ONLINE MARKETPLACES MONITORING: NO OBVIOUS COMPETITION PROBLEMS SO FAR, BUT BUSINESSES ARE ADVISED TO ASSESS THE RISKS OF CERTAIN PRACTICES
The Competition Council, after conducting monitoring of online marketplaces, did not identify any obvious illegal competition restraints or other factors that effectively restrict competition in electronic commerce. However, the Authority has drawn the attention of the sector to certain business practices that may pose a risk of restricting competition.
In recent years, e-commerce sector has become increasingly significant as a trading channel. The popularity of online marketplaces that provide online intermediary services is also growing, creating opportunities for more businesses to reach consumers.
In order to better understand the principles of online marketplaces, the importance of this trading channel, the accessibility, the spread of algorithms, and to identify potential competition restrictions and problems, the Competition Council carried out the online marketplaces monitoring.
In 2022, experts from the institution surveyed 16 online marketplaces, including 4 general consumer goods platforms, 3 food ordering and delivery platforms, 8 gift platforms, and 1 beauty service reservation platform. Additionally, responses were obtained from 90 online marketplaces traders.
The business survey revealed that, despite the growing popularity of online marketplaces, the respondents still considered their brick-and-mortar stores as the most important sales channel. Nearly one-third of the respondents reported that sales through their physical stores generated over 80% of their revenue, while only 6% of the respondents derived over 80% of their revenue from sales through online marketplaces.
However, there is still a significant gap between major players and smaller competitors in the market. The largest online marketplaces are 10 times ahead of the small ones in terms of number of traders, and some traders have indicated that they were unable to replace the major platforms due to their size, popularity, reputation, and professionalism. Furthermore, out of the 16 online marketplaces surveyed, 5 are hybrid platforms that compete with their own traders as they operate both as product sellers and as providers of online intermediary services. According to the assessment of the Competition Council, all these factors suggest that the importance of competition rules in online marketplace activity will continue to increase in the future.
According to the monitoring data, some online marketplaces impose price parity obligations on traders, setting the conditions under which traders can distribute goods and services in other sales channels, as well as set maximum resale prices for goods or services. Through surveys, signals have been received indicating that hybrid e-commerce platforms may apply more favourable positioning or ranking of their own products or services. They may also have access to non-public information about the sales of traders, which is not available to others.
As emphasised by Irma Urmonaitė, Deputy Chairwoman of the Competition Council, the Law on Competition itself does not prohibit such business practices. However, depending on the circumstances, certain actions can pose a risk of restricting competition. For example, the actions of hybrid platforms aimed at giving advantages to the goods and services they distribute could strengthen the market position of the hybrid platforms, weaken the ability of competitors to compete in offering their goods and services, which could lead to a reduction in choice for consumers, higher prices, and a deterioration in the quality of goods.
"We remind businesses of their obligation to assess their actions and, if necessary, change their business practices to avoid the risk of violating the Law on Competition. The Competition Council, in turn, will inform market participants by supplementing e-commerce guidelines and preparing new recommendation-based documents regarding the restrictions identified during monitoring," stated I. Urmonaitė.
Since no obvious competition restraints, problems, or other factors that effectively restrict competition in this sector were identified, the Competition Council finds no reason to initiate an in-depth market study on the restrictions identified during this monitoring. Business representatives who have information about specific competition restraints in the e-commerce sector are encouraged to report them to the Competition Council, which can initiate investigations of the infringements of the Law on Competition.
The Competition Council of Latvia has also conducted monitoring of online marketplaces. The results of the monitoring carried out in Latvia will also be published in the near future.
Full text of the online marketplaces monitoring (in Lithuanian), summary (19.2 KB ) (in English).
