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On Focus

Author: Massimo Maggiore


Competition and Commercial Practices

THE ITALIAN COMPETITION AUTHORITY HAS OPENED AN INVESTIGATION ON ONLINE PRICING PRACTICES THAT UNFAIRLY EXPLOIT THE CORONAVIRUS EMERGENCY

 

By way of a press release of March 12th, 2020, the Italian Competition Authority (the “ICA”) has announced that it started proceedings against Amazon and eBay for unfair commercial practices under articles 19  27 of the Consumer Code (legislative Decree no. 206/2005). 

The investigation concerns the offering for sale on the two platforms of hand disinfectants, masks for the protection of the respiratory tract and other hygienic-sanitary products on occasion of the Covid-19 (coronavirus) health crisis. The release states that the commercial practices under scrutiny are of two categories: i) the use of untruthful claims relating to the alleged virus specific- protective efficacy of the products in question and ii) the considerable and unjustifiable price increase that has been applied in connection with the same products.

Unfortunately the conciseness of the release (which can be found in Italian at https://www.agcm.it/media/comunicati-stampa/2020/3/PS11716-PS11717) does not allow a thorough analysis of the underlying factual and legal basis. This would have been extremely useful, particularly in connection with the second category of practice under the ICA’s spotlight, for which, absent any details in the ICA’s release, it is not as immediate as it is for the first one, to scope out the grounds under which the e-commerce platforms should be accused of unlawful behaviour.

It is in fact easy to hold that the use of untruthful product claims qualifies as a misleading commercial practice under art. 21, first paragraph, let. b) of the Consumer Code. This corresponds to article 6, first paragraph, let. b of the unfair commercial practice DIRECTIVE 2005/29/EC (the “UCP Directive”), according to which “A commercial practice shall be regarded as misleading if it contains false information and is therefore untruthful or in any way, including overall presentation, deceives or is likely to deceive the average consumer… in relation to … (b) the main characteristics of the product, such as its… benefits”.

On the other hand, it is quite rare to see the ICA intervening on pricing behaviours, such being the second type of practice for which Amazon and eBay have been investigated, both in the realm of business to consumers practices, and in that of competition law. When unilateral conducts are at stake, competition law does look at the effects of pricing behaviour, but it does so in very exceptional situations, those that would enable to stigmatize excessive pricing by a dominant company. The case would be captured by art. 102, second paragraph, let. a) of the Treaty on the Functioning of the European Union ("TFEU"), which explicitly refers to "directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions" as a form of abuse. Yet competition authorities are wary of applying such a concept as the basis of their investigations, due to the inherent difficulty of benchmarking prices and because of the underlying economic theory. As a matter of fact, at times of product shortages on the supply side, pricing in market economy reflects the marginal utility of that product for a consumer at a given point in time and as such works as a demand correction factor. Moreover, excessive pricing behaviour is considered as self-correcting,  because it would encourage the entry onto the market of other competitors.

The covid emergency in Italy has certainly given way to the opportunistic behaviour of many, that have offered certain much wanted products used to prevent the infection for prices that exponentially exceed the normal prices. To give an example, while a set of 50 medical masks can normally be found for as low as 2 euros or so, the same set has been of late priced, online, 30 or more times as much. As mentioned the economic theory underlying antitrust law stands in the way of prompt antitrust intervention, not least because abuse of dominance cases could only be brought against a handful of quasi-monopolistic companies and because the analytic and enforcement energy required is quite substantial.

The ICA in the case commented here has therefore directed its attention to Consumer laws and the unfair commercial practices toolbox. Absent any indication from the ICA, it can be assumed that the ICA will try the overpricing conduct in the case in question as a form of aggressive commercial practice, pursuant to art. 25, let. c), of the Consumer Code, corresponding to art. 9, let. c) of the UCP Directive. According to this provision, a commercial practice shall inter alia be considered aggressive when it consists of: “the exploitation by the trader of any specific misfortune or circumstance of such gravity as to impair the consumer's judgement, of which the trader is aware, to influence the consumer's decision with regard to the product”. 

This is only an educated guess, because the ICA’s press release does not provide as mentioned any indication. Yet, in the unfair commercial practices’ set of provisions, there seems to be no other point of law which would enable the ICA’s intervention. The exceptionality of the current emergency and the worldwide crisis that it is triggering seems on the other hand to provide a spot-on occasion, and probably one of a kind, for the application of the specific case of aggressive practices contemplated under the above reported art. 25, let. c) of the Consumer Code which, otherwise, would normally be destined to remain dormant. On a higher level, the case epitomizes how traditional antitrust laws are meant to work in synergy with the laws that look at the specific behaviour of any undertaking, short of the analytic fatigue and the fulfilment of the strict subjective and evidentiary requirements of antitrust laws. This is a tendency that has been making its way beyond the ambit of business to consumers practices, also in that of business to business practices, as in the case of the recent EU Directive 2019/633 on unfair trading practices in the food supply chain and should probably be welcome, because of the limitations of antitrust laws,  which would leave the short lived conducts of undertakings other than incumbents substantially unchecked.

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