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Meglena Kuneva

European Consumer Commissioner

Barriers to eCommerce in the EU

Presentation of new eCommerce Report
European Parliament; 5 March 2009

Ladies and Gentlemen,

Let me start by warmly thanking our host MEP Lambsdorff for organising this event. It is a great pleasure to join you today to discuss recent developments in online commerce - a topic that has been at the centre of the European Consumer Policy Strategy 2007-2013. I have made it one of my priorities to ensure that Europe delivers the benefits of the internal market to consumers.

On this occasion, I would like to share with you the recent findings of a Commission report on cross-border e-commerce.

Last year in London, I set out 3 priorities for consumer policy in a digital age. One of them was the need to critically examine the obstacles facing consumers in the online internal market. This report is the result of the work conducted by my services in coordination with the services of my colleagues who are part of the Competitiveness Group of Commissioners (CCCG).

This report is also the result of the Commission's new market monitoring approach focused on gathering solid evidence to inform policy. I have promoted this evidence based approach in consumer markets by establishing the yearly Consumer Market Scoreboard, which presents market outcomes for important retail markets around the EU.

The Scoreboard screens consumer markets in order to identify sectors with the greatest risk of market malfunctioning for consumers. These sectors are then selected as the subject of further in-depth analysis. The need to investigate online commerce in more detail emerged from the Commission's first ever Consumer Market Scoreboard.

So why was e-commerce chosen as a subject for further study?

The first reason is that the strong growth in online shopping in recent years is providing an incredible stimulus to consumer markets and to the internal market. The internet allows fast, less costly communication as well as access to a wider variety of goods and services.

As a result, internet retailing holds the promise of making the retail internal market a reality for consumers. Consumers need no longer stay confined within national borders.

The second reason is the interdependence of e-commerce with in-store shopping, which has implications for retail services in general and the broader economy.

The internet has become a convenient alternative to window-shopping and is shaping the way that consumers think about purchases. For example, 3 in 5 Europeans who have internet access at home have compared prices online before making a purchase, either online or in a physical store.

The third reason is that the development of online shopping has exposed the flaws of our retail internal market.

From an EU perspective, there are still a number of structural barriers to a fully functioning online internal market. This is a pity at a time when consumers are celebrating the borderless nature of the internet. For this reason, this report focuses on the cross-border aspects of internet retailing.

Let me present briefly three of the main findings of this report.

The first finding is that e-commerce is doing rather well. Consumers are generally satisfied with online shopping. For particular groups of products, namely information and technology products, as well as entertainment and leisure goods, consumer satisfaction with the internet is on average higher than for retailing in general.

80% of consumers who bought entertainment and leisure goods on the internet thought that their retailer’s prices offered reasonable value for money, compared to 67% on average for all retail channels.

It seems that consumers are satisfied with online shopping especially when it comes to comparing prices, the wider range of offers, the affordability of products and the choice of alternative suppliers.

However, consumers are less enthusiastic about aspects such as product information, advertising, the protection of privacy, issues of trust and the possibility to return goods during the cooling-off period.

In addition, dispute resolution at a distance remains problematic for consumers. Mechanisms for providing cross-border redress are already in place thanks to the network of European Consumer Centres, but few consumers or businesses seem to know about them.

This is an area where more cooperation is needed. Consumer protection authorities must also cooperate more strongly with one another to enforce the legislation.

The second finding is that there exists a strong potential for cross-border trade in online commerce. One third of EU citizens would consider buying a product or a service from another Member State via the internet because it is cheaper or better.

The same proportion of consumers is equally confident making purchases online from businesses located in their own country or in another EU country.

An increasingly diverse and multicultural Europe is also making cross-border online shopping more attractive to consumers. For example, one third of EU consumers also say they are willing to purchase goods and services in another language. In a multicultural Europe, there is a demand for more choice and a wider variety of offers than local stores or global brands can supply.

The third finding is that the potential of cross-border trade is failing to materialise. From 2006 to 2008, the share of online shoppers in the EU has increased from 27% to 33% of consumers while cross-border e-commerce remained stable. Only 7% of consumers currently buy cross-border online. The result is a gap between domestic and cross-border online shopping.

A number of obstacles are at play here. I would therefore like to explore the implications for consumers and businesses.

There are many reasons why this potential has failed to materialise. For one, the internet has made apparent to consumers a number of short-comings in the way that goods and services are distributed throughout the EU.

Most traders now have a website that is visible to consumers everywhere. And yet most retailers still seem to operate on the assumption that the internal market is partitioned along national lines. The range of possibilities is enormous, yet in practice, consumers end up being locked in their country of origin. They are either redirected to national sites or refused a sale.

It is frustrating for a consumer to arrive at the end of a shopping process only to discover that a web trader will not deliver to his home address.

