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Commission Proposes E-Commerce Legislation Package

On 25 May 2016, the European Commission presented a three-pronged package aimed at promoting e-commerce across the EU. The proposed legislation is intended to advance three goals:

  • first, limiting discriminatory practices like geoblocking;
  • second, making cross-border parcel delivery more affordable, transparent and efficient;
  • and third, promoting customer trust through better protection and enforcement mechanisms.

The proposed legislation applies to all traders offering their products and services to European consumers in the EU, regardless of whether traders are established in the EU or in a third country. As such, Hong Kong retailers and distributors operating online or offline in EU markets should be aware of these proposals.

Discriminatory sales practices: Previous EU legislation established a principle of non-discrimination in the consumer market. However, existing rules are deemed ambiguous and difficult to enforce. The Commission claims that the new package will more effectively ban discriminatory behaviour. These proposed regulations define specific situations where customers cannot be denied access to products and services solely for reasons relating to nationality, place of residence or place of establishment.

Geoblocking refers to discriminatory practices where access to websites as well as certain products or services on the site are denied to a customer of different nationality or place of residence. The proposed regulations prohibit re-routing (in a way that the consumer is limited to a country-specific website) without the customer’s prior consent.

Additional instances of unjustified discriminatory practices include the sale of products without cross-border delivery options, and sale of electronically supplied services to non-national clients for additional fees. Further, discriminatory payment requirements will be prohibited if these three conditions are met:

1. Payments are made through electronic transactions by credit transfer, direct debit, or a card-based payment instrument;
2. The trader can request strong customer authentication by the payer, and
3. The payments are in a currency that the trader accepts.

The draft package does not impose on traders an obligation to deliver across the EU. It exempts small businesses that fall under a national VAT threshold from certain provisions. Restrictions do not concern services already covered by sector-specific legislation or those not easily traded across borders, including transport services, retail financial services, and audiovisual services.

Moreover, there would still be valid reasons for treating customers differently (e.g. not selling if a particular product is out of stock). The proposal does not address pricing as such, nor does it address dynamic pricing, where traders adapt their offers over time, depending on a number of factors (competitor-pricing, supply and demand, and other external factors in the market). Exceptions also exist where national or EU legal requirements may oblige the trader to block access (e.g. a prohibition to sell alcohol to non-residents).

Cross-border deliveries: The proposed regulations’ second prong aims to increase price transparency and regulatory oversight of cross-border parcel delivery services. Parcel delivery providers with 50 or more employees or who are active in more than one EU country would be required to send national postal regulators basic information about their operations (e.g. name, address) and annual updates on volumes, turnover and number of employees. Only parcel delivery providers who do not already submit information to national postal regulators have this additional responsibility.

There is no cap on delivery prices. Price regulation would only be a means of last resort, where competition does not bring satisfactory results. The Commission will assess progress made in 2019 and decide if further measures are necessary.

Consumer trust and protection: A proposed revision of the 2007 Consumer Protection Cooperation Regulation will give more powers to national authorities to enforce consumer rights. For example, the Commission, in conjunction with national authorities, will be able to check if websites geo-block consumers or offer after-sales conditions not respecting EU rules (e.g. the right to withdraw from a contract). Authorities will also be able to order the immediate take-down of websites hosting scams. Furthermore, they would be able to request information from domain registrars and banks to detect the identity of the responsible trader.

The proposal concerning consumer trust and protection does not impose legal obligations on businesses. It streamlines administrative systems for the enforcement of existing consumer laws and simplifies the business environment, especially in the EU's Digital Single Market. Businesses operating in all or a large majority of Member States will benefit from a one-stop-shop approach. A possibility to negotiate commitments at EU level, the Commission hopes, will make it simpler, faster and cheaper for the businesses to resolve consumer issues.

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