Digitalisation has brought changes to many parts of the economy, with the e‑commerce sector experiencing substantial growth in light of technological advancements and evolving consumer behaviour. Most Polish, Latvian and Lithuania consumers now regularly make purchases online, with this trend having accelerated during the COVID‑19 pandemic, and businesses across the region increasingly use digital channels to sell products.
Within the e‑commerce sector, online marketplaces offer a distinct service by connecting and facilitating transactions between two distinct user groups: sellers, who use the platform to list and sell goods, and consumers, who use it to search for and purchase goods. As multi-sided platforms, online marketplaces face distinct, albeit interconnected, competitive environments on each side of the platform. Promoting competition in online marketplaces, on both the consumer and seller side, can be expected to drive outcomes such as higher quality goods and services, broader choice, lower prices, and innovation.
Presently incumbent platforms in Poland, Latvia and Lithuania have strong leading positions in their jurisdiction (albeit with variations), with a significant degree of concentration in the market for core general online marketplaces – namely, those general online marketplaces which provide a “one‑stop-shop” for consumers who value the ability to transact across many retail categories (in terms of product type, quality and price range) – and in particular a reduced level of effective competition on the seller side of core general online marketplaces. These findings are consistent with other recent assessments across Europe and in other jurisdictions. In Poland, on both the consumer side and the seller side, the leading platform Allegro has a strong market position which has persisted over time, and which appears unlikely to change in the short to medium term.
In Lithuania and Latvia, regional player Pigu is the market leader when it comes to core general online marketplaces. Taking a broader view at all other general online marketplaces, operating under an otherwise different business model, other players such as AliExpress and newer entrant Temu have recently gained visibility among consumers, as well as large retailers, although these alternatives remain differentiated from Pigu in multiple key respects. Importantly, in Latvia, Pigu represents the primary pathway for sellers to reach consumers, while in Lithuania, Pigu is the largest available channel alongside domestic rival Varle. Beyond this, alternative players do not appear to exert a significant competitive constraint on the seller side. In relation to specific categories of consumers and sellers, the expansion of Temu’s local merchants programme in Latvia and Lithuania might constitute a potential competitive constraint in the long term, notwithstanding persisting factors that would continue limiting substitutability.
The competitive environment across the three countries under review has been shaped by a combination of distinct structural features and strategic conduct, which have created high barriers to entry and made market entry or expansion in core online marketplaces increasingly difficult, consistent with trends seen across digital markets, and in other jurisdictions. These factors include the presence of strong network effects, significant economies of scale, high costs of switching or multi-homing (particularly on the seller side) and significant vertical integration from the leading players.
Allegro and Pigu’s vertical expansion into additional services has reinforced their positions in several ways as the leading online marketplaces in their respective countries: Allegro in Poland and Pigu in Lithuania and Latvia. For instance, this can raise entry barriers as potential entrants increasingly need to match the platforms’ comprehensive portfolio of services in order to compete effectively. More broadly, it also enhances Allegro and Pigu’s capacity to accumulate, combine and strategically deploy large volumes of user and transactional data to their own competitive advantage, which could make entry more difficult for rivals that lack access to similarly diversified data inputs and are unable to benefit from feedback loops. Most critically, Allegro and Pigu’s ecosystem expansion also gives them – to different degrees – the ability to leverage their leading position in online marketplaces to the advantage of their services in other markets, giving rise to foreclosure risks for other firms in those segments.
The incumbent platforms in these countries have a durable competitive advantage that is difficult for new entrants to overcome, with degrees of variation amongst the three jurisdictions. In Poland, Allegro holds an entrenched position as the leading online marketplace, which has endured over time, with the market likely to have “tipped” and future market contestability becoming substantially limited. In Latvia, too, leading platform Pigu (220.lv) faces few challengers on the seller side and its strong market position has endured over time, despite the presence of other players (marketplaces and online retailers) on the consumer side. Pigu also remains the leading platform in Lithuania, although the seller side is less concentrated as compared to Latvia and Poland in light of the presence of the alternative online marketplace Varle. Even so, given Pigu’s market position in these countries, and the structural factors and strategies identified in this report, there is a risk of Pigu’s position potentially becoming entrenched.
While there are some differences in the degree of concentration and levels of contestability across the three jurisdictions, common risk factors should be addressed in order to promote competition in the short term, and to ensure contestability in the long term. In light of this, a range of measures are recommended to address platforms’ market power by enhancing market monitoring and enforcement in the three countries analysed.
These measures propose to strengthen the role of the national competition authorities, including through enforcement, and enhance scrutiny over incumbents’ market power and specific behaviours, like those identified in this report, which may result in the strengthening of such market power or explicit anticompetitive conduct. Alongside this, additional recommendations could help lower barriers to entry and expansion in online marketplaces, particularly by reducing switching costs for sellers, promoting a pro‑competitive use of data and facilitating cross-border competition.
There are significant imbalances in the relationships between sellers and the incumbent platforms. In particular, the structural relationship between online marketplaces and sellers is characterised by several features which create persistent imbalances that could give rise to competition concerns under certain conditions. First, platforms which operate a hybrid business model may face conflicts of interest, having both the incentive and the ability to preference their own offers over those of sellers. Second, sellers’ strong reliance on incumbent platforms leads to an imbalance of bargaining power, such that the platforms could have the ability to set unilateral terms, extract higher commissions and/or mandate the use of ancillary services. Finally, various informational and logistical asymmetries give these platforms a structural advantage over sellers, which they can use to shape competitive conditions and trading outcomes. Taken together, these dynamics increase the risks of exclusionary conduct (such as self-preferencing and tying) and exploitative terms (including pricing restraints), impacting outcomes and weakening the competitive environment for sellers (and thus for consumers), as well as impacting competition in online marketplaces and other related markets more broadly.
In light of these risks, the OECD considers there is a need for clear, proportionate, and effective frameworks to address these imbalances and any related competitive harm. In this context, a gradual approach could be beneficial: recommendations include first evaluating the effective implementation and enforcement of the P2B regulation, and, secondly, exploring the possible value of a code of conduct for online marketplaces, which could provide policymakers with a forward-looking, behaviour-focussed framework to govern the relationship between certain large online marketplaces and sellers. Together, these measures aim to promote a more competitive environment in online marketplaces and related services, improving outcomes for consumers and sellers as relative to the current status quo.