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Communication on e-commerce – frequently asked questions

Commission Européenne - MEMO/12/5   11/01/2012

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MEMO/12/5

Brussels, 11 January 2012

Communication on e-commerce – frequently asked questions

1. Why is the European Commission adopting this Communication?

The Internet in general, and electronic commerce - or e-commerce - in particular have enormous potential for boosting growth and creating jobs. In some G8 countries the Internet has accounted for 20% of economic growth and 25% of job growth in the last five years1. For every job that is lost by the introduction of information technology, the online sector creates 2.6 new jobs2. Companies that exploit the full potential of the Internet create more than twice as many jobs as the average company. In Europe, this potential remains largely untapped. The Internet only accounts for less than 3% of the EU economy (gross domestic product) and only 3.4% of all products and services are sold over the Internet.

The EU Single Market for e-commerce is still not functioning as it should as there are significant differences in the rules, standards and practices applied to e-commerce within individual Member States. As a result, companies find it difficult to provide online services or to sell goods across EU borders, and citizens miss out on the opportunity to purchase goods and services from websites based in other EU countries.

This communication sets out an action plan to overcome these problems and make e-commerce in Europe work for the benefit of all Europeans.

2. What kinds of activities are covered by e-commerce?

E-commerce is a term which signifies the sale of any goods or services on the Internet, ranging from flight tickets to garden furniture, newspaper subscriptions, 'apps' (smart phone applications) or music. But the communication also deals more broadly with any commercial service that a company offers, such as free web based email accounts, search engines, Internet call services (Voice over Internet Protocol services), news services or social networks. These services are often financed by advertising revenues.

3. What does the Communication on e-commerce actually propose?

The Communication contains an action plan to boost e-commerce in Europe. It is based on the belief that the EU can double the contribution e-commerce and the Internet make to the European economy from their current values of 3.4% of the retail sales sector and less than 3% of the EU economy respectively.

In order to achieve this, the Commission proposes actions which will lead to substantial and measureable improvements in a number of areas:

a) Better access to different kinds of online services for consumers across the EU

The Commission will:

- extend the Internal Market Information System (IMI) and the Consumer Protection Cooperation network (CPC); in order to ensure the correct application of the E-commerce Directive and of the Directives protecting consumers online;

- quickly implement the European strategy for intellectual property rights, in particular by presenting a legislative initiative on private copying (2013) and a review of the Directive on copyright in the information society (2012);

- report on the outcome of the consultation on the online distribution of audiovisual works (mid-2012); and

- ensure that the new rules on selective distribution are rigorously applied.

b) Easier ways to buy and pay for products online

The Commission will take a number of initiatives to further develop the market for payments by card, Internet or mobile phones, on the basis of the responses to a Green Paper adopted today (see IP/12/11 and MEMO/12/6). The Green Paper looks at (i) the barriers to entry and competitive environment in these markets, (ii) what needs to be done to ensure that these payment services are transparent for both consumers and sellers, (iii) how to improve and accelerate the standardisation and interoperability of payments by card, Internet or mobile phone (iv) how to increase the level of payment security and data protection. The Commission will present conclusions by mid-2012.

c) More efficient and affordable delivery of products across Europe

In 2012 the Commission will launch a consultation on parcel delivery, with a particular focus on cross-border deliveries. This will draw on the results of the study on the costs of cross-border postal services, in order to try to identify possible solutions to delivery problems encountered by businesses and consumers. The Commission will present the conclusions of this exercise and the next steps by the end of 2012.

d) More transparency on companies and prices on the Internet and better consumer protection

The Commission will:

- improve training for online traders in their obligations and the opportunities offered by the Digital Single Market, in particular through the Enterprise Europe Network. The Network of European Consumer Centres can provide input on consumer issues;

- encourage the development of transparent cross-border, price and quality comparison sites through dialogue with information intermediaries;

- boost the capacity of the Consumer Protection Cooperation (CPC) Network which consists of national authorities enforcing consumer legislation equipping it with instruments able to ensure the implementation of relevant legislation at European level;

- adopt a "European Consumer Agenda" in 2012 including digital issues, which proposes actions to guarantee an appropriate level of information and customer care online;

- present a European action plan for online gambling which will focus on administrative cooperation, consumer protection and the development of a legal market (2012); and

- ensure the adequate protection of patients purchasing medicines online through the application of the directive on falsified medicines; this will include contributing to the creation of “trust marks” to allow the identification of legal distance-selling websites, monitoring the development of falsified medicines and examining the potential specific risks linked to the online sale of medicines.

