On 25 May 2016 the European Commission published legislative proposals aimed at promoting the single market in e-commerce to enable consumers and companies to buy and sell products and services online more easily and confidently across the EU. The draft legislation aims to: tackle geo-blocking; improve cross-border parcel delivery; and strengthen customer rights. The proposals form a centrepiece of the Commission’s Digital Single Market strategy and result from an e-commerce sector inquiry which was launched one year ago.

Where has this come from?

In May 2015, the European Commission adopted its Digital Single Market Strategy, to identify business practices which may hamper competition in e-commerce sales straddling national borders. This sits alongside the Commissions Single Market Strategy, adopted in October 2015, which aims to fight discrimination based on nationality or place of residence.

These strategies have resulted in host of inquiries and publications, including a report published in March 2016, setting out the Commission’s preliminary findings on geo-blocking. There is an ever expanding body of evidence indicating that the Single Market is not working effectively in cross border e-commerce.

What are the proposals?

As noted above, the proposals take a three-pronged approach to addressing the barriers to improved functioning of a digital Single Market.

1. Preventing geo-blocking and other forms of discrimination based on nationality or place of residence

The proposals seek to prevent businesses discriminating against cross-border customers by price, sales or payment conditions, unless it is objectively justifiable (for example, VAT). Whilst this non-discriminatory principle already exists under the Services Directive, these proposals are seeking to provide greater legal certainty and enforceability for products and services online and offline. To avoid introducing disproportionate burden on businesses, the proposals do not impose an obligation to deliver across borders, although businesses must offer customers the same delivery options that local customers receive, e.g. delivery to a local address. It will also be permissible for businesses to set different prices across different websites, but customers should be free to choose from which website they wish to buy. The blocking of access to websites and the use of automatic re-routing without the customer’s prior consent will be prohibited.

2. Making cross-border parcel delivery more affordable and efficient

It is intended that increases in price transparency and regulatory oversight of cross-border delivery services allow consumers and retailers to benefit from affordable deliveries and convenient returns options, regardless of their respective locations. To-date the Commission has faced complaints that high delivery charges for cross-border shipping has undermined the Single Market, preventing retailers and consumers from buying and selling more across the EU. Whilst the proposals do not include a cap on delivery prices, the Commission is prepared to adopt price regulation should competition (fostered through increased transparency) not provide satisfactory results. With a role for national postal regulators, the proposals complement self-regulatory initiatives already taken by postal operators to involve the quality and convenience of cross-border parcel delivery.

3. Increasing consumer trust in e-commerce

Finally, proposed revisions have been suggested to the Consumer Protection Cooperation Regulation, which will give more powers to national authorities to better enforce consumer rights. These will enable them to:

  • check if websites geo-block consumers or offer after-sales conditions not respecting EU rules;
  • order the immediate take-down of websites hosting scams; and
  • request information from domain registrars and banks to detect the identity of the responsible trader.

Updated guidance on unfair commercial practices will also be published, to clarify the application of the Unfair Commercial Practices Directive.

It should be noted that these proposals will work alongside existing legislative proposals including those published in December 2015, regarding the supply of digital content and online and other distance sales of goods.

What happens now?

These proposals are first stage in the legislative process and will now pass to the European Parliament and national governments (acting in the Council of the EU) for adoption. Whilst the timing of the process is uncertain, it is likely that certain parts the new legislation will take effect in 2017 with the remainder to follow in 2018. Once formally adopted, Member States will not need to introduce domestic legislation to give effect to the new rules.

How could this affect you?

With estimates that a fully functioning Digital Single Market could contribute approximately €415 billion to European GDP, businesses that are quick to act off the back to these proposals stand to gain the most. Business should review their operations to ensure that they are not breaching existing EU competition rules. This is of particular relevance to suppliers and resellers, who should ensure their agreements do not confer absolute territorial restrictions and limit parallel trade, as well as not imposing illegal Resale Price Maintenance or exclusivity obligations.