Newsletter-21

149 COMPETITION LAW Selective Distribution It is noted that there is an increasing trend to adopt a selective distribution system whereby manufacturers set criteria for quality in order for retailers to become part of their network, and sales to unau- thorized retailers are prohibited. Manufacturers reported that they use this system to control distribution quality and price as a result of the development of e-commerce. The Report concludes that it might become necessary for the Commission to scrutinize provisions that are restrictive, especially those included in selective distribution agreements. Vertical Restraints The growth of e-commerce has also led to the increase of vertical restraints used by manufacturers. These restraints may be seen as pric- ing restraint, restrictions to sell online or cross-border. In terms of cross-border sales, preliminary findings on restric- tions point out that retailers resort to geo-blocking in order to limit cross-border online sales. Almost 12% of retailers advise that they use cross-border restrictions at least for one of their product categories. Such restrictions can be realized in various forms, including oral com- munication. E-commerce of Digital Content Licenses and their availability are key factors in digital content markets. Licensing agreements are used to define the scope of the rights within technological, territorial and temporal scopes. Exclusiv- ity is noted to be widely used. The Report further emphasizes that long-term exclusivity agreements may foreclose the market, especially if they include provisions that extend the term of the exclusivity. The preliminary findings question whether there is an opportunity for new online business models and services to develop, or for smaller businesses to grow into other markets, due to current licensing prac- tices.