Coverage: E-Commerce giants under scrutiny

European regulators are putting some online U.S. retailers under the microscope as they look into whether some large companies are thwarting online competition.

The New York Times had these details in a story by Mark Scott:

European officials on Wednesday opened an antitrust investigation into whether large technology companies were impeding competition in online shopping, the latest in a string of inquiries in Europe focused on the web’s biggest players.

Margrethe Vestager, Europe’s antitrust chief, said the review would focus on how electronics, clothing, shoes and online content are bought and sold online, and whether e-commerce companies had created artificial barriers that stopped Europeans from buying goods from other parts of the Continent.

Although the regulators said the investigation was not targeting specific companies, Amazon, which is based in the United States, is the leading e-commerce company in the region, with sales more than double those of its closest competitor.

“European citizens face too many barriers to accessing goods and services online across borders,” Ms. Vestager said in a statement on Wednesday. “Some of these barriers are put in place by companies themselves.”

ComputerWorld’s Loek Essers said the EU commission was trying to boost confidence in its markets:

Making cross-border e-commerce easier for consumers and companies is high on the Commission’s agenda. It plans to harmonize rules on contracts and consumer protection for online purchases, to boost confidence to shop and sell across borders.

It will also propose measures to make parcel delivery more affordable: 62% of companies that try to sell online find excessive parcel delivery costs are a barrier, it said.

Unjustified geo-blocking must also end, the Commission said. Some online sellers deny consumers access to a website based on their location, or re-route them to a local store with different prices. Legislative proposals to tackle unjustified geo-blocking should be ready before the end of the year, it said.

At the same time, it will also reform Value Added Tax (VAT) rules to relieve the administrative burden, especially on small and medium-size enterprises, so that sellers of physical goods to other countries also benefit from single electronic registration and payment.

Julia Fioretti wrote for Reuters that some think the rules could be harmful to startups as well:

Representatives of big U.S. tech companies, however, already smarting from last month’s move by the new Commission to pursue Google on antitrust charges, warned against snaring fast-moving industries in ways that would hurt a Europe that U.S. President Barack Obama recently accused of taking a protectionist turn.

“The idea of regulating platforms is ill-conceived,” the Computer and Communications Industry Association (CCIA) said in a statement after confirmation of the EU plan to complete a major review of the platform business by the end of the year to assess the value of calls for them to be more tightly overseen.

Such rules could hurt the small European start-ups more than incumbent global giants with big legal teams, the CCIA argued.

As well as the inquiry into online platforms, the EU’s competition commissioner confirmed she would investigate the e-commerce sector for possible breaches of antitrust law, especially in relation to postal charges.

European Union leaders reject charges of anti-Americanism in their efforts to reshape online markets at home. But there is no lack of suspicion among European voters and politicians at the power of U.S. tech companies, not least following revelations in recent years that Washington has been spying on its allies.

Arjun Kharpal wrote for CNBC that equalizing the rules for TV and commerce would make a significant contribution to tax revenue:

Currently there are different rules across the EU from e-commerce to TV rights. If there were a common set of rules, it could add around 415 billion euros ($465.8 billion) per year to the bloc’s economy, according to Commission.

One of the most significant proposals is an end to a practice known as “geo-blocking” – where companies deny access to their website based on a user’s location. A company like Netflix for example might not let a viewer in Italy see a program it is running in Germany. This however, could raise issues around licensing deals in place in different EU countries.

“Mandating pan-EU access would interfere with the business interests that have led to territorial licensing and geo-blocking, so the impact such a reform would have should be properly considered,” Adam Rendle, senior associate in the Media and Entertainment industry group at law firm Taylor Wessing, said in an email.

“It would be counter-productive to introduce a reform which would make it more difficult to finance creativity in future.”

CIO Today’s Shirley Siluk summarized the goals of the strategy:

Among some of the goals the strategy aims to meet are setting rules to make cross-border e-commerce easier; enabling more efficient and affordable package deliveries; creating a more modern European copyright law; and proposing a partnership with industry on cybersecurity. Another objective is to put an end to “unjustified geo-blocking.”

Geo-blocking, is “a discriminatory practice used for commercial reasons,” according to the EU. It involves e-commerce sites that deny visitors access based on where in the EU they are located, or that reroute users to other stores that might offer higher prices for the same service.

While they might not be explicitly going after Amazon, it’s definitely a targeted move to counter their dominance. The EU is looking to find some type of balance and increase income. The outcome could cost someone millions, while helping others. The trick will be making sure smaller online retailers aren’t hurt.