The impact of the Digital Single Market strategy on E-Commerce: what are the trickle down effects for corporations and consumers?

Speakers: Constantin Simona, McMillan Neil
Moderator: Crofts Lewis

On Wednesday, 23rd of June, at the premises of Science14 Atrium in Brussels, PubAffairs Bruxelles hosted a debate on the theme of the impact of the Digital Single Market strategy on E-Commerce and the trickle down effects for corporations and consumers. The debate was moderated by Lewis Crofts, Chief Correspondent at Mlex,while the discussants were Mrs Simona ConstantinMember of Cabinet of Commissioner Vĕra Jourová, Mr Geoffrey Mamdani, Case Handler, DG COMP, European Commission and Mr Neil McMillan, Director, Advocacy and Political Affairs, EuroCommerce.

In the first part of the debate, Lewis Crofts introduced the speakers, the theme of the debate and the main topics which the discussion should be investigating into. He then gave the floor to the discussants by asking their opinion on the current European Commission investigation on e-commerce. The speakers could consequently proceed to give their preliminary statements and discuss the issues at stake.

Mr Mamdani started his intervention by stating that e-commerce is only at its initial stage of development in Europe as while half of the population buys goods and services on-line, less than one-sixth shop cross-border, and e-commerce is consequently developing mainly at national level. He continued by stating that this situation is due to a number of factors including cultural, regulatory and fiscal hurdles as well as barriers created by businesses. For these reasons, among the sixteen actions that form part of the Digital Single Market strategy, a competition sector inquiry was included. Mr Mamdani further explained that competition authorities have indications that the actions of businesses, in particular vertical agreements between suppliers and retailers, have played a role in limiting cross-border e-commerce. The aim of the sector inquiry is therefore to understand not only how common such agreements are, but also, more broadly, to better understand the current market dynamics.

Mrs Constantin started her intervention by saying that the Digital Single Market strategy encompasses various policy sectors and as such represents both a series of challenges and a number of opportunities for European institutions. For example, from a justice and consumer protection point of view, the strategy offers the occasion to further concentrate in the current legislative package on the issue of data protection reform as this domain is, in her opinion, a key enabler for the functioning of a Europe-wide Digital Single Market. She continued by stating that another issue which is relevant for the Digital Single Market, regards rules for on-line sales of digital content and tangible goods and added that the question of harmonising consumer contract law legislation has been often pointed out as one of the obstacles to e-commerce in Europe. As there is a fair amount of evidence that e-commerce as such is a fragmented landscape in terms of regulation, the Commission aims to implement a targeted harmonisation of key contract law measures for the benefit of both businesses and consumers and to address the matter of the lack of judicial remedies, as even national legislations often struggle to provide adequate protection for consumers and, ultimately, to offer them a greater degree of choice.

Mr McMillan started his intervention by stating that, while both consumers and suppliers were increasingly willing to conduct business on-line, the EU lagged far behind the US in penetration. This difference could be explained by the way that EU and differing national regulation had not yet made it possible to address all member states as a single market. The growth of e-commerce would help the growth of the EU economy as a whole. But since a lot of e-commerce was still in physical goods the Digital Single Market would only work if the Single Market worked too; this, in his opinion, was still struggling to be achieved. Mr McMillan concluded by highlighting that SMEs should be the main beneficiaries of the Digital Single Market, but were paradoxically being held back most by the high administrative and regulatory costs that current lack of consistent regulation allowed.

A first focal point of discussion consisted of the reasons for the current low level of cross-border e-commerce in Europe. With regard to this question,  Mrs Constantin premised that, in her opinion, the principle which should guide the judgement on barriers is the need to facilitate consumers to purchase on-line. She added that, from a juridical point of view, there are often regulatory discrepancies between the applicable contract law from the merchant perspective, which is notably the one of the country where the business is established and the applicable consumer protection law, which varies in consequence of where the consumer resides. For this reason, the Commission is investigating the extent to which an harmonisation of consumers’ rights is possible as consolidating European standard of consumer protection can enhance trust and confidence in cross-border e-commerce. Within this framework, she concluded, the practices, the reasons and the definitions of what justified and unjustified barriers are, are to be researched. Mr McMillan stated that businesses are always interested in expanding their activities and that the Digital Single Market initiative certainly gives a valuable opportunity in this respect. Nonetheless, he added that there is still room for improvement in terms of harmonisation. Mr McMillan further expressed concern about future labelling regulatory requirements, which would have to be met by suppliers. In this regard, he suggested taking a closer look at how to best simplify the procedures. Mr Mamdani reiterated the opinion that while it is difficult to define the root causes of e-commerce barriers within the single market, one the main purposes of the on-going sector inquiry is the attempt to define the larger dynamics of barriers to digital commerce in Europe, including the commercial drivers of restrictions on cross-border.e-commerce activity.

A second focal point of discussion consisted of the interrelation between territorial restrictions, companies freedom of market choice and commercialisation timing, and the difference between on-line and off-line commerce. On these matters, Mr Mamdani noted that competition policy does not address unilateral decisions of non-dominant companies. He further explained that one of the aims of the sector inquiry is to understand the commercial logic behind certain restrictions, in the context of enhancing knowledge of e-commerce markets. Mr McMillan elaborated that there should be no substantial difference in treatment between off-line and on-line commerce. Retail and wholesale were already heavily regulated, but a plethora of national rules made it difficult to serve consumers in a seamless way across Europe. He welcomed the approach to better regulation adopted by the Commission, as well as the initiatives in the Digital Single Market paper on such things as the cost of parcel delivery. Mrs Constantin reiterated that an harmonisation of consumers protection law is a pivotal point to enhance e-commerce and eliminate barriers to on-line purchasing, and that solutions such as a European dispute resolution settlement mechanism are to be taken in consideration as regards enforcement of rights. She specified that a balanced approach towards the needs of both consumers and businesses is needed as the very point of the current wave of legislation is to facilitate the relation between these two actors. She also remarked that although there should be in principle no differentiation between on-line and off-line commerce, their peculiarities shall be taken into account, especially given the need to act now on the Digital Single Market which is lagging behind. She concluded by saying that, in terms of consumers rights, the Commission is more looking at regulating the key existing gaps and ”enablers” to commerce, and not an entire overhaul of consumers rights law.

The final part of the debate and the Q&A session also covered the following issuesthe role of sector inquiries, the pay TV sector specificities, the differences between new and old business models, the differences between tangible and intangible goods, the question of geo-blocking for intangible goods, the question of how to ensure a forward-looking Digital Single Market strategy, the question of copyright harmonisation, the question of the pace of  the EU law harmonisation process, the parcel delivery domain, the question of how to develop new business models with special regard to SMEs, the difference between the future digital contracts proposal and the Common European Sales Law proposal, the question of labelling, the coherence between the various approaches suggested by the Commission, the role of platforms within the e-commerce sector.

Do you want to go further into the issues discussed in our debate? Check our list of selected sources which we have provided for you

Digital Single Market, European Commission

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

Digital single market: creating opportunities for European companies, European Parliament

Driving forward the Digital Single Market, European Commision, DG Just

European Commission, DG Competition website

EuroCommerce Resource Center

Europe’s Digital Single Market strategy: what is it and what does it mean for e-commerce?, Siliconrepublic.com

Action 9: Updating the e-Commerce Directive, A Europe 2020 Inititive, Digital Agenda for Europe, European Commission