UK technical non-paper: e-commerce In a letter to Commission President Juncker on 12 January, Prime Minister David Cameron set out the UK vision for the digital single market: The UK proposes that the EU take bold steps to create an open, flexible market with a regulatory framework that reflects the dynamic nature of the digital economy Our vision for the digital single market is one which is digital by default, where it is even easier to operate online across Europe than it is to do things offline in a single state, and where online businesses go through administrative processes once, not 28 times. 1 This technical non-paper develops the e-commerce proposals from the UK vision paper in further detail. E-commerce should bring the reality of the single market closer to consumers and businesses. Consumers should be able to buy the best product at the best price from any Member State. Businesses, in particular SMEs, should be able to reach consumers across Europe simply by providing access to their goods and services online. However, this is far from the current reality. There is clear potential for more consumers to take advantage of buying online in the single market. Only 15% have purchased online from a business based in another EU Member State compared to 47% who have purchased online from a seller based in their home country. 2 Consumers are missing out - one study estimates that a single EU market in e-commerce could deliver gains to consumers of nearly 60 billion from lower prices and 95 billion from extra choice. 3 Barriers remain that prevent consumers buying online across borders. Gaps in EU consumer protection rules, for example on digital content, varied enforcement of existing rules, and a lack of clarity regarding which rules of redress apply all act to undermine consumer confidence in cross-border e-commerce. 4 Consumers are concerned about long delivery times and non-delivery of parcels as well as a lack of information about parcel delivery. 5 There is also some 1 UK vision for the EU s digital economy http://engage.number10.gov.uk/digital-single-market/ 2 Consumer Attitudes Towards Cross-border Trade and Consumer Protection, Eurobarometer, Commission, June 2013 3 Civic Consulting (2011), Consumer market study on the functioning of e-commerce and Internet marketing and selling techniques in the retail of goods. Based on a scenario of a 15% share of internet retailing in total EU retail sector. 4 http://www.eurocommerce.eu/media/86151/omnichannel_policy_guidance_final_mar_2014.pdf; www.beuc.org/consumer-rights-and-enforcement; UK Department for Business interview with SME, January 2015; unpublished research, European E-commerce Taskforce, 2013; Report from the Commission on the functioning of Regulation (EC) No 2006/2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws (the Regulation on consumer protection cooperation) 5 The European Consumers Centres Network report, European Online Market Place Consumer complaints 2010-2011, September 2012; unpublished research, European E-commerce Taskforce, 2013; Flash Eurobarometer 358, Consumer Attitudes Towards Cross Border Trade and Consumer Protection, June 2013
evidence that in certain sectors consumers have faced unfair price discrimination based on their country of residence. 6 And it s still too difficult for businesses, particularly small businesses, to set up and operate online across borders. The lack of a single market means that they find it more difficult to achieve real scale at a global level compared with US competitors. We need to make it easier for businesses to set up at a click of a button and trade immediately across the EU. Many Member States have lengthy bureaucratic processes for company registration and compliance with company law requirements. Registering for VAT and obtaining national domain names can also be complex. 7 Businesses often have to go through up to 28 different administrative processes to meet these requirements, frequently without the possibility of doing it digitally. 8 There are still some differences between the rules applied to consumers in different MS, including labelling and sales promotions rules, 9 and small businesses can suffer from problems with cross-border parcel delivery. 10 Europe needs to take action to ensure consumers have the confidence they need to buy online from other Member States and remove the barriers that dissuade businesses from going online and selling cross-border. Proposals for enhancing consumer confidence in cross-border shopping It can be daunting enough to buy cross-border without worrying that your parcel won t be delivered quickly or that a rogue business will mean it s impossible to get help if there s a problem. The EU needs a common set of consumer rights tailored to the purchase of digital content. These and Europe s other consumer protections need to be easy for consumers to understand and act on, and properly enforced by all Member States working together. Some businesses are simply unaware of their obligations, so they need be better informed of how they should be protecting consumers. The EU must also find creative ways of making it easier for businesses to meet their obligations, as it can be difficult to understand the legal requirements of a consumer s home market. And there ought to be transparency about pricing, and businesses shouldn t unfairly exploit consumers trust in the single market. 11 The Commission therefore should: Propose a common set of consumer rights tailored to the purchase of digital content. This would help create a level playing field and boost consumer confidence. The current legal position for sales of digital content is unclear 6 A report undertaken by Matrix Insight for the European Commission in 2009 ( Study on business practices applying different condition of access based on the nationality or the place of residence of the service recipients ) found prima facie evidence for different treatment based on the place of residence of the customer across the four sectors covered in the study car rental, digital download, online sale of electronic goods and tourism. 7 E-commerce Frontrunners Initiative: Top-level domains project, Mystery Shopper exercise, Sept 2014; unpublished research, European E-commerce Taskforce, 2013 8 E-commerce Frontrunners Initiative; http://www.eurocommerce.eu/media/86151/omnichannel_policy_guidance_final_mar_2014.pdf ; 9 Cut EU Red Tape, Business Task Force Report, October 2013; unpublished report, European E-commerce Taskforce, 2013 10 European Commission Green Paper, An integrated parcel delivery market for the growth of e-commerce, Nov 2012 11 UK vision for the EU s digital economy http://engage.number10.gov.uk/digital-single-market/
