In May I reported on Europe's Digital Single Market Strategy which sets out an ambitious pan to break down the barriers that currently hinder cross border ecommerce in Europe. The European Commission recognizes that ecommerce within the EU is not realizing its full potential. As the consultation observes:
".....only 18% of consumers who used the Internet for private purposes in 2014 purchased online from another EU country while 55% did so domestically. Only 12% of all EU retailers sell online to consumers in other EU countries, while more than one third (37%) do so domestically. There are a number of reasons why the Digital Single Market has not yet reached its full potential in the EU."
Today's legal conundrum
In a single market companies should ideally be able to manage their sales under a common set of rules. But any business that has considered online presence across more than one EU Member State will quickly tell you Europe's digital regulatory and ecommerce landscape is far from harmonized. What's more, even in areas where there have been past attempts at harmonization, gaps or national differences remain. In fact, conducting online business in Europe from a single platform is intrinsically difficult.
All too often an online business has to approach this multi-faceted conundrum with triage and a process of risk analysis assessing the consequences of non-compliance because full localization and compliance with each and every local law is impracticable or uneconomic. Factor in the myriad of language, VAT and cultural differences and the rule calibration may either scale back launch plans or drive risk mitigation rather than compliance strategies.
Better online access for consumers and businesses across Europe
The first pillar of the Digital Single Market Strategy targets "better online access for consumers and businesses across Europe". The Strategy's wider intent should be welcomed as to break down the borders that currently exist in respect of online trade in the EU could potentially simplify operations, incentivize compliance and stimulate trade. After all, a long term objective for the European Union has been to build a level playing field with unrestricted commerce between Member States.
Under the first pillar of the Digital Single Market Strategy the Commission took an action, before the end of 2015, to make a "modified proposal" covering "(i) harmonised EU rules for online purchases of digital content; and (ii) the application of the trader's national law with a focused set of key mandatory EU contractual rights for domestic and cross-border online sales of tangible goods".
Existing online rules but inconsistency around digital content
Today's online regulatory landscape in Europe is a mixed one where some aspects of contract and online regulation have been harmonized but others follow the independently made rules and rights of individual Member States.
Today, EU rules touch upon:
- Vendor identity disclosures and transparency around the online contract process;
- The information that should be provided to consumers before they enter into a contract; and
- The rules that govern a consumer's right to withdraw from the deal if they have second thoughts.
But, there is imperfect or no harmonization around issues such as:
- The basics of consumer contract law;
- the characterization of the supply of digital content products under contract rules (eg as service, lease or sales contracts) which results in differing treatment, remedies and rights around digital content Member State to Member State;
- The remedies available if tangible goods are not in conformity with the contract of sale (there have been attempts to harmonize but certain Member States have gone further);
- The remedies applicable for defective digital content purchased online (such as e-books, online games or in-app purchases for virtual goods).
A legal topography confused by new emerging approaches in respect of digital content
In some instances, in the UK for example, specific national rights have been introduced (think the new Consumer Rights Act 2015 shortly to impose new remedies for consumers purchasing digital content and refreshing other statutory remedies). The Netherlands and Ireland have also taken steps to adopt legislation on digital content products. These only confuse the picture for an ecommerce vendor targeting online EU sales and aspiring to operate uniform processes and systems. Each year we see more national rights, or specific online behaviours driven by national enforcement activity. There is no "single" online marketplace. The online actor faces 28 different consumer law environments.
A focused set of key mandatory EU contractual rights
The Consultation reiterates the Digital Single Market Strategy: "the main problem identified as hindering business and consumers to fully benefit from the Digital Single Market are differing contract rules that apply in cross-border sales within the EU". In this context it should not be forgotten that the EU has long debated a common European sales law, one standardized approach for all 28 of its Members. This proposal which appears from time to time has frequently been buried in debate around the practicalities of adoption as well as political and cultural rhetoric. Back in 2011 the European Parliament published another version of just such a proposal (see COM(2011) 635, 2011/0284/COD).
As alluded to above, the Digital Single Market Strategy itself hinted at a "modified proposal" to harmonize online sales rules across the EU. Whether this consultation will result in a move away from the ambition of achieving a common European sales law remains to be seen. It is clearly intended to counsel Europe's business and consumer stakeholders about their views of the challenges and the potential legislative solutions.
A call to action
The purpose of the consultation is "to collect interested parties' views on the possible ways forward to remove contract law obstacles related to the online purchases of digital content and tangible goods. It does not aim at addressing copyrights related issues as this will be subject to a separate course of action."
There's your context and these next steps matter to all online actors and anyone looking to address Europe's markets via ecommerce. Time to act, prepare and submit your own response?
Partner, Digital Regulation and Technology - Silicon Valley