace bans are not hardcore restrictions, a case-by-case analysis of effects will be required for both luxury and non-luxury goods.

[1] Coty Germany GmbH v. Parfümerie Akzente GmbH (C-230/16).

[2] Case KVZ 41/17.

[3] Case C/13/615474 / HA ZA 16-959.

The Ruling of the EU Court of Justice in Intel

By Giuseppe Colangelo

Almost ten years have passed since the Commission began its proceeding against Intel. However, the lawfulness of Intel’s practices remains inconclusive. In its recent judgment (Case C-413/14 P), the Grand Chamber of the Court of Justice of the European Union (CJEU) set aside a previous ruling in which the General Court affirmed the decision of the Commission to prohibit Intel’s practices, and referred the case back to the General Court.

The judgment turns on efficiency-enhancing justifications. The Grand Chamber of the CJEU, just as in Post Danmark I (Case C-209/10), reiterates that antitrust enforcement cannot disregard procompetitive effects even in the case of unilateral conduct, such as loyalty rebates. Although Article 102 does not reproduce the prohibition-exemption structure of Article 101, for the sake of consistency there must be room to allow unilateral practices as well. Therefore, like agreements restrictive by object, unilateral conduct which is presumed to be unlawful, as loyalty rebates are, can also be justified and rehabilitated because of the efficiency and consumer welfare benefits it can produce. The General Court’s formalistic approach towards Intel’s rebates demonstrated the need for the CJEU to clarify the role that assessing procompetitive effects must play in the analysis of dominant firms’ practices.

To this end, the CJEU suggests ‘clarifying’ the interpretation of Hoffman-La Roche (Case 85/76), one of the totems of EU antitrust orthodoxy. Unfortunately, it accomplishes exactly the opposite. Intel clearly supports the economic approach by denying a formalist, or per se, shortcut to the authorities. The abusive character of a behavior cannot be established simply on the basis of its form.

In Hoffman-La Roche, the CJEU pronounced that it considered any form of exclusive dealing anathema. To make the link to the exclusive dealing scenarios depicted in Hoffman-La Roche apparent, the General Court introduced a class of ‘exclusivity rebates’ in its ruling on Intel’s pricing practices. This is a new category of discounts different from the previously defined classes of quantity and fidelity rebates.

However, in its judgment the CJEU offers a different interpretation of the law on fidelity rebates. For those cases where dominant firms offer substantive procompetitive justifications for their fidelity rebates, the CJEU requires the Commission to proffer evidence showing the foreclosure effects of the allegedly abusive practice, and to analyze: (i) the extent of the undertaking’s dominant position on the relevant market; (ii) the share of the market covered by the challenged practice as well as the conditions and arrangements for granting the rebates in question, their duration and their amount; (iii) the possible existence of a strategy aimed at excluding from the market competitors that are at least as efficient as the dominant undertaking. As expressly acknowledged by the CJEU, it is this third prong – that is, the assessment of the practice’s capacity to foreclose – which is pivotal, because it “is also relevant in assessing whether a system of rebates which, in principle, falls within the scope of the prohibition laid down in Article 102 TFEU, may be objectively justified.”

The Intel ruling is also a significant step towards greater legal certainty. In addition to being able to effectively assert efficient justifications to overturn the presumption of anti-competitiveness, firms also know that for the CJEU the ‘as efficient competitor test’ (AEC test) represents a reliable proxy (although not the single or decisive criterion) of analysis that cannot be ignored, especially when used by the Commission in its evaluations.

The application of the effect-based approach to all unilateral conduct of dominant firms brings the European experience closer to the rule of reason analysis carried out under Section 2 of the Sherman Act. As indeed is explained by the Court of Appeals in Microsoft [253 F.3d 34 (D.C. Circuit 2001)], when it comes to monopolistic conduct, where the task of plaintiffs complaining about the violation of antitrust law is to show the exclusionary effects of the conduct at stake and how this has negatively affected consumer welfare, the task of the dominant firm is to highlight the objective justifications of its behavior.

U.S. Appeals Court for the Ninth Circuit Finds Per Se Treatment Inapplicable to Tying Arrangement in the Premium Cable Services Market

By Valerio Cosimo Romano

On 19 September 2017, the U.S. Court of Appeals for the Tenth Circuit (“Appeals Court”) affirmed with a split decision the tossing by the U.S. District Court For the Western District of Oklahoma of a jury verdict in a suit alleging that a telecommunications company had illegally tied the rental of set-top boxes to its premium interactive cable services.

 

Parties and procedural history of the case

Cox Communications, Inc. (“Defendant”) operates as a broadband communications and entertainment company for residences and businesses in the United States. Its subscribers cannot access premium cable services unless they also rent a set-top box from Cox. A class of subscribers in Oklahoma City (“Plaintiffs”) sued Defendant under antitrust law, alleging that Defendant had illegally tied cable services to set-top-box rentals in violation of § 1 of the Sherman Act, which prohibits illegal restraints of trade.

