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Posted by Patti Freeman Evans on April 30, 2010
Last week the European Commission redrafted guidelines, many of which relate to regulations around distance selling. The revised guidelines had been adopted 10 years ago and the new ones are to be in place beginning in May for the coming 10 years.
There continue to be many restrictions allowed but the overall set of guidelines pull back on some types of restrictions suppliers can put in distribution contracts. For example, suppliers can no longer prohibit authorized sellers to sell on the Internet.
In addition, suppliers can no longer prevent online sellers from taking a sale from across borders including within a distribution system such as exclusive distribution or selective distribution. For example, a retailer in the UK can accept and ship an order to a buyer in France even if they are not authorized to sell physically in that market. The retailer cannot proactively market to that customer, but they may accept an order if it comes to them passively.
The regulation causing the most controversy centers around the issue of selective distribution (an ill-defined state). Those suppliers, most commonly in the luxury sector, who have selective distribution contracts can oblige an authorized seller to have a physical store. Therefore, suppliers can choose not to sell to online-only retailers simply because they do not have a physical store presence. This guideline allows these suppliers to have a certain amount of additional control over which retailers sell their products and which do not. However, if a supplier chooses to sell to one online-only retailer, they should then in principle sell to all online-only retailers that would meet the criteria to become part of the supplier's distribution system.
Additionally, this allowance is only accepted if a supplier has less than 30% market share. If more than 30% of market then the supplier can’t make the distinction of being in a selective distribution mode and will thus have to justify their position to the commission if they wish to exclude web-based retailers. A collective of European distance selling organizations (BeCommerce, the Belgian eCommerce and distance selling association; EMOTA the European E-commerce and Mail Order Trade Association; La FEVAD, the French E-commerce and Home Shopping Federation; IMRG, the UK leading industry body for global e-retailing (IMRG); Thuiswinkel.org the Dutch Home Shopping Association) have issued a statement of concern about the effects of an over-strict interpretation of this guideline and will be actively involved in monitoring effects of implementation.
Over the 10 years of these regulations, the commission commits to be very attentive to how things are evolving in this complex multichannel world. They can and may change a regulation if they feel it is having a detrimental effect on marketing development. As a result of the eCommerce industry coalition action, the EU announced they will specifically watch how online-only retailers are being excluded from distribution.