Competition and antitrust in the digital age

OnDemand

April 20 2017

Competition & Antitrust Czech Republic

While the digital economy offers abundant opportunities to customers and retailers alike, it also raises a number of competition concerns, including the impact on bricks-and-mortar businesses, the potential for abuse of market power by major digital platforms and the challenge of fostering online competition while preventing free riding. Competition authorities must evolve and adapt traditional antitrust principles and approaches 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?

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.

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?

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.

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

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

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?

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.

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

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

For further information on this topic please contact Jitka Linhartová or Claudia Bock at Schoenherr by telephone (+420 225 996 500) or email (j.linhartova@schoenherr.eu or c.bock@schoenherr.eu). The Schoenherr website can be accessed at www.schoenherr.eu.

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Authors

Jitka Linhartová

Jitka Linhartová