e) Better protection against abuses on the Internet

The Commission will:

- adopt an initiative on notice and action procedures in 2012 (see question 8); and

- propose an overall strategy for Internet Security in Europe in 2012 that will increase protection against cyber attacks, for instance through the establishment of the European Cybercrime Centre by 2013.

f) A better offer of high-speed Internet and better communication infrastructure for more citizens

The Commission will:

- adopt a recommendation on access-pricing schemes in the wholesale market in order to stimulate investment in fibre deployment (2012), prepare the projects which will benefit from the Connecting Europe Facility (2012-13) (IP/11/1200) and adopt a recommendation on the 2009 guidelines on State aid for high-speed networks (2012) (see also question 16);

- take the necessary measures to implement the radio spectrum policy programme (2012); and

- adopt an overall strategy on cloud computing (2012).

4. Who will benefit from a better-functioning Internal Market for e-commerce and how?

Consumers will benefit from a wider range of goods and services and lower prices, thanks in particular to online price and quality comparisons.

A better-functioning Internal Market for e-commerce will also create jobs, help people look for jobs, or work from home. It will bring environmental benefits because it will reduce the need for physical production methods (e.g. through more purchases of digital music or online newspapers) and cut the frequency of certain journeys (e.g. more working from home or provision of advice online).

There is a lot to gain. The cost of the failure to complete the Digital Single Market could be at least 4.1% of GDP between now and 2020, i.e. €500 billion or the equivalent of €1 000 per citizen.

A study into e-commerce in goods3 (as opposed to services) showed that consumers can save about €11.7 billion a year (an amount equivalent to 0.12% of EU GDP) thanks to lower prices and wider choice.

If e-commerce were to grow to 15% of the total retail sector and Single Market barriers were eliminated, total consumer welfare gains would reach around €204 billion, equivalent to 1.7% of EU GDP. This is four times higher than a situation with a similar share of Internet retailing, the continued existence of 27 fragmented national consumer markets. Two-thirds of consumer welfare gains are due to increased online choice, which is considerably larger across borders.

5. What is the link with other Commission initiatives?

The Communication responds directly to the request of the European Council of June 2011 to submit a roadmap for achieving an internal digital market by 2015. As such, it is linked to a number of ongoing EU initiatives launched under the Europe 2020 strategy4 for growth & jobs.

In particular:

- the Communication follows on directly from the 2009 Commission Communication on cross-border business-to-consumer e-commerce, the conclusions of which are still relevant.

- the Communication marks a big step forward in the implementation of the Digital Agenda for Europe since it identifies specific individual components of a coherent and strategic approach to encouraging the development of online services.

- as a follow-up to the Single Market Act, it deepens the Digital Single Market lever (IP/11/469).

The action plan focuses on new actions only. Actions previously announced in either the Digital Agenda or the Single Market Act are not repeated in this action plan, even if they are relevant to the development of e-commerce (for instance: the proposal for a Common European Sales Law, and the common regulatory framework for mutual recognition of eID and eSignatures).

6. Why not simply revise the e-commerce Directive?

The e-commerce Directive (2000/31/EC) contains rules which facilitate the offer of online services in the EU and ensure, in the interests of consumer protection, that these services meet certain standards.

The E-commerce Directive for instance determines that online service providers only need to comply with rules from the country in which they are established. The Directive also obliges service providers to place their contact details on their websites, and ensures that advertisements can easily be identified as such. It also sets out a "safe harbour" in the form of a liability exemption for online intermediary companies if they comply with certain conditions (see question 7).

In the second half of 2010, the Commission consulted stakeholders on the functioning of the Directive. Despite the numerous technological and business developments in the 10 years since its adoption, stakeholders consider that the Directive still offers a sound and balanced framework for the development of e-commerce.

The vast majority of the 420 responses to the public consultation on e-commerce asked the Commission not to revise the Directive. However, stakeholders said the Commission needed to clarify how certain provisions of the e-commerce Directive should be interpreted.

One of the two Staff Working Papers accompanying the Communication explains how the provisions on intermediary liability have been interpreted by the European Court of Justice and applied by national courts and other administrative bodies.

Stakeholders in particular asked for clarifications about how "notice-and-action procedures" should work in practice and this Communication presents an initiative that will help to clarify this. (see question 8).

In addition the Action Plan seeks to respond to the conclusions of the European Council of June 2011 to identify actions that will complete the Digital Single Market by 2015. Therefore this Communication also addresses the key enabling factors like high speed wireless and fixed broadband, cloud computing and internet security.

