Marketplaces are in the crosshairs
Different countries are searching for ways to safeguard competition in the field of e-commerce and reduce the risk of monopolisation. Russia is no exception. The recent trend is to shift from self-regulation of e-commerce to more stringent regulation. Pepeliaev Group’s partner Elena Sokolovskaya considers one of the initiatives whereby bans and obligations for marketplaces are proposed to be introduced.
Important!
RUB 6.4 trillion was the volume of e-commerce in Russia in 2023, according to the Online Retail Association
Over 50 % was the share of marketplaces in the total volume of e-commerce as at June 2023.
The relevance and role of marketplaces on the market are gaining momentum. It is not uncommon already, however, for owners of such platforms to violate legislation on the protection of competition. Antitrust authorities of different countries instigate cases against marketplaces and impose multi-billion dollar fines on them. Digital markets abroad are experiencing increased regulation and control from public authorities.
Examples of foreign regulation
On 7 February 2021, the Anti-monopoly Commission of the PRC's State Council released its Anti-Monopoly Guidelines (the ‘Guidelines’). The Guidelines define an e-commerce platform's dominance on the market and describe how abuse of such dominance can manifest itself. The Guidelines also address the issues of how algorithms can be used and personal data of consumers can be harvested to manipulate the market, setting out the procedure for determining the extent to which such data can be gathered.
At the level of the EU, the Digital Markets Act (DMA) came into force in full on 6 March 2024. It aims to define gatekeepers, meaning those market players who have most relevance for competition and whose activities may interfere with maintaining and developing the competition. The list of such gatekeepers which the EU Commission published in September 2023 included Amazon, the US marketplace used by buyers and sellers worldwide.
The question pops up: how is this sphere regulated in Russia?
Until recently, it has been predominantly developing as a self-regulating sphere.
In 2022, Wildberries, Ozon and Yandex.Market created a unified information system which contained information regarding sellers of counterfeit products. Wildberries has also launched a service protecting rightholders and buyer against forgeries. In 2023, the Russian Corporate Counsel Association, representatives of marketplaces, rightholders and the Russian Federal Antimonopoly Service have devised Practices for Marketplaces to Liaise with Rightholders and Sellers to Prevent the Sale of Counterfeit Products. The Practices are already being actively used: 2.4 million cards of counterfeit products were blocked further to claims of rightholders on the above platforms in 2023.2.4 million product cards have been blocked on the marketplaces further to the complaints of rightholders // The official website of the Federal Antimonopoly Service. 25 January 2024. URL: https://fas.gov.ru/news/33041.
Nonetheless, the question of whether self-regulation is sufficient has now become even more acute. The antimonopoly authority has been receiving an increasing number of complaints over activities of marketplaces, most of which concern, among other things, non-transparent operations, consumers being forced to participate in promotional events, changes being unilaterally introduced into contractual terms, various charges, and difficulties with the acceptance, storage, delivery and return of products.The Federal Antimonopoly Service: if self-regulating mechanisms of marketplaces are efficient, there is no need to regulate them // The official website of the Karelia Department of the Russian Federal Antimonopoly Service. 23 June 2022. URL: https://karelia.fas.gov.ru/news/17897.
The first significant step towards stricter control of public authorities was the fifth antitrust package of legal instruments (Federal Law No. 301-FZ dated 10 July 2023 “On amending the Federal Law ‘On protecting competition’”), the provisions of which entered into force on 1 September 2023. As a result, a ban has been introduced on monopolistic activity on digital markets, along with quantitative and qualitative criteria for determining whether a platform owner is dominant on the market.
Now we are witnessing a new round of regulation. A number of initiatives relating to additional requirements for marketplaces have been submitted to the lower chamber of Russia's Parliament (the State Duma) over recent six months. One initiative is draft law No. 568223-8, “On the state regulation of trade activity of aggregators of product information in the Russian Federation and on amending the Federal Law ‘On the basic principles concerning the state regulation of trade activity in the Russian Federation’” (the ‘Draft Law’) which was brought before the State Duma on 5 March 2024.
The Draft Law has been devised to establish the fundamentals of the state regulation of activity of aggregators of product information (marketplaces) whose bad-faith conduct may create adverse consequences for vendors and pick-up points and put them into a disadvantageous position, force them to operate on terms which run counter to their commercial interests and also create additional opportunities to monopolise the market by pursuing unfair practices.
The amendments provide for two groups of claims against the activities of online retailers:
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Universal claims which are addressed to all marketplaces.
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Special claims are lodged against aggregators who hold a prominent position on the market and are targeted at reducing the monopolising of the market.
Let us focus on the second group.
First, a definition has been introduced of an ‘aggregator of product information that holds a prominent position on the market’. A marketplace will fall under the above definition if the share of transactions that are consummated on it between vendors and buyers exceeds, in monetary terms, 20% of the total volume of transactions on marketplaces in Russia for the previous calendar year.
According to the Draft Law, such an aggregator shall be prohibited from:
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establishing: discriminatory conditions as defined in Federal Law No. 135-FZ “On protecting competition” dated 26 July 2006, or obstacles for other business entities to access, or withdraw from, a product market;
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tying a counterparty to: product promotion services, logistics and other similar services that are unrelated to organising e-commerce;
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creating advantages in how information is arranged regarding a product, the promotion, delivery or release of a product whose vendor is the owner of the aggregator as compared with products of other vendors on the marketplace;
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holding, free of charge, promotional events when the price is reduced of products which are sold on the aggregator except when the owner of the aggregator sells such products.
The Draft Law has also set obligations for owners of marketplaces:
- to notify of any changes in the agreement which worsen the position of vendors or owners of pick-up points 30 days before such changes become effective;
- to devise and publish in the public domain its commercial policy setting out the cost of the marketplace's services, as well as the grounds for granting discounts and their size.
Therefore, Russia has apparently started to shift away from a self-regulating digital market towards regulating its operations. This is being implemented by improving legislation in the area of the antimonopoly regulation of digital platforms.
We believe we will soon see the active development of practice of applying the new rules. Because the features of the digital environment are so specific, such practice may predominantly be established on a case-by-case basis.