Focus on Czech Republic, Slovenia and Bulgaria: Competition and antitrust in the digital age

10 May 2017 | newsletters

In this Legal Insights, our Bulgarian, Czech and Slovenian offices look at competition and antitrust in the digital age, emphasising that competition authorities need to adapt to meet the challenges of the rapidly changing digital market.

What impact has the rapidly changing digital market had on competition in your jurisdiction, and how have legislators and competition authorities responded?

CZ: While the advance of the digital economy and the growth of e-commerce necessarily affects competition in the Czech Republic, the Office for the Protection of Competition has not yet developed a special strategy or coherent decision-making practice with respect to the specific issues relating to digital markets. That said, the office has issued several decisions regarding competition in online markets – in particular, regarding mergers between e-shop operators and e-shop resale price maintenance arrangements.


SL: The rapidly changing digital market has certainly had a significant impact on online and traditional sales channels in Slovenia; however, studies show that the number of online purchases is still below the EU average. This number decreases in relation to individuals engaged in cross-border online shopping. On the other hand, the number of online stores per capita is high, at approximately 1,500 online retailers.[1]
The most common barriers which limit or prevent enterprises from partaking in online sales are connected with:

  • products being unsuitable for online sale;
  • problems regarding logistics; and
  • problems associated with the cost of introducing web sales.[2]

Taking into account that online services have not yet reached their peak, the Slovenian legislature and competition authorities have not yet faced major competition concerns in this regard. As such, their views on the topic are eagerly awaited.

BG: Online and digital services are well represented in Bulgaria and there is developed competition among different online retailers and online and mobile platforms.

However, no changes to the Competition Protection Act have been implemented or proposed as a result of the growth of the digital market, and no separate rules about online services have been issued or proposed by the Commission for Protection of Competition. The only text in the act that concerns online services is in the section about unfair competition. It provides that use of a domain or the design of a website that is identical or similar to other domains or websites and which misleads or may mislead competitors is prohibited.

Nonetheless, the development of digital services has led to changes in the Consumer Protection Act, meaning that there are specific rules regarding online sales and services. For instance, if a customer buys goods or services online, the customer has the right to cancel and return the order within 14 days, for any reason and with no justification. No similar right of return or cancellation exists for in-store purchases.

Online sales and purchases are regulated by the Electronic Commerce Act.

Some other laws also contain provisions regarding online services (eg, provisions about electronic money and electronic payment).

In terms of market definition, are online services considered to be in the same market as traditional services in your jurisdiction? What impact has this had on competition?

CZ: The office considered this question in a recent merger case concerning the consumer goods retail market.

Before the office cleared the merger between two merging competitors which operated major e-shops and were involved in the online sale of consumer goods (electronic goods, perfumes, beauty and health products, clothes), it defined the relevant market as the online retail market for consumer goods. Accordingly, the relevant product market did not include consumer goods sold in brick-and-mortar stores.

In support of not including online and brick-and-mortar retail in a single retail market, the office cited:

  • feedback from consumer goods e-shop operators, which considered other online stores – rather than brick-and-mortar stores – as competition;
  • the fact that brick-and-mortar stores cannot contend with all of the reasons why consumers prefer online stores;
  • practical restrictions on the scope of goods sold in brick-and-mortar stores compared to online stores;
  • the fact that major online stores are operated by different entities than major brick-and-mortar stores; and
  • the geographical limitations of brick-and-mortar stores.

The decision is relatively new and its influence cannot yet be evaluated.

SL: Over the past four years, the Competition Protection Agency (AVK) has not taken an official stance as to whether online services are part of the same market as traditional services.

For example, in its 2016 merger control clearance decision concerning Zara Holding BV and Slovenian companies Pina, Maduro, Quick Adria, Beba and Zafir, in which the notifying party specifically mentioned online purchases as part of the market for retail trade of clothes and shoes, the AVK provided no opinion on the topic and left the final definition of 'product market' open.

