Going digital—e-commerce and the Digital Single Market

The European Commission recently launched its Digital Single Market, as well as an inquiry into potential competition concerns in e-commerce markets.

https://twitter.com/DigitalAgendaEU/status/600582084051247104

Richard Eccles, a partner at Bird & Bird LLP, examines these dual developments:

What is the significance of these latest developments?

The European Commission published its Communication on a Digital Single Market Strategy for Europe on 6 May 2015. This document contains proposals for a wide range of initiatives, many of them legislative, to remove barriers to online trading in the EU.

The aim of the Digital Single Market is to remove regulatory barriers to trade between the 28 national markets within the EU. The Commission estimates that a fully functional Digital Single Market would contribute €415bn per annum to the EU economy.

The Digital Single Market Strategy is built on three pillars:

  • improving access for consumers and businesses to digital goods and services across Europe
  • creating the right conditions and a level playing field for digital networks and innovative services, and
  • maximising the growth potential of the digital economy

Within the first pillar, improving access for consumers and businesses to digital goods and services, the Commission's proposals include the following:

  • legislative proposals to reduce the differences between national copyright regimes and allow for wider online access to works by users across the EU, including through further harmonisation measures—these proposals will include portability of legally acquired content, ensuring cross-border access to legally purchased online services (while safeguarding the value of rights in the audio visual sector) and modernising enforcement of intellectual property rights
  • action to end ‘unjustified’ geo-blocking—geo-blocking generally involves the use of technical means to prevent users outside a designated territory gaining access to a website, or techniques for re-routing consumers in certain geographical areas to a different website (where the relevant products or prices might differ)
  • measures to improve regulatory oversight and price transparency of parcel delivery
  • new harmonised contract rules across the EU for online purchases of digital content, with a set of mandatory EU contractual rights for domestic and cross-border online sales of goods

Under the second pillar, creating the right conditions for digital networks and services to flourish, the Commission’s proposals include:

  • a review and reform of the telecommunications regulatory framework aiming to achieve a consistent approach to spectrum policy and management, to incentivise investment in high speed broadband networks and to improve the effectiveness of the regulatory institutional framework
  • a review of the role of platforms in the single market covering, among other things, transparency in search results, conditions for the use of copyright-protected content by intermediaries, and how best to tackle illegal content on the internet
  • a review of the Audiovisual Media Services Directive 2013/13/EU, to determine, among other things, whether new services and players should be brought within its scope
  • establishing a public-private partnership on cybersecurity and solutions for online network security, and a review of the e-Privacy Directive 2002/58/EC

Under the third pillar, maximising the growth potential of the Digital Economy, the Commission is proposing various initiatives including a ‘free flow of data’ initiative to tackle restrictions on the free movement of data other than for reasons of protection of personal data, and the adoption of a plan to identify and define key priorities for standardisation—for example, in relation to e-health, e-freight and smart metering.

The Digital Single Market proposals are therefore extensive.

At the same time, as a related matter, the Commission has also launched a sector enquiry, under EU competition law, of the e-commerce sector. This sector enquiry will cover barriers caused by companies to cross-border e-commerce trade, with a view to using the information gained in the subsequent enforcement of competition law in the e-commerce sector, including through individual anti-trust proceedings. Electronics, clothing, shoes and digital services are given as examples of the product areas on which the Commission will focus, being some of the product sectors in which e-commerce is used most widely.

The Commission has indicated that geo-blocking of access to websites will be an important feature of the competition law sector enquiry. This could cover contractual obligations on a reseller to geo-block certain data products or services, for example, as well as geo-blocking conduct by dominant companies.

There is reference to the Common European Sales Law. Given that this is likely to be optional, what impact will this measure have in practice?

The Commission is planning to propose legislation for a single, effective set of contract rules for cross-border purchases of digital content and for a set of mandatory EU contractual rights for online sales of physical products. It is intended that a simplified and modern set of rules for online and digital cross-border purchases ‘will encourage more businesses to sell online across borders and increase consumer confidence in cross-border e-commerce’.

The Commission states that companies should be able to manage their sales under a common set of rules and that, while some aspects of consumer and contract law have already been fully harmonised for online sales, for other aspects of the contract, no specific EU rules exist as yet—for example, as regards remedies for defective digital content purchased online (such as e-books).

How is the Commission proposing to reduce administrative VAT burdens for businesses?

The Commission plans to reduce VAT related burdens for cross-border sales. The measures to be proposed in this area include the introduction of a common EU-wide simplification measure (VAT threshold) to help small start-up e-commerce businesses, and allowing for home country controls including a single audit of cross-border businesses for VAT purposes. The Commission states:

Instead of having to declare and pay VAT to each individual member state where their customers are based, businesses would be able to make a single declaration and payment in their own member state.’

How realistic is the deadline of the end of 2016 for the 16 initiatives to be implemented?

The Commission has set a challenging timetable for its roadmap for completing the Digital Single Market. All of the proposals are to be introduced by the end of 2016— for many of the proposals under the first pillar, 2015 is given as the timescale. Final adoption of the relevant legislation in each case would of course be likely to take longer.

The Commission’s e-commerce competition law sector enquiry is to take almost two years. The Commission plans to issue its final report in the first quarter of 2017, with a preliminary report for consultation in mid-2016.

Interviewed by Alex Heshmaty. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

A Digital Single Market for Europe: Commission sets out 16 initiatives to make it happen:

https://www.youtube.com/watch?v=ORGNoRLo80c

Digital Single Market: can it fulfill expectations?

https://www.youtube.com/watch?v=nCV41nnblao

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