09 Feb 2016

Comparing the Market – A spotlight on pricing, a consumer’s paradise

Authored by: Victoria Woods & Rachael Ashley

Comparing the Market – A spotlight on pricing, a consumer’s paradise

According to recent reports, the UAE’s e-commerce market is expected to almost triple in value in the next two years. It seems that consumers are increasingly choosing more convenient and often cheaper ways of purchasing goods and services. This brings the advent of the arm chair ‘window shopper’. Savvy consumers are progressively looking to comparison websites as a less stressful means of comparing prices at the click of a button, to ensure they get the best deal, whether purchasing online or ultimately heading out to stores.

Retailer Sensitivities

Price comparison websites can no doubt be a hugely valuable resource for buyers, with sites such as pricena.com, cellsouq.com, Bkam.com and the Dubai Government’s Sallety.ae all bringing the extensive retail landscape for the sale of goods into focus for consumers. But the relationship between comparison sites and retailers may not always be quite as contented.

Whilst many retailers welcome the rising use of price comparison sites, which often increase traffic flow to their own websites and stores, others may be sensitive to the visibility of their pricing on such a scale. In the absence however of any misrepresentation of retailers or their goods on these sites, there may not be any justifiable legal grounds on which retailers can and should be entitled to object to being featured. In fact, an agreement between a retailer and a comparison site operator to deliberately exclude or censor that retailer from the scope of the market under review, could itself be deemed to be anti-competitive, in breach of Federal laws aimed at promoting a free market in the UAE.

Price comparison site operators should remember however, the fair use principle when using a retailer’s or manufacturer’s intellectual property. The underlying principle of the UAE intellectual property laws is to solely entitle the creators of intellectual property rights to their commercial exploitation, either directly or through licensing the use of such rights to third parties. Where a price comparison site uses a retailer’s or manufacturer’s logo or other recognised mark to merely identify that retailer or product, provided that product and its price are accurately displayed, it may be difficult for a retailer to successfully argue that there has been an intellectual property right infringement, particularly since the retailer or manufacturer is inherently identified with the purpose of reference and information, and without the intent to mislead.

Consumer Protection

In the UAE, consumer protection laws seek to safeguard the rights of consumers and to encourage fair trade, competition and accurate information in the marketplace. On their face, provided correct data is published regarding products and their prices, price comparison websites should be the digital epitome of the healthy marketplace, stimulating competition between retailers through bringing their pricing under the spotlight. However, there have been challenges to the apparent wholesale benefits of these sites in some jurisdictions, which owners of such sites should bear in mind. There have been cases in Europe, for example, where operators of price comparison sites entered into contracts with retailers preventing those retailers from offering prices to consumers that were lower than those published on their comparison site. Such arrangements have been banned for being anti-competitive in England and Wales.

There have also been reports of price comparison sites earning a commission on sales referred via their sites. If those referral costs are built into the ultimate price the customer pays, it’s arguably impossible to result in the cheapest price to the customer.

In both of these scenarios, in the UAE there’s the possibility that the authorities would deem such arrangements between retailers and site operators to be “restrictive agreements”, in contravention of the Competition Law. Such activity could attract a fine of up to AED5m, business closure for between three and six months and negative media.

Trends in Europe, while raising interesting questions surrounding the legality of certain practices of price comparison websites, also fundamentally illustrate the growth of the ‘virtual’ marketplace for consumers. Situations such as these, and indeed questions over the operation of price comparison websites overall, are yet to be heard by the courts in the UAE, but no doubt the boom in e-commerce in this region will lead to a very ‘real life’ debate on the subject in the near future.