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The freedom to shop

One of the founding freedoms of the European Union is the free movement of goods and services between Member States. The freedom to shop in and from other Member States is literally enshrined into EU law.

June 2015

The issue of what to do about the faulty leaning tower of Pisa lamp you bought on holiday in Italy has always been a pressing one but with the advent of e-commerce, not only has the potential to buy increased, so have the challenges to cross-border shopping. 

The European Commission (Commission) has identified enabling better online access for consumers and business across Europe as one of the three pillars of its Digital Single Market (DSM) strategy, published in early May. Producing cross-border e-commerce rules that consumers and business can trust is at the heart of the strategy.  Other elements such as reform of copyright law and an end to unjustified geo-blocking are dealt with in 'What might a Digital Single Market for content look like?' and 'What is the EC proposing to ensure effective competition in the digital market?'.

There has been considerable harmonisation of European consumer protection laws already, most recently with the Consumer Rights Directive which deals, in part, with distance sales.  There can be no doubt though that a number of barriers remain.  The Commission estimates that EU consumers could save Euros 11.7bn per year if they had the choice of the full range of goods and services sold online in the EU.  Looking at the issue from the opposite perspective, there would be obvious benefits to business, in particular to SMEs, if cross-border selling were easier.

In the DSM strategy, the Commission identifies a number of issues which prevent European e-commerce from reaching its full potential.

For consumers, there is a lack of confidence when purchasing from other Member States.  This is caused partially by language issues but also by confusion and uncertainty as to their rights and remedies when purchasing outside their own country.  In addition, there are widespread concerns about data security and about potentially high delivery and returns charges.

bank card on laptopIt's not just consumers who find the EU consumer protection landscape hostile.  57% of companies (according to DSM strategy) say they would either start or increase their online sales to other EU Member States if there were a single EU set of rules for e-commerce.  This applies not just to basic contractual rights and remedies but also to rules on packaging and labelling.

So how is the Commission proposing to bring down these barriers?

  • The Commission will make an amended proposal covering harmonised EU rules for online purchases of digital content and allowing traders to rely on their national laws based on a focused set of key mandatory contractual rights for domestic and cross-border online sales of tangible goods; and
  • there will be a proposal for a review of the Regulation on Consumer Protection Cooperation in order to develop more efficient cooperation mechanisms.

As many readers of Download will know, the UK has just introduced its own rules for online purchases of digital content in the Consumer Rights Act (CRA), passed in March 2015 and likely to come into full effect on 1 October 2015.  While the concept of treating digital content as a separate category of content (and, indeed the definition of "Digital Content") come from the European Consumer Rights Directive, the DSM Strategy Working Document cites the CRA as a potential threat to cross border e-commerce even while acknowledging that the EU has been slow on the uptake regarding laws on digital content: "There is also a risk of specific, new, divergent national laws appearing.  For instance, the UK has recently adopted new rules on the conformity with the contract and the corresponding remedies for certain digital content products".  Is this a slap on the wrist and does it mean (assuming we remain in the EU) that the shiny, new CRA may soon need to be amended?

The issue of harmonising business to consumer law is one which the Commission has wrestled with for some time and it is hard not to think about the fate of the Common European Sales Law (CESL) when reading the DSM Strategy.   The CESL proposals were withdrawn in January 2015, ostensibly to make way for amended proposals a part of the DSM project but it is fair to say that they had become so bogged down and so controversial that their demise was inevitable.

yellows balls through gateThe CESL was an attempt to create an optional pan-European contractual instrument for cross-border online sales between businesses and consumers and businesses where one business was an SME.  The European Parliament strongly backed the CESL but it faltered in the Council.  The UK, along with France and Germany, were strongly opposed.

Quite apart from drafting issues, there were a number of conceptual difficulties with the CESL.  The UK argued that far from reducing costs, the burden to business of having to get to grips with another contractual regime would outweigh any potential benefits and consumers would also have to understand an entirely new set of rules creating confusion between systems rather than providing a single, clear system.  There was also the problem with the interaction with Member State law.

The UK has a common law system which means that case law is used to develop and clarify the legal framework.  Judges have a central role in making the law and lower court judges are bound by the judgments of higher courts when dealing with the same issues.  By contrast, many European countries have a Civil law system in which statute is the primary source of law and the law is highly codified.  Judges have a less significant role in interpretation and their judgments are relied on as guidance rather than binding law.  The interaction of a new contractual framework with these very different systems, not to mention the creation of a new body of English case law which would not necessarily be reflected in other Member States as well as the burden placed on the courts with no existing case law in such an important area, mean we are now unlikely to see the new proposals revive a recommended separate contractual instrument.  The DSM strategy document suggests that we are more likely to see a Directive with minimum harmonisation standards and consumer rights.  We will have to wait until at least the end of the year to find out more.

The second proposed limb of consumer law reform is in connection with enforcement: "just having a common set of rules is not enough.  There is also a need for more rapid, agile and consistent enforcement of consumer rules for online and digital purchases to make them fully effective", says the Commission.  The first step will be proposals to review the Regulation on Consumer Protection Cooperation and the creation of an EU-wide online dispute resolution platform in 2016 under the already enacted ADR Directive.

Perhaps the other areas of most concern to consumers buying online are what happens to their personal data and cyber security.  While these are not dealt with by the DSM strategy under the same pillar as reforming e-commerce rules, but rather under the pillar "Creating the right conditions and a level playing field for advance digital networks and innovative services", because the issues go wider than e-commerce, data protection and cyber security are essential to consumer confidence in cross-border e-commerce.

EU flagsOf course, there is a pan-European data protection Directive but this has been implemented in different ways across the various Member States.  Proposals for data protection reform are well underway with the General Data Protection Regulation.  The sceptical among us expect the Regulation to be passed next year but the DSM strategy suggests it will be pushed through this year and followed up with a review of the e-Privacy Directive.  The Commission is also relying on the Network Information Security Directive (in the final stages of negotiation) to spearhead a European cyber security strategy.

We know that the creaking legislative machine of the European Union will struggle to deal with the widespread reforms being proposed and many in the UK are probably wondering whether we'll still be part of the Union when they go through.  Even if we do leave the EU though, we are going to need to continue to trade with other Member States and will, therefore, need to comply with EU consumer protection, e-commerce and data protection rules when doing so.

Find more content and resources on our Digital Single Market hub.

If you have any questions on this article please contact us.

shopping carts online
Debbie Heywood

Debbie looks at the Commission's proposals to remove barriers to e-commerce.

"The issue of harmonising business to consumer law is one which the Commission has wrestled with for some time and it is hard not to think about the fate of the Common European Sales Law when reading the DSM strategy."