7. What exactly does the e-commerce Directive say about the liability of service providers?

Online service providers simply "transmitting" content on the Internet (for instance companies that provide consumers with access to the Internet) cannot be held liable for illegal content that is uploaded by third parties. For example, an Internet access provider cannot be held liable for providing access to an illegal website.

Online service providers that "host"' content on the Internet (for instance websites on which you can view content that users themselves put online) cannot be held liable for illegal content uploaded onto their websites by others, as long as they are not aware of it. However, as soon as they become aware of this illegal content (for example via a notification), they are obliged to remove it or to block access to it immediately.

Finally, governments may not impose a general obligation on online service providers to monitor the content that they transmit or host.

8. What are notice-and-action procedures?

"Notice-and-action" procedures refer to rules on removing or blocking of access to illegal content by an online company, after it has received a request to do so. Internet users can submit a notification of illegal content that they have found displayed on the website of an online intermediary (such as a social network, an online vendor or a search engine). To avoid liability, the E-commerce Directive obliges the online intermediary to take action as soon as it becomes aware of the illegal content. Taking action can take the form of takedown (removing content) or blocking (disabling access to content).

9. Why an initiative on notice-and-action?

In the responses to the public consultation on e-commerce, stakeholders complained that it is not clear how these procedures are meant to work. As a result, illegal content stays online for too long, companies face legal uncertainty and the rights of content providers (like individuals who upload content on the Internet) are not always respected.

The Commission will analyse how notice-and-action procedures can work in a way to best address these concerns. For this purpose, it seeks answers to questions such as: how exactly should an intermediary be notified? Should that be done electronically? Should the notice contain a detailed Internet address? Should a content provider have an opportunity to explain why he thinks certain content is not illegal? If content is illegal, how fast should an intermediary act? Should there be more transparency about the N&A procedures of individual companies?

The Commission wants to involve all stakeholders in this initiative to get the right answers to these and other questions. There will for instance be a targeted public consultation on notice-and-action procedures.

10. What are the main problems faced by online shoppers in the Single Market now?

A study into e-commerce in goods shows that one in five (24%) online shoppers has experienced problems. There does not seem to be any significant link between the sales channel used and the number of problems experienced (with problems in offline transactions experienced by 20% of EU consumers). Similarly, cross-border shoppers do not seem to encounter more problems than domestic shoppers: 14% of consumers shopping online on the domestic market experienced a problem, compared with 13% of those shopping online from other EU countries.

Consumer perceptions of problems when shopping online from other EU countries are lower among those who have tried it. 66% of those consumers who have made at least one cross-border purchase say they are equally confident buying from domestic or foreign EU-based online retailers (compared with 33% for the general population). The main problems currently experienced by online shoppers relate to (a) delivery (b) getting help when things go wrong (c) reliable information.

11. Why are postal delivery services important for e-commerce?

Despite the increase in sales of digital content, there are still many goods which need to be physically delivered to the customer.

Accessible, affordable and high quality postal services are an essential dimension in the overall online purchasing experience of the customer. However, recent studies and consultations demonstrate many customers are reluctant to purchase online, especially cross-border, because of uncertainties relating to final delivery.

In the EU, almost one in two consumers (46.7%) said they were not interested in making a cross-border transaction because of worries about delivery.5

Apart from long delivery periods and high prices for cross-border delivery in comparison to similar domestic service (see also question 13), customers have raised uncertainties about available remedies in case the delivery service is not provided or the purchased item is damaged during delivery.

12. How are postal delivery services regulated in the EU?

The main aim of EU postal reform, initiated in 1992, is to ensure the provision of basic postal services for all citizens across the European Union.

Under the Postal Services Directives all citizens of the EU have the right to basic postal services both domestically and cross-border (e.g. basic letters; basic parcels) and this needs to be guaranteed by Member States.

It is important to differentiate between basic postal services where Member States need to ensure these are provided to all citizens under the same conditions, and value-added services such as express postal services that have traditionally been provided under competitive conditions and without state intervention. Value-added services involve services such as "track & trace", which are more elaborate than basic postal services.

As a consequence, express postal service providers have to comply with the essential requirements in the EU's Postal Directive (e.g. availability of consumer complaints procedures; protection of personal data) and, like other economic sectors, they need to comply with relevant competition rules where applicable (e.g. prohibition of abuse of a dominant position).

13. Why is the Commission proposing a Green Paper on parcel delivery?

A recent study on the cross-border delivery of parcels within the EU6 identified three main obstacles to the development of e-commerce directly linked to postal delivery services:

- price of these services, which is often significantly higher for individual senders than for large senders;

- quality of service, where consumers and retailers are worried about the delivery times and possible damage sustained in the course of the delivery;

- availability of relevant information, where individual senders and SMEs in particular lack relevant information on available alternatives for delivery.

