The recent Communication from the European Commission on cross-border e-commerce is likely to have a significant impact on online trading within the European market.
The proposals are designed to break down artificial barriers created by online suppliers that restrict the freedom of choice for online buyers located in different EU member states.
The final version of the proposals is expected next year with legislation coming into force in mid-2017. It is therefore advisable that online suppliers closely follow the debate on these proposals to be well prepared for future changes on conducting business in the EU.
As the value of retail e-commerce in the EU grew on average at a rate of 22% annually between 2000-2014, and the turnover from e-commerce as a share of total turnover in the retail sector reached 8% in 2015, the European Commission has considered various ways in which to sustain this economic growth. However it has become apparent from widespread studies that there are distortions in the EU e-commerce market.
One example of such distortion is the practice of geo-blocking, the act of blocking cross-border online transactions or blocking the use of foreign delivery addresses or credit cards, by retailers throughout the EU. This is a focal point of the European Commission’s proposal.
Investigations into this practice have confirmed its far-reaching impact, where it has been found that in 2015 only 37% of websites allowed visitors located in another EU member state to successfully complete a purchase, and in a public consultation more than 80% of European consumers indicated that they had experienced geo-blocking. Meanwhile, more than 90% of consumer respondents either agreed or strongly agreed that consumers and businesses ought to be able to purchase products and access services anywhere in the EU.
The report from the European Commission proposes that in order for e-commerce to thrive in the EU, action is needed to effectively tackle unjustified geo-blocking and other forms of discrimination. The core of the initiative is the imposing of a non-discrimination obligation, whereby traders cannot discriminate in their selling of goods and services based on the consumer’s nationality, place of residence or place of establishment, within the EU market.
In other words a customer in a different member state than the trader will be able to purchase goods and services under the same conditions as local consumers. This also applies to services used by the consumer outside of their own member state (such as car hire, or the rental of accommodation).
However the current proposals will not immediately apply to:
- electronically supplied services (such as cloud services, data warehousing, website hosting and so on) – implementation delayed until mid-2018, in order to allow service providers time to prepare for the changes
- non-audio-visual online content services concerning copyright protected works (although this will be subject to review at a later date)
While traders will not be obliged to deliver their goods to every member state (given the potential of high delivery costs, for example), they should inform all of their customers of existing delivery restrictions, in accordance with the Consumer Rights Directive, and offer the same delivery options available to consumers located in areas supplied by the trader (such as delivery to a given address provided by the customer or pick-up at a collection point). The implication is that even if the trader cannot supply directly to the consumer’s country, the consumer could make alternative arrangements to receive the desired product or service, and would not be limited by the location of their residence for example, when making their purchase.
Similarly, while traders will not be forced to accept any particular means of payment, they cannot refuse payments or otherwise apply different standards or conditions related to payment for reasons related to the customer’s nationality, place of residence or place of establishment (when the trader can receive adequate customer authentication and the payment can be carried out in a currency the trader accepts). Thus, the trader cannot reject measures or instruments of payment (such as credit cards) issued in another member state if they accept the same type issued in their own country.
Further actions related to e-commerce suggested in the communication from the European Commission include:
- establishing measures to ensure affordable parcel delivery solutions in Europe
- proposing regulations in order to ensure effective cross-border consumer protection
- offering guidance on the Unfair Commercial Practices Directive (UCPD)
- suggesting simple cross-border contract rules for consumers and businesses
- attempting to reduce the administrative burden on business arising from differing VAT regimes
The proposed regulations may initially have a considerable impact on traders’ practices with regards to customers from other EU countries accessing their website, as well as paying for and receiving their goods and services, and transition for some traders may be challenging. However, the EU Commission believes that the ensuing growth in inter-state commerce as a result of these proposals could be highly substantial, with both buyers and sellers potentially reaping the rewards.
These proposals will also apply to the UK when implemented at an EU level. Notwithstanding the Brexit vote, the UK still remains a full member of the EU until such time as it negotiates its exit treaty, or two years after (and any agreed extensions) the service of a notice under Article 50 of the Treaty of the European Union (which starts the formal secession process), whichever is the sooner.