On 25 May 2016 the European Commission published legislative proposals aimed at promoting the single market in e-commerce to enable consumers and companies to buy and sell products and services online more easily and confidently across the EU.
Where has this come from?
In May 2015, the European Commission adopted its Digital Single Market Strategy, to identify business practices which may hamper competition in e-commerce sales straddling national borders. This sits alongside the Commission's Single Market Strategy, adopted in October 2015, which aims to fight discrimination based on nationality or place of residence.
These strategies have resulted in host of inquiries and publications, including a report published in March 2016, setting out the Commission’s preliminary findings on geo-blocking. There is an ever expanding body of evidence indicating that the Single Market is not working effectively in cross border e-commerce in respect of the sales of both goods and services.
What are the proposals?
As noted above, the proposals are aimed at addressing the barriers to improved functioning of a digital Single Market.
1. Preventing geo-blocking and other forms of discrimination based on nationality or place of residence
The proposals seek to prevent businesses discriminating against cross-border customers by price, sales or payment conditions, unless it is objectively justifiable (for example, VAT). Whilst this non-discriminatory principle already exists under the Services Directive, these proposals are seeking to provide greater legal certainty and enforceability for products and services online and offline. The geo-blocking legislation will also be supplemented by new legislation designed to increase price transparency and regulatory oversight of cross-border delivery services.
2. Increasing consumer trust in e-commerce
Revisions are also being made to strengthen and extend existing consumer legislation and to provide for the equal and consistent enforcement of consumer laws across the EU (which will include the new rules on geo-blocking). The existing Consumer Protection Cooperation Regulation will be revised, by giving national authorities greater powers to better enforce consumer rights and providing for a single procedure, coordinated by the Commission, where problems have an EU dimension.
In addition, updated guidance on unfair commercial practices will also be published, to clarify the application of the Unfair Commercial Practices Directive, including clarification of existing consumer rules relating to the travel sector, specifically air travel, package holidays, car rentals and hotel accommodation.
It should be noted that these proposals form part of the Commission’s ongoing Digital Single Market Strategy, although the Digital Single Market Strategy is just one measure aimed at benefiting consumers in online markets. The new proposals will sit alongside general principles of competition law. For example rules that restrict illegal resale price maintenance, exclusivity and other pricing restrictions – such as price parity, or “most favoured nation” clauses which have received such intense scrutiny in the hotel sector – will continue to apply.
What happens now?
These proposals are first stage in the legislative process and will now pass to the European Parliament and national governments (acting in the Council of the EU) for adoption. Whilst the timing of the process is uncertain, it is likely that certain parts the new legislation will take effect in 2017 with the remainder to follow in 2018. Once formally adopted, Member States will not need to introduce domestic legislation to give effect to the new rules.
How this could affect you?
With estimates that a fully functioning Digital Single Market could contribute approximately €415 billion to European GDP, businesses that are quick to act off the back to these proposals stand to gain the most. Those operating in the hotels sector should also be mindful that agreements with customers and/or third parties (including online travel agents) comply with competition law.