The jury found that Plaintiffs had proven the necessary elements to establish a tying arrangement. However, the District Court disagreed, and determined that Plaintiffs had offered insufficient evidence for a jury to find that Cox’s tying arrangement had foreclosed a substantial volume of commerce in Oklahoma City to other sellers or potential sellers of set-top boxes in the market for set- top boxes. The District Court also concluded that Plaintiffs had failed to show anticompetitive injury.

 

Tying theory

A tie exists when a seller exploits its control in one product market to force buyers in a second market into purchasing a tied product that the buyer either didn’t want or wanted to purchase elsewhere. Usually, courts apply a per se rule to tying claims, under which plaintiffs can prevail just by proving that a tie exists. In this case, there is no need for further market analysis.

The Supreme Court determined that tying two products together disrupted the natural functioning of the markets and violated antitrust law per se. However, the Supreme Court has declared that the per se rule for tying arrangements demands a showing that the tie creates a substantial potential for impact on competition.

On the basis of Supreme Court’s precedents, lower courts have defined the elements needed to prove per se tying claims. In particular, in the Tenth Circuit, a plaintiff must show that (1) two separate products are involved; (2) the sale or agreement to sell one product is conditioned on the purchase of the other; (3) the seller has sufficient economic power in the tying product market to enable it to restrain trade in the tied product market; and (4) a ‘not insubstantial’ amount of interstate commerce in the tied product is affected. If a plaintiff fails to prove an element, the court will not apply the per se rule to the tie, but then may choose to analyze the merits of the claim under the rule of reason.

 

Legal precedents

According to the Appeals Court, legal precedents (Eastman Kodak, Microsoft) show that in some industries a per se treatment might be inappropriate.

In this regard, the Court cited a recent case from Second Circuit (Kaufman), concerning the same kind of tie by a different cable company. In Kaufman, the court thoroughly explained the reasons why the tying arrangement at issue didn’t trigger the application of the per se rule.

To start, the court explained that cable providers sell their subscribers the right to view certain contents. The contents’ producers, however, require the cable companies to prevent viewers from stealing their content. This problem is solved by set-top boxes, which enable cable providers to code their signals. However, providers do not share their codes with cable box manufacturers. Therefore, to be useful to a consumer, a cable box must be cable-provider specific.

After explaining the function of set-top boxes, the Second Circuit turned to the regulatory environment and the history of the cable industry’s use of set-top boxes. The court described the Federal Communication Commission’s (“FCC”) attempts to disaggregate set-top boxes from the delivery of premium cable, and stated that the FCC’s failure is at least partly attributable to shortcomings in the new technologies designed to make premium cable available without set-top boxes. The court also pointed out that one FCC regulation actually caps the price that cable providers can charge customers who rent set-top boxes. Under the regulation, cable companies must calculate the cost of making such set-top boxes functional and available for consumers, and must charge customers according to those costs, including only a reasonable profit in their leasing rates.

On this basis, the Second Circuit concluded that the plaintiffs’ factual allegations because they didn’t trigger the application of the per se tying rule.

 

Analysis

In our case, the discussion relates to the fourth element (affection of a ‘not insubstantial’ amount of interstate commerce in the tied product). Plaintiffs claim that this element only requires consideration of the gross volume of commerce affected by the tie, and that they met this requirement presenting undisputed evidence that Cox obtained over $200 million in revenues from renting set-top boxes during the class period. On the other side, Defendant maintains that this element requires a showing that the tie actually foreclosed some amount of commerce, or some current or potential competitor, in the market for set-top boxes.

According to the Appeals Court, recent developments in tying law validate the district court’s order and support Cox’s interpretation of tying law’s foreclosure element. Based on the Supreme Court’s tying cases and other precedents, the Appeals Court therefore concluded that Plaintiffs had failed to show that the tie has a substantial potential to foreclose competition.

The Appeals Court’s reasoning is based on four points. First, Cox does not manufacture the set-top boxes that it rents to customers. Rather, it acts as an intermediary between the set-top-box manufacturers and the consumers that use them. This means that what it does with the boxes has little or no effect on competition between set-top-box manufacturers in the set-top-box market, as they must continue to innovate and compete with each other to maintain their status as the preferred manufacturer for as many cable companies as possible. Second, because set-top-box manufacturers choose not to sell set-top boxes at retail or directly to consumers, no rival in the tied market could be foreclosed by Cox’s tie, and therefore the alleged tie does not fall within the realm of contracts in restraint of trade or commerce proscribed by § 1 of the Sherman Act. Third, all cable companies rent set-top boxes to consumers. This suggests that tying set-top-box rentals to premium cable is simply more efficient than offering them separately. Fourth, the regulatory environment of the cable industry precludes the possibility that Cox could harm competition with its tie, as the regulatory price control on the tied product makes the plaintiffs’ tying claim implausible as a whole.

