A revision to the rules governing online sales in Europe risks sparking a wave of litigation between e-commerce companies like eBay and the makers of luxury goods, a Brussels-based lobbyist said today.
The European Commission has published a draft regulation governing how brand owners and retailers both on- and offline do business. Earlier versions of the text were criticised for being biased in favour of online retailers by allowing them almost unlimited rights to sell whatever brands they wanted.
The latest version attempts to redress the balance, granting brand owners greater control over how their wares are distributed.
Unveiling what it hopes is the final text, the Commission opened a public consultation, which closes on September 28, on the new rules.
The new regulation "aims to ensure that the assessment of supply and distribution agreements under the competition rules takes account of recent market developments, namely new forms of distribution including the opportunities brought by the internet," said Neelie Kroes, competition commissioner.
While broadly welcoming the latest text, Jaques Lafitte, founder of Brussels lobby firm Avisa - works for the French luxury goods firm LVMH - said one crucial element of the rules dealing with online sales is not clear.
"What if eBay opened a shop on the Champs Elysee in Paris; could it then sell as much luxury branded goods as it liked via the internet?" Lafitte asked during a telephone interview earlier this month, adding that "the text is still not clear on this point".
Another lobbyist close to the luxury goods industry went further, warning that the text will spark lawsuits between suppliers and retailers.
"If the regulation was adopted tomorrow we'd see litigation by the end of this year," said the lobbyist, who asked not to be named.
The draft law is an update to an existing text granting block exemptions from European Union competition rules for certain types of deals between suppliers and distributors. The update is largely designed to address new internet-based retail advances.
A section titled "hardcore restrictions" clearly states that "requiring a distributor to limit the proportion of overall sales made over the internet" is against the law.
But in a footnote the regulation appears to contradict this by stating that suppliers such as the makers of luxury goods can require "that the buyer (retailer) sells at least a certain absolute amount (in value or volume) of the products offline to ensure an efficient operation of its brick and mortar shop".
"The Commission has made good progress with this latest version of the regulation but this apparent contradiction needs to be resolved. It's the last battleground," Lafitte said, adding that this issue "was always going to be the hardest to resolve".
eBay has lobbied hard to avoid any restrictions being placed on online retailers, arguing that lawmakers should prioritize the interests of consumers over those of the luxury goods industry.
EBay wasn't immediately available to comment on the latest version of the text. Eurocommerce, a lobby group representing retailers in Brussels also wasn't available to comment.