whether they are goods, services or something else. Rights on digital content should be modelled on those for goods but should also reflect the differences between the two. For example, that digital content can be remotely updated, and that intermediaries are often involved in the processing and transmission of digital content. We would like to see a clear set of rights for consumers in relation to digital content (that it should be fit for a particular purpose, meet the description given and be of a satisfactory quality the consumer can reasonably expect) with a clear set of remedies (repair or replacement or failing that a reduction in price). Updates should not reduce the quality of the digital content, and the consumer should have a clear course of action against the trader if a problem occurs with an intermediary with whom the consumer has no relationship. Bring forward proposals to ensure that EU consumer protection rules are easy for consumers to understand and act on, and properly enforced by all Member States working together. This means bringing forward ambitious proposals to improve the enforcement of existing EU consumer rules, including enhanced coordination, allowing the Commission to hold Member States and their national regulators to account for failing to properly enforce EU consumer rules. The Commission should consider whether or not it needs additional powers to do this. It should also propose additional powers for competent national authorities, for example in the areas of test purchases, naming of infringing traders, and interim enforcement measures. These authorities should also be able to investigate and take down illegal and infringing websites without having disproportionate procedures. Ensure that prices for digital products and services should not change unfairly on the basis of where consumers come from in the EU. The Commission should review the extent to which consumers are discriminated against online on the basis of their location and the economic and consumer consequences of this; and propose the necessary steps to address any unfair discrimination. This should build on the Commission s recent initiative with regard to car rental companies. 12 Prices of course can differ legitimately, for example because of sales tax or delivery costs, but there should be no unjustified discrimination based on your IP address. Proposals to make it easier for businesses to set up and operate online, and trade across borders The internet offers innovators unlimited ways of offering better products and services, as long as we don t have regulation that is easy to comply with for the big incumbents but a struggle for all other businesses. We have to design rules that help new entrants by providing a level playing field, not an obstacle course that defeats many would-be online exporters at the first hurdle. The Commission s new investment plan highlights the need to remove barriers to service provision across the EU this approach should apply equally to the digital market. 13 12 http://europa.eu/rapid/press-release_ip-14-917_en.htm 13 UK Vision for the EU s digital economy http://engage.number10.gov.uk/digital-single-market/
The Commission therefore should: Bring forward a package of legislative and non-legislative measures to make it easier to set up and operate online across all 28 Member States. There should be a single digital process for every step required in setting up and operating online and, once a company has gone through that process in one MS, it should be valid across the EU. This would cover: o Registering a website domain name, with no requirement for a physical/ service address in the country providing the name. The Commission should consider whether such establishment requirements are consistent with the free movement of goods and services and if necessary take enforcement action. o Enabling companies to be formed within 24 hours, with all company law requirements able to be fulfilled electronically. Not all MS are currently meeting the EU s targets for quick, online registration and MS should be strongly encouraged to make the necessary changes to their domestic legislation to enable companies to do so. o Registering to pay VAT on all e-commerce within the EU through continuing to push for further modernisation and simplification of the VAT rules for business trading across the EU. This includes looking at an expansion of the VAT Mini One Stop Shop IT system which allows businesses to register and declare VAT through one Member State only, and the further development of an EU Web Portal to provide EU businesses with more and better information about the VAT rules in Member States. o Navigating national identity requirements through a secure, businessfriendly, cross-border electronic identity process. This will make it easier for businesses to confirm their identity when dealing with online services anywhere around the EU. That means working with other Member States in the eidas Regulation working group to ensure that businesses and individuals can prove who they are when accessing public or private services online. o Finding information on how to trade online in any Member State. Although some of this is currently provided by mechanisms such as Points of Single Contact (required under the EU Services Directive), the quality of these vary across Member States and they are not always comprehensive (particularly for online operation) or user-friendly. The Commission should propose measures to improve the quality of PSCs when publishing its single market strategy later this year and, building on the current mechanisms, ensure that these effectively deliver information on how to trade online. Ensure the process for collecting VAT works for small and micro businesses operating across borders, to prevent them being discouraged from selling outside their home Member State. The changes to VAT rules which took
effect from 1 January 2015 will ensure that large corporates pay tax fairly. But they were agreed before the rise of small, agile online businesses, some of which may face disproportionate difficulties in meeting these requirements. So, in addition to a single point for VAT registration and guidance, consideration should be given to a single cross-border VAT threshold below which businesses should not have to pay VAT or file a VAT return. Once a micro-business is big enough to reach this threshold, the Mini One Stop Shop service should relieve the burden where they operate across borders. Take action to remove national sales promotion laws that dictate when businesses can offer discounts, for examples bans on two-for-one offers. These create arbitrary geographical restrictions to consumers ability to get the best deal from anywhere in the EU. Explore whether there is value in revisiting the Rome I regulation to see how well it is operating in the context of the Digital Single Market. For example, there is an argument that if a UK consumer is happy to accept French law when physically purchasing in France there should be no difference when buying from the same business online, provided the consumer is aware what the relevant law would be. Any revision of Rome I would need to ensure one of its fundamental purposes, the protection of consumers, was maintained. Ensure that the industry-led EU Parcels Roadmap delivers its objectives of achieving a single market in parcel delivery by mid-2015, in particular the availability of more transparent information between operators, retailers and consumers. If this outcome is not achieved, the Commission should take further action, including considering the potential for regulatory solutions, taking into account the need to maintain the competitive and innovative domestic parcels markets that exist in some Member States. Review labelling rules to consider whether physical consumer labelling (for example, on clothing and non-essential information on food) could be optional where the relevant information is provided online at the point of purchase. Online retailers would have to provide exactly the same information in order that consumer protections are not weakened for online buyers, but would have the freedom to provide the information digitally rather than physically on the product. Engage with industry to understand the role of identity in delivering online services, such as in the financial sector where there are regulatory requirements around the user's identity, and in the sharing economy where building trust in the user is important to business growth. Push for the timely implementation of the Interchange Fee Regulation and agreement to update the Payments Services Directive. The completion of these legislative measures will remove significant barriers to e-commerce and benefit EU business and consumers by reducing costs. The Commission should focus on the implementation of these measures once agreed, and to be proactive and ambitious in developing new proposals.