UK government mulls ecommerce legislation

Ecommerce is unlikely to require new legal powers to ward off the threat of online monopolies, but there are some causes for concern, according to a new government report.

The study - Ecommerce and its Implications for Competition Policy - which was published this week by the Office of Fair Trading (OFT), reports that existing competition laws will suffice but that some areas of the New Economy will need careful monitoring. It looked at market definition, market power and the assessment of individual agreements.

European Union (EU) and US competition regulatory bodies have expressed concerns that market leaders may form cartels via the backdoor of joint venture business-to-business (B2B) online exchanges. However, the EU's competition commission has said these ventures would be covered by existing rules and are not being treated as special cases.

The report's authors concluded that the New Economy made it easier to move into new business-to-consumer and B2B ecommerce markets, making for more competition. But there were some circumstances where barriers of entry were raised.

These included the high initial marketing costs needed to establish consumer loyalty and create significant first mover advantages, which in turn increases the costs of starting a competitive business.

John Bridgeman, director general at OFT, said: "Many characteristics of ecommerce should increase competition because buyers will have access to a global marketplace and the ability to compare price and product features."

"Whether existing competition law is up to the tasks of dealing with this new and constantly evolving marketplace is an issue being discussed by many competition authorities," he added.