The European Commission has announced measures to encourage cross-border e-commerce to unlock over €400 billion for Europe’s GDP.

What?

Over the last few decades, digital technology has transformed the way business is done. Each day, countless contracts are concluded over the internet and the advent of e-mail has increased the pace of business significantly. Figures suggest that such technology is behind 30% of GDP growth in the EU from 2001- 2011.

Despite the contribution of digital technology to economic growth across the member states, the EU is lagging behind other regions, namely the United States (where 55% of GDP growth in the decade leading up to 2011 has been attributed to digital technology).

Clearly, there is work to be done. Although the EU is stated to be a single market, a central tenet of which is the free movement of goods and services between its member states, this statement does not ring true where e-commerce is concerned.

There are various barriers to free movement of digital products that have been identified by the European Commission, such as a variation in e-commerce and copyright laws across the member states, complex VAT rules and postage charges, the common practice of denying individuals access to websites due to their location (known as geo-blocking), lack of consistency in the regulation of the telecoms market and a lack of interoperability in digital technologies between the EU member states.

These barriers reduce consumer confidence and place significant burden upon businesses looking to become involved in cross-border e-commerce. A lot of work has been done to reduce barriers to cross-border trade generally and the European Commission has recognised that it is now time to do the same in relation to e-commerce. Consequently, the Commission has recently announced various schemes to cumulatively develop what is known as the “European Single Digital Market” to address those barriers.

There are three pillars to the European Single Digital Market, broadly incorporating the following:

  • Improving the accessibility of e-commerce

This pillar focuses on facilitating cross-border e-commerce and includes the following measures:  

  • standardising e-commerce rules across the member states (focusing in particular on remedies and guarantee periods);
  • preventing the denial of access to websites based on location, where this is unjustified;
  • systems to be put in place to promote co-operation between enforcement authorities;
  • clarifying and simplifying the VAT rules; and
  • clarifying/standardising parcel delivery costs across the EU.  
  • Implementing measures to enable digital networks to grow  

This pillar centres upon the telecoms and media sectors and includes proposals to:

  • harmonise telecoms rules across the EU, particularly in relation to issues such as net neutrality;
  • improve broadband access, particularly in rural areas;
  • review the legal framework governing audio-visual media with particular focus on advertising and child protection measures; 
  • improving the regulatory framework governing social media, search engines and the like, in light of increasing concerns about their increasing influence within the market; and 
  • look at measures to improve cybersecurity.  
  • Making the most of growth opportunities within the digital economy  

    The proposals under this pillar focus on removing barriers to growth across all sectors and include:

    • removal of unjustified barriers to the free flow of data between member states, in order to promote an open market in relation to data storage;
    • standardisation of technologies, including the introduction of 5G, cybersecurity and mobile payments; and
    • interoperability between various sectors, including transport, health and energy.
    • removal of unjustified barriers to the free flow of data between member states, in order to promote an open market in relation to data storage;
    • standardisation of technologies, including the introduction of 5G, cybersecurity and mobile payments; and
    • interoperability between various sectors, including transport, health and energy.

So what?

Although significant work will be required to finalise and implement the proposals, there is significant optimism as to their potential effect - it is estimated that improvements in the frameworks governing digital technology could add an additional €415 billion to the EU’s GDP. For businesses, the proposals will introduce new opportunities for growth and will facilitate access to a marketplace which consists of some 500 million people across the member states.

Whilst the bulk of the detail relating to the changes is yet to be finalised, TMT businesses should expect a number of key European legislative and regulatory developments which could have far-reaching consequences on the sector, including:

  • legislative proposals for the harmonisation of online purchasing rules across Europe by the end of 2015, including the introduction of mandatory EU contractual rights (such as legal guarantees and remedies for non-performance) for domestic and cross-border online sales of goods;
  • the express prohibition of unjustified geo-blocking through legislation proposed in the first half of 2016;
  • a Commission inquiry into the effectiveness of competition in the e-commerce sector;
  • legislative proposals for the harmonisation of copyright regimes within the EU to enable broader online access to copyrighted works across member states (such as requiring the ability to port legally acquired content) by the end of 2015;
  • legislative proposals in 2016 to address the tax treatment of cross-border sales;
  • reforming and revising the existing telecoms rules; and
  • the adoption of the General Data Protection Regulation, which the EU institutions intend to have in agreed form by the end of 2015.

With such wide-reaching legislative changes expected in the short to medium term and the prospect of cross-border sales boosting (or threatening) revenues across the sector, TMT businesses should keep a close eye on developments relating to the digital single market to maximise the opportunities presented by the changes and avoid falling behind any astute competitors.