Misleading online ads and EU dual-pricing ban scrutinized by Dutch authority

This is the third of three stories from an exclusive MLex interview with Martijn Snoep, head of the Dutch competition authority. The other two stories can be found here:

Part 1/3: Big Tech antitrust breaches are better prevented than cured, Dutch authority's Snoep says

Part 2/3: Leadiant faces Dutch supply-restriction questions over orphan drug's ingredients

Companies conveying a false impression of scarcity to consumers could face more regulation in the Netherlands, as the Authority for Consumers and Markets is investigating such behavior, the watchdog’s president has said.

Martijn Snoep also said the Dutch agency would submit ideas to the European Commission on how EU rules governing vertical distribution agreements, which prohibit “dual pricing,” could be changed so they don’t give such a boost to online retail at the expense of bricks-and-mortar traders.

The comments came in a wide-ranging interview with MLex in which Snoep also proposed a faster and less adversarial approach to regulating tech giants, and said drugmaker Leadiant Biosciences faces questions about potential restrictions to the supply of an ingredient for a rare-disease drug.

Misleading consumers

The issue of misleading online advertising, particularly for opaquely-priced services such as hotel rooms and plane tickets, has caught the attention of regulators around the world.

Most Western consumers have at some point been told online that there’s only one seat left at this price, with six people looking at it right now — and have no way of verifying the claim.

The difficulty of regulating this practice is that it often falls between competition and consumer law, meaning it’s not clear which regulating authority should take up the case.

That’s less of an issue in the Netherlands, Snoep said, because the ACM is in charge of both competition and consumer protection.

“What pure competition authorities have to watch out for is that they aren't trying to solve a consumer-protection problem with a competition tool,” he said. “We have the benefit of having both sets of tools.”

He said the ACM is looking into online sellers using “sophisticated and personalized” marketing methods to get consumers to buy products as soon as possible. These tricks “require our scrutiny to protect consumers who don’t know that they are being manipulated.”

The authority will publish an “issues paper” to discuss with companies the “boundaries between legitimate online marketing and misleading customers,” and will then publish guidelines by the end of the year, Snoep said.

Dual pricing

On dual pricing, Snoep said he was concerned that the EU’s outright prohibition was limiting the ability of physical retailers to compete with e-commerce rivals, and of brands to encourage the sale of their goods in bricks-and-mortar shops.

The EU’s Vertical Block Exemption Regulation came into force in June 2010 and is due to expire in May 2022. Manufacturers and brand-owners are currently responding to the commission’s public consultation.

Under the rules, manufacturers are barred from charging different wholesale prices to the same retailer depending on whether the retailer’s products are sold online or offline.

Snoep said the review would be a good opportunity to reconsider whether dual pricing in such circumstances should remain as a “hardcore restriction.”

He said some suppliers have complained that these rules prevent them from protecting offline sales by selling at lower prices to these physical outlets compared to online shops.

Suppliers may have good reasons for giving offline sales a price break, particularly if they’re seeking to keep bricks-and-mortar stores open in rural areas, or they want to maintain physical stores for product testing.

“It's important that we give clarity to the market soon because it may be that this could help to maintain a physical store infrastructure that many people appreciate,” Snoep said.

Physical stores have been suffering as consumers switch to e-commerce. Offline stores can also be subject to “free riding” in which consumers browse for products in person and then make their purchases more cheaply online.

Snoep said that may be “various reasons” that physical stores are closing, but if one of them is that suppliers can’t discriminate between online and offline sales, “then maybe we should have a more hands-off or liberal approach towards online-offline dual pricing.”

The European Commission said in a report on e-commerce in 2017 that while dual-pricing is illegal, the rules do allow case-by-base exemptions.

This is the third of three stories from an exclusive MLex interview with Martijn Snoep, head of the Dutch competition authority. The other two stories can be found here:

Part 1/3: Big Tech antitrust breaches are better prevented than cured, Dutch authority's Snoep says

Part 2/3: Leadiant faces Dutch supply-restriction questions over orphan drug's ingredients