The Appeals Court also argued that it does not have to apply the rule of reason unless Plaintiffs also argued that the tie was unlawful under a rule of reason analysis. However, as Plaintiffs had expressly argued that tying arrangements must be analyzed under the per se rule, the court did not address whether Defendant’s tie would be illegal under a rule of reason analysis.

 

Final outcome

The Appeals Court therefore agreed with the District Court that Plaintiffs had failed to show that Defendant’s tying arrangement foreclosed a substantial volume of commerce in the tied-product market, and therefore the tie did not merit per se condemnation. Thus, the Appeals Court affirmed the district court’s order.

European Commission publishes a preliminary report on the e-commerce sector inquiry

By Nikolaos Theodorakis

On 6 May 2015, the European Commission launched a sector inquiry into e-commerce within the context of the Digital Single Market strategy, and in connection with Article 17 of Regulation 1/2003. In March 2016, the Commission published its initial findings on geo-blocking, which refers to business practices whereby retailers and service providers prevent the smooth access of consumers to the digital single market. In doing so, geo-blocking usually has three dimensions: (i) it prevents a consumer from accessing a website because of his IP address; (ii) it allows the consumer to add an item to his online shopping basket, but it cannot be shipped to his location and (iii) it redirects the consumer to another local website to complete his order.

As part of the sector inquiry, the Commission requested information from various actors in e-commerce throughout the EU, both related to online sales of consumer goods (e.g. electronics and clothing) as well as the online distribution of digital content. For that purpose, the Commission gathered evidence from nearly 1,800 companies operating in e-commerce and analyzed around 8,000 distribution contracts. The inquiry wished to look into the main market trends and gather evidence on potential barriers to competition linked to the growth of e-commerce.

E-commerce has been growing rapidly over the past years, and the EU is the largest e-commerce market in the world. As a result, any barrier in online trade may have severe consequences and distort healthy competition. In September 2016, the Commission published a preliminary report with certain findings. It identified issues arising from distribution agreements, which pertain to trade in goods, and licensing agreements, which pertain to trade in services.

 

Issues arising from distribution agreements

Distribution agreements may create geo-blocking restrictions, both from the manufacturers’ and the retailers’ side.

Manufacturers have adjusted to the increasing popularity of e-commerce by adopting a number of business practices that help them control the distribution of their products and the positioning in the market. These practices are not by default illegitimate, however under specific conditions, they can be.

For instance, manufacturers use selective distribution systems in which products can only be sold by pre-selected authorized sellers online. They also use contractual sales restrictions that may make cross-border shopping or online shopping more difficult and ultimately harm consumers since they prevent them from benefiting from greater choice of products and lower prices. The reasoning behind selective distribution systems is to control the quality of the product and safeguard brand consistency. This, nonetheless could classify as a vertical restraint and could be considered discordant with the principles of EU competition law.

Retailers use geo-blocking to restrict cross-border sales. Several retailers collect data on the location of their customers with a view to applying geo-blocking measures. This most commonly takes the form of refusal to deliver and refusal to accept payment from cards issued in other countries.

 

Issues arising from licensing agreements

With respect to digital content, the availability of licenses from the holders of copyrights in content is essential for digital content providers and a key determinant of competition in the market. The Preliminary Report finds that copyright licensing agreements can be complex and exclusive. The agreements provide for the territories, technologies and digital content that providers can use. As such, the Commission is expected to assess on a case-by-case basis whether certain licensing practices are unaccounted for and restrict competition.

In fact, one of the key determinants of competition in digital content markets is the scope of licensing agreements that determine online transmission. These agreements, between sellers of rights, use complicated definitions to define the reach of the service, creating differences in technological, temporal and territorial level. These contractual restrictions are practically the norm, whereas access to exclusive content increases the attractiveness of the offer of digital content providers.

A striking 70% of digital content providers restrict access to their digital content for users from other EU Member States. Further, the 60% of digital content providers are contractually required by rightsholders to geo-block. This practice is more prevalent in agreements for films, sports and TV series. Licensing agreements enable rightsholders to monitor that content providers comply with territorial restrictions, otherwise they ask for compensation. These agreements usually have a very long duration and they may make it more difficult for new online business services to emerge and try to win a stake in the market.

Additional questions arise when online rights are sold exclusively on a per Member State basis, or bundled with rights in other transmission technologies and then are not used. This might signal a semi perfect price discrimination policy depending on how much money each Member State is willing to pay, and a consequent further balkanization of the digital single market.

 

Next Steps

After publishing the preliminary report, the Commission is soliciting views and comments of interested stakeholders until 18 November 2016. The final report of the sector inquiry is expected in the first quarter of 2017. As a follow-up to the sector inquiry, the Commission may further explore if certain practices are compatibility with the EU competition rules and launch investigations against specific distributors and/or resellers on matters of both goods and digital content.

Finally, the results of the sector inquiry provide useful information for the debate on Commission initiatives relating to copyright and the proposed geo-blocking regulation.