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How Does Competition Law Affect My eCommerce Business?

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As an eCommerce business, you must abide by the laws which apply to you as an online brand making online sales. One area of law online marketplaces must comply with is competition law. Digital platforms must comply with rules about unfair competition and fair competition. If you do not, the competition authorities can investigate your online platform. Not complying could result in fines for online platforms or a punishment as severe as a prison sentence. You could also be disqualified from being a company director. It is also essential to ensure your electronic commerce business does not suffer because another business model still needs to comply. This article will, therefore, explain how competition law affects your eCommerce business in the UK.

What is Competition Law?

Competition law is in place in the UK to ensure healthy business competition. This includes eCommerce websites such as yours. 

Therefore, anti-competitive agreements are prohibited. These include, for example:

  • price fixing agreements; and
  • agreements to carve up markets.

Also, if you have a dominant position in the market, you must not abuse this. It is also likely that if your internet brand merges with another brand, this could be stopped if it causes a reduction in competition.

How Does Competition Law Affect My eCommerce Business?  

As an eCommerce business, like any other business, competition law affects your brand. Even though the presence of online companies helps to increase competition in markets, it is still possible for anti-competitive behaviour to take place in the eCommerce industry.

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Therefore, it is crucial to follow competition law. We give you some examples of how competition law affects your eCommerce business.

Anti-competitive Agreements

As an Internet business, you are prohibited from entering into anti-competitive agreements with other companies. This means an agreement which does the following to competition:

  • prevents;
  • distorts; or
  • restricts.

For example, if your eCommerce business sells a particular product, you may enter a contract with businesses competing with you in that product. This will be illegal if it contains an agreement to fix price rises

Dominant market position

If your business is not small and instead has a dominant position in the market, competition law prohibits you from abusing this position. Equally, as an eCommerce business, you must be aware of this in terms of your competitors who may be doing this. Companies that could be in a dominant position will usually be those who have a 40% share of the market. 

However, other facts can determine if you have a dominant market position, such as:

  • number of competitors and customers;
  • size of competitors and customers; and 
  • how easy it is for new businesses to set themselves up in competition with you.

If an eCommerce business is abusing its market position, you may, for example, see them:

  • deciding to allow an existing internet customer to buy from them without giving an objective reason; or
  • pricing your eCommerce goods or services at an unfair price.

eCommerce Business Cartels

The most severe type of prohibited competition law act is forming a cartel. This is an agreement between you and another eCommerce business or other business that you will not compete with each other. Serious cartels are a criminal act.

The types of activities cartels may carry out include:

  • market-sharing;
  • price-fixing;
  • bid-rigging; and 
  • where a business only agrees to produce or supply certain goods or services.
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 Key Takeaways

As an eCommerce brand, you are susceptible to competition, and competition laws apply to your internet business. You must comply with these, or you could see a fine or even prison sentence. It is also essential for your eCommerce business that others comply. Therefore, you should know what competition law means and how it affects your eCommerce brand. For example, you must not engage in anti-competitive agreements that restrict competition. Competition law also prohibits dominant market abuse and eCommerce business cartels are not allowed, such as businesses which engage in bid-rigging. 

If you need help understanding how competition law affects your eCommerce business in the UK, LegalVision’s experienced eCommerce lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. So call us today on 0808 196 8584 or visit our membership page.

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Clare Farmer

Clare Farmer

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