Let me be clear as to what my goals are. My goals are not to force traders to sell to consumers everywhere or at any cost. Setting up distribution networks is costly. The decision to set up shop in one country or another should be the result of a business decision that takes into account the various incentives facing businesses. In some instances, the costs may outweigh the benefits.

Rather, my goals are for the EU to foster a more harmonious trading environment and one that is more conducive to cross-border shopping.

We must work to create the conditions in which businesses have the incentives to operate throughout the EU without constraints and without ever having reasons to refuse a sale.

There are number of practical and regulatory obstacles for online businesses already wishing to adopt a pan-European approach.

But before I discuss them, I would also like to flag another issue that concerns me. That is the arbitrary segmentation of the internal market by traders for the sole purpose of price discrimination of EU consumers. This kind of artificial segmentation based on national borders has no place in Europe's Single Market. I will come back to this issue in more detail in September, on the basis of more evidence.

Now, I will come back to the more conventional barriers holding back businesses and consumers.

Language barriers remain an issue for most traders and consumers, but we should be careful not to overstate their importance. For example, on average almost 60% of retailers are already prepared to carry out transactions in more than one language.

There are also problems of logistics related to the interoperability of postal and payment systems. It is difficult for online businesses to manage the last mile to the consumer when market conditions and performance levels vary so much.

Finally, there are regulatory barriers that appear increasingly unjustifiable to consumers and businesses.

Regulatory barriers result in market fragmentation at EU level. A number of areas are affected by regulatory fragmentation, including consumer law but also VAT, intellectual property protection, the national transposition of the EU legislation on electronic waste disposal, for example.

Taken altogether, these differences amount to significant compliance costs and business risks. This considerably diminishes the appeal or feasibility of cross-border expansion. As a result, traders may refuse to serve new markets or may develop online business models that fragment the internal market along national lines.

This is why it is important that we critically examine the legitimacy of artificial barriers that are holding back businesses and consumers.

What are the next steps in this process?

There are several key dates to remember

1- In the context of the forthcoming retail services monitoring exercise to be conducted by the European Commission, I launched last Autumn a Commision wide process to screen for barriers to e-commerce. I will finalize my report by September 2009. The report will identify the root causes of the artificial segmentation of the European Single Market and will take stock of the current tools to address these barriers.

To assess the actual impact on consumers of market segmentation within the EU, I have commissioned an independent "mystery shopping". Experts will pose as consumers and will attempt thousands of cross border transactions in online commerce in order to see when, why and how consumers are being prevented from shopping across the EU. The results will be published in September and the evidence will give us a better indication on the way forward.

In the areas directly under my portfolio, I am already taking action.

2- This Spring, I am focusing on the need for better enforcement of consumer rights, notably online. Many of you will already be familiar with the Consumer Protection Cooperation Network of national authorities who work together on issues such as the sale of airline tickets online or the ringtone scams found online.

I will bring forward in June 2009, a Communication on Enforcement setting out how we intend to step up EU wide enforcement co-operation in the online and "real" world with an emphasis on cross border cooperation.

3- I also believe that more must also be done to promote redress mechanisms available to individual engaging in cross border trade. Throughout the EU, a network of European Consumer Centres are responsible for handling cross-border disputes and for mediating between consumers and traders located in different countries: further efforts will be made to publicise the work of the ECCs with citizens.

4- By now, you are all familiar with my proposal for a Consumer Rights Directive to strengthen consumer protection in cross-border e-commerce. The new rules would also significantly reduce compliance costs for businesses by introducing a simplified common set of basic rules. I hope to see this Directive move forwards though the institutional process quickly this year.

5- Finally, I would like to mention the work being done on data collection, targeting and profiling over the internet. There is currently a big debate on the opportunities and challenges generated by the massive amount of personal data online. I will publish in the context of an event on March 31st 2009 a new Commission Report on data collection, targeting and profiling. The report will look at privacy policies and the commercial use of personal or behavioural information. If we are to maintain trust in our digital platforms we must get this debate right.

The opportunities of the Digital world for consumers will be discussed at length in the first ever "EU Consumer Summit" which will take place in Brussels on April 1-2. Bringing together over 250 stakeholders from 27 Member States, the summit will focus entirely on the next generation of digital challenges facing consumers. I hope many of you who are here this morning will join us at that summit, to continue to debate these issues.


Creating a European internal market online, one that truly gives value and opportunities to European Consumers is crucially important at this time of crisis. European consumers will want to make the most of their budgets and will not take it lightly to see their expectations frustrated online. Just as businesses can only succeed in a healthy market by meeting consumers' needs, governments will only succeed in healthy democracies by meeting their citizens'need. It is the beauty of markets and the beauty of democracy. We must now rise to the task and deliver European consumers the most efficient marketplace they can have for the 21st century, one that will deliver for them and one that will fulfil their expectations and needs.

Thank you once again for the opportunity to speak to you. I look forward to working together.

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