In 2012 the Commission will hold a public consultation on cross-border parcel delivery in order to obtain a better understanding of possible problems in the market and the solutions that are currently being or could be applied by different stakeholders (e.g. regulatory authorities; delivery operators; retailers). Following the public consultation the Commission will assess whether and what further steps and measures may be needed to address outstanding issues.

14. What will the Commission do to help consumers who have a problem with an online transaction?

In accordance with the proposed draft Regulation on Online Dispute Resolution (‘ODR Regulation'), the Commission will develop a single EU-wide online platform (an Online Dispute Resolution platform) which will allow consumers shopping online from other EU countries to get their disputes with traders revolved entirely online and without going to court.

The platform will be linked electronically to the national ADR (‘Alternative Dispute Resolution’) entities which have been set up and notified to the Commission in line with the new rules. National ADR entities will remain responsible for handling individual contractual disputes which the platform refers to them.

The ODR system will be effective thanks to a set of common rules. These will include the role of national contact points acting as ODR facilitators in the respective country, and the requirement to deliver a solution within 30 days.

For more info see:

http://ec.europa.eu/consumers/redress_cons/adr_policy_work_en.htm

15. How will the Commission ensure better information on online transactions?

The Commission will engage closely with information intermediaries to: a) ensure that they respect EU consumer legislation, and b) encourage them to include cross-border offers on price and quality in a way that unlocks the potential of the Single Market. It will also work closely with organisations providing information on product quality comparisons/price/best value for money, to see how to make results more available and comparable across the EU.

The Commission will use existing networks to better inform online retailers about the opportunities offered by selling in other EU countries and taking advantage of the potential of the Single Market.

16. Why does the Communication on e-commerce include guidelines on broadband infrastructure?

The high-speed internet, and the services based on internet access are essential components of Europe’s growth strategy. But investment of between € 180 and 270 billion, which cannot be met by traditional telecom providers alone, is needed to modernise the internet infrastructure in Europe.

The mix of public and private funds, the use of new financial instruments and the adoption of new investment models will provide new opportunities for investment from across the public and private sector including from more recently established alternative telecoms operators. This could attract financing from newer sources like utilities, equipment vendors, content providers, institutional investors, etc.

The Commission has already proposed financial mechanisms to help bridge this investment gap, including support from the EU's rural development and structural funds in less developed regions. As part of the Connecting Europe Facility, the Commission has also proposed to support broadband projects through new models of investment based on a mix of grants and financial instruments. (see MEMO/11/709). The Commission estimates that each euro invested by Connecting Europe Facility in broadband could leverage gross private investment of up to €15.

To assist and ensure the best use of these different financial sources, from EU funds and initiatives taken at national and local/regional level with or without public funds, the Commission is proposing to share best practices. The guidelines proposed in the Communication will illustrate how to best engage the full range of prospective investors including utilities, institutional investors, equipment manufacturers and help public authorities.

17. What happens after the launch of the e-commerce Action Plan?

The Commission will immediately follow up on the actions mentioned herein.

The Commission will publish annual reports on the development of e-commerce in Europe that will include assessments of the functioning of the e-commerce Directive. In 2013, it will invite stakeholders to a conference on the development of e-commerce.

In parallel, the Commission will continue to monitor the follow-up to the Digital Agenda and in 2013 the Commission will present a mid-term evaluation.

1 :

http://www.mckinsey.com/Insights/MGI/Research/Technology_and_Innovation/Internet_matters

2 :

http://www.economie.gouv.fr/files/rapport-mckinsey-company.pdf

3 :

Civic Consulting (2011). 'Consumer market study on the functioning of e-commerce'.

http://ec.europa.eu/consumers/consumer_research/market_studies/e_commerce_study_en.htm

4 :

http://ec.europa.eu/europe2020/index_en.htm

5 :

Eurobarometer, Consumer attitudes towards cross-border trade and consumer protection, Analytical Report, Flash Eurobarometer 299, March 2011. Chapter 2, Section 2.2, page 30. Q5, ‘Thinking generally about purchasing goods or services from sellers/providers located elsewhere in the European Union, which we refer to as “cross-border shopping”, please tell me to what extent you agree or disagree with each of the following statements’. Base: all respondents, % EU-27. Please note that what aspect of the delivery they are worried about is not specified in the question.

6 :

http://ec.europa.eu/internal_market/post/studies_en.htm


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