lightspeed ecommerce

EU: ‘Many manufacturers use contractual sales restrictions’

Manufacturers in Europe have adopted several practices in order to better control the distribution of their products. It happens a lot that products can only be sold by pre-selected authorized sellers or that manufacturers sell their products online directly to consumers. But the European Commission found that manufacturers increasingly use contractual sales restrictions in their distribution agreements and this may harm consumers.

The European Commission published a preliminary report on the findings of its inquiry into ecommerce. It gathered data from almost 1,800 ecommerce companies in Europe and analyzed 8,000 distribution contracts. If found certain business practices that may limit the online competition in Europe. “The report should be a reason for companies to review their current distribution contracts and bring them in line with EU competition rules if they are not.”

Due to the growth of ecommerce over the years, manufacturers have adopted several practices so it could better control the distribution of their products and the positioning of their brands. There are manufacturers who only allows their products to be sold by pre-selected sellers, while others sell their products directly to consumers, which makes them direct competitors of online retailers.

Restrictions when selling online

Restricted from selling

The report also found that over 40 percent of retailers face some form of price recommendation or price restriction from manufacturers and that almost 20 percent of retailers are contractually restricted from selling on online marketplaces. Also, almost one in ten retailers are contractually restricted from submitting offers to price comparison web sites and over 10 percent of retailers report that their suppliers impose contractual restrictions on cross-border sales.

‘Contractual sales may harm consumers’

“All these types of contractual sales restrictions may make cross-border shopping or online shopping in general more difficult and ultimately harm consumers by preventing them from benefiting from greater choice and lower prices in ecommerce”, the Commission writes. It expects to publish the final report in the first quarter of 2017.