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E-commerce agreements face further investigation

As part of its wider consideration of e-commerce, the Competition and Markets Authority (CMA) has launched another investigation of the use of retail "Most Favoured Nation" clauses on price comparison websites.

These clauses require a supplier of a good or service to set the price of a product sold online via a price comparison website at a price as low as or lower than the price at which the product is sold in rival outlets.

What has happened?

The use of “Most Favoured Nation” clauses came to the attention of the CMA during its market study of digital comparison tools, including price comparison sites.

The CMA has also considered the use of the clauses in private motor insurance, in on-line hotel booking and in live auction platform services.

The CMA has launched an investigation into suspected breaches of competition law by the use of the clauses in a price comparison website in relation to home insurance.

Most Favoured Nation clauses are used by businesses to seek to ensure that they are not at a competitive disadvantage when selling their goods and services through a specific sales channel, in particular through e-commerce platforms.

The use of the clauses may prevent discounting and lead to indirect price-fixing by competing undertakings.

What might happen next?

The CMA will obtain information from the undertakings allegedly involved in the infringement, their suppliers, competitors and customers to determine whether an infringement has occurred. The CMA will also investigate the parties to the infringement and the nature and scope of the infringement.

If the CMA decides that an infringement has occurred, it will make a decision to that effect and impose sanctions, which may include fines and disqualification from holding the office of director for up to 15 years.

In addition, any unlawful arrangements are unenforceable and may expose the businesses involved to the risk of awards of damages for losses incurred by customers caused damage by the arrangements.

The parties involved will be required actively to implement a competition compliance programme to prevent any further infringements of the competition rules.

What does this mean for me?

Businesses selling goods and services online are at greater risk of investigation for infringing competition rules.

They should review their distribution arrangements to make sure that they do not infringe either the United Kingdom or the European competition law rules and implement completion compliance programmes to minimise the risk of an inadvertent infringement of the competition rules.

How can Ward Hadaway help?

A simple audit of your e-commerce operations will identify whether your business is involved in any activities that may infringe competition law.

We can advise you how to operate on e-commerce markets and achieve your commercial objectives while minimising the risk of infringing the competition rules.

We have considerable experience in the application of competition law to e-commerce. In conjunction with our expertise in commercial law, Ward Hadaway is able to provide e-commerce businesses with advice on optimal e-commerce trading arrangements.

Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.

This page may contain links that direct you to third party websites. We have no control over and are not responsible for the content, use by you or availability of those third party websites, for any products or services you buy through those sites or for the treatment of any personal information you provide to the third party.

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