Sector inquiry by the European Commission on e-commerce: How can companies prepare?

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Publié le 18 août 2015
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Shouldn’t the Internet allow the free purchase of goods and services around the world, regardless of location?  Although national markets have recorded strong growth in online sales, cross-border transactions are progressing slowly.  Only 15% of European consumers make online purchases in a country in the European Union other than their own.[1] Improving digital access by…

Shouldn’t the Internet allow the free purchase of goods and services around the world, regardless of location?  Although national markets have recorded strong growth in online sales, cross-border transactions are progressing slowly.  Only 15% of European consumers make online purchases in a country in the European Union other than their own.[1]

Improving digital access by consumers and businesses to goods and services throughout Europe is one of the essential components of the digital single market required by Brussels.

In this context, in early May, the European Commission launched a sector investigation to detect « potential barriers erected by companies to cross-border online trade in goods and services where e-commerce is most widespread, such as electronics, clothing and shoes, as well as digital content. » [2]

What form will the enquiry take?

The European Commission, using its investigative powers, will send requests for information to the companies concerned including manufacturers and wholesalers as well as online retailers. Pursuant to Regulation No. 1/2003,[3] the Commission is entitled to claim from a company all documents, whether in paper or electronic form, that are relevant to the investigation. These requests may very well be about simple statistics, but also contracts or other documents and electronic communications going back several years.  In practical terms, companies that receive these requests, must be able to quickly identify the requested information in their information systems, in order to meet deadlines imposed by the Commission, which are usually very short. Companies facing sector inquiries typically need to identify, collect, review and produce large volumes of documents in electronic format, including emails sent internally and externally, about the subject of the investigation. If they fail to provide the information requested within the prescribed time limit, or if they provide incorrect or misleading information, they risk being punished with a fine of up to 1% of their total turnover for the previous financial year. The Commission may also impose penalty payments of up to 5% of their net average daily turnover in the preceding business year, for every day of delay. Depending on the results of the review of the information collected, the Commission may decide at a later stage to conduct further investigations and operations, including dawn raids in order to gather more evidence.

How can companies  prepare?

Companies concerned about the possibility of receiving information requests from the authorities, can prepare themselves by identifying and analysing data which is likely to be relevant to the subject of the investigation. This involves mapping its information systems so that if a request is receive they can quickly identify where relevant data might be stored, and also being ready to extract and sort the information.  The aim is to try and identify the specific documents or correspondence that might be required to meet the purpose of the investigation. The ability to sort data is also important as documents and exchanges that are protected by attorney-client confidentiality need to be identified to avoid producing them to the authorities. To this end, legal technologies such as ediscovery platforms, which include document review functionality and search tools allowing you to search for documents by keywords and other criteria, can be very helpful.

By taking this proactive approach towards inquiries, companies can better understand their risk, and prepare their response strategy and documents accordingly.

A compliance policy

It is also essential for companies to have a compliance program that will not only prevent the occurrence of offences, but also detect violations when they do occur. It may also be appropriate to launch internal audits, in an ad hoc way on very specific subjects.  This could include looking at contracts but also at electronic documents and communications involving certain key functions in the business particularly vulnerable to competition.  Of course this needs to be done in accordance with current data protection and privacy rules. The competition authorities have become increasingly aware of the value of turning to electronically stored information within companies when searching for evidence of anti-competitive behaviour. National competition authorities and the European Commission have adopted specific techniques and tools for collecting and examining electronic evidence and they do not hesitate to use them during their investigations.[4] Any approach to compliance and risk detection, which ignores electronic data, cannot really claim to be effective.

Thomas SELY
Senior Consultant
Kroll Ontrack

[1]  Detailed projects for the creation of a Digital Single Market : http://ec.europa.eu/priorities/digital-single-market/docs/dsm-factsheet_en.pdf.

[2]   Press release of the European Commission on May 6 2015 : http://europa.eu/rapid/press-release_IP-15-4921_fr.htm

[3]  Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty (Text with EEA relevance)

[4]   European Competition Network (ECN) recommendation on the power to collect digital evidence, including by forensics means, December 2013 : http://ec.europa.eu/competition/ecn/ecn_recommendation_09122013_digital_evidence_en.pdf

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