French Competition Authority adopts Broad View on Online Sales Market
On 28 November 2014, the French Competition Authority (“FCA”) dismissed an action against Vente-privee.com (“Vente-Privee”), a French “online sales” (or “online private sales”) site, opened following a complaint from competing e-commerce company, BrandAlley, regarding the alleged imposition of abusive exclusivity clauses in its contracts with its suppliers.
Vente-privee.com offers products from multiple brands to a limited number of people who must be registered at discounts of up to 80%, during a limited time window (usually a few days). This enables manufacturers to sell their stock surpluses. This sales channel has grown significantly over the last ten years and is now a more than €1 billion industry in France alone. Vente-Privee.com is the largest player in France, with an annual turnover of €1.6 billion in 2013.
The FCA originally took the view that Vente-Privee had abused its dominant position on the narrow market for online sales events, by inserting exclusivity and non-compete clauses in its contracts with suppliers, precluding them from supplying to another online sales events website for an excessive period of time. However, during the course of its investigation the FCA changed its approach to market definition, concluding that Vente-Privee was not dominant.
The FCA defined a geographic market limited to Metropolitan France, noting that, despite the fact that by nature websites are accessible to Internet users across borders, high delivery costs led companies to create national websites. While some purchases are made by customers outside France, they represent a small proportion of the sites’ turnover. The FCA also referred to the language barriers and different consumer consumption habits.
The FCA then turned to product market definition. Having originally focused on whether there were characteristics of online sales events that warranted identifying a distinct market (e.g., discounts of up to 70%, the confidential and restricted nature of the sales, impulsive purchasing behaviour, high-end image and a large stock of products), it ultimately found that these characteristics are not particular to online sales events. The FCA concluded that the existence of a market for online private sales could not be established, noting that other distribution channels for destocked items competitively constrained Vente-Privee (e-commerce websites, outlet factory, etc.).
This decision also provides some useful guidance on the FCA’s approach to exclusivity clauses in the context of online sales. The FCA noted that (i) the duration of the contracts generally exceeded the duration of the period covering the sales and the management of unsold products (i.e., 16 weeks) and that (ii) the contracts prevented suppliers from selling their products to third parties within two days of the sale. The FCA concluded that Vente-Privee.com had not been able to justify the longer than 16 week duration of these clauses, noting that reliance on such clauses by a dominant company might be abusive.