Based on the above it seems that the AVK has not had to answer the question of whether online services should be considered as part of the same market as traditional services.

BG: The Commission for Protection of Competition has assessed the market of different online services on a few occasions only. There is no single decision regarding all online services that states whether online services form one separate market or whether they are part of other traditional product markets.

Thus, in Decision 822 (October 15 2015) the commission assessed whether online and in-store sales form one or a number of different product markets.

The commission stated that the market cannot be divided into different channels for sales – specifically online and offline sales – since the products' prices are similar and customers often learn about a product online but purchase it in-store or vice versa. The commission outlined that for customers price is the key factor, not the channel for sale (online or offline). Thus, the commission found that the online and offline (ie, in-store) purchases form part of one product market (ie, the retail of non-food products).

In Decision 1106 (September 4 2013) the commission assessed online advertising and compared it to traditional advertising (eg, radio and television advertising). It found that the different advertising platforms (ie, Internet, radio and television) reach different customers and have different effects and therefore form separate product markets. Thus, online advertising forms a separate product market from traditional advertising.

In Decision 748 (June 27 2013) the commission found that electronic payment services via the Internet form a separate market, different from traditional payment services.

The commission's definitions regarding the relevant product markets have no binding character and the commission may adopt different market product definitions in the future.

Also, the above decisions do not present an explicit list of all commission decisions dealing with online services, but only illustrate that in some cases the commission found that online services form a separate market, while in other cases they were placed in the same product market as the traditional services.

What types of conduct constitute abuse of dominance in the online space and what practices are most likely to catch out unwary online players?

CZ: There is no developed decision practice with respect to abuse of dominance in the online space.

SL: The AVK has not issued a decision on abuse of dominance in the online space; however, it is safe to assume that the practices which recently caught the attention of the European Commission and the national competition authorities of other member states could be deemed problematic if carried out in, or having an effect on, the territory of Slovenia.

BG: Abuse of dominance would be found when the online space is subject to general prohibition under the Competition Protection Act (abuse of dominant position under the act follows Article 102 of the Treaty on the Functioning of the European Union). No separate rules about the specific form of abuse of dominance online have been adopted or applied.

So far, no proceedings about abuse of dominance online have been opened by the commission.

The proceedings before the commission which concern online sales or services are typically cases for unfair competition in the form of unfair practices (eg, misleading discounts offered online or misleading online advertising). However, the fact that a breach was made online or through an online platform would have no effect on the commission's legal arguments or its final decision.

What steps are competition authorities in your jurisdiction taking to prevent online retailers and service providers from free riding on the investments of bricks-and-mortar retailers and service providers?

CZ: The office recently confirmed that it has neither considered this question in any of its decisions nor made any official statement in this respect. There are no known office decisions dealing with bans or restrictions on online sales or arrangements discriminating against online sellers.

SL: Based on publicly available information, unfortunately, the AVK has not yet adopted an approach towards free riding. Its position is expected to mirror the European Commission's initiatives and approaches.

BG: At present there are no such steps in Bulgaria.

How can competition authorities best ensure that these steps do not hinder innovation or consumer choice and promote the continued evolution of online services?

CZ: These issues have not yet been addressed by the authorities, the legislature or experts. 

SL: There has been no relevant practice in Slovenia with respect to this issue.

BG: This question is not applicable in Bulgaria.


All articles were first edited by and published on www.internationallawoffice.com


[1]      Source: Online market trends in Slovenia: Cross-border ecommerce soars (link).

[2]     Source: Digital Slovenia 2020 – Development Strategy for the Information Society until 2020 (link)

Eva Škufca

Eva Škufca

Local Partner in cooperation with Schoenherr

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e.skufca@schoenherr.eu

Urša Kranjc

Urša Kranjc

Associate

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u.kranjc@schoenherr.eu

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Galina Petkova

Galina Petkova

Attorney at Law

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g.petkova@schoenherr.eu

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