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Vice-President of the European Commission, EU Justice Commissioner
The Common European Sales Law – breaking the mould to help businesses and customers
Realising the European Single Market Forum 2012, Forum Europe
Brussels, 6 March 2012
Ladies and gentlemen,
I am delighted to have the opportunity to attend today's Forum Europe conference on "Realising the Europe Single Market". The conference has taken a specific focus on the proposal for a Common European Sales Law, which I made in October last year.
The conference is timely. In the run-up to last week's European Council, there was a useful exchange of letters between a number of national leaders and President Barroso on how best to kick-start growth in Europe. The Commission's answer has already been put on the table: the Europe 2020 strategy to provide the Union with the direction and hope it needs now more than ever.
Our best lever of growth is the Single Market. It is our great economic asset in the years ahead; a market of 500 million consumers - a huge competitive advantage in today's globalised world.
The job of creating a Single Market is not finished. As a new digital economy emerges, so does the need to break down new barriers. This is why our Single Market must increasingly become also a digital Single Market. The stakes are high: we have just published a study showing that a truly digital single market could boost EU GDP by as much as €110 billion a year.
As the Commission's Digital Agenda underlined, the internet economy will continue to grow exponentially under one pre-condition: that people's trust in the internet prevails.
This is where the Common European Sales Law comes in. It will increase consumer confidence, it will increase business confidence and it will increase cross-border trade in Europe.
Let me tell you why.
Firstly, E-commerce offers growth potential for businesses as it makes selling and buying cross-border simpler. But while the digital market is perceived to be borderless, borders still exist for trade in the EU. Because of differences in national contract laws companies face additional transaction costs when selling cross-border. This is true in particular for small and medium-sized enterprises.
Businesses that want to sell cross-border have to investigate the various national consumer laws, hire specialist lawyers, and amend their contracts accordingly. It costs traders on average 10,000 Euro to expand into the market of just one other Member State. On top of this, adapting a website can cost a further 3,000 Euro on average. When you look at this from the perspective of a micro enterprise these costs of simply entering one new market could amount to up to 7 percent of its annual turnover. This is hardly an incentive to expand your business into new markets. It is a small wonder that as many as three quarters of European companies currently do not sell across borders. And those micro, small and medium-sized enterprises make up 99 percent of all companies in the European Union!
Consumers also lose out: A mystery shopper study testing the availability of online offers of 100 popular consumer goods showed major price discrepancies across EU countries. In half of the cases, consumers could have bought a product at least 10 percent cheaper abroad than in their domestic market. This shows that without proper cross-border competition, consumers would have to buy the product for a higher price at home. At this moment in time when money is tight, this is hard to justify.
Those who try and manage to take advantage of better deals in other countries are often refused sale or delivery by the trader. Survey data shows that over 60 percent of European consumers are refused a sale every year. That is why only 8 percent of consumers buy online from other EU countries, while one third buy online in their own country.
Small and medium sized enterprises will be able to expand their business when using the Common European Sales Law. SMEs make up 99 percent of all enterprises in the EU. A survey shows that at least 38 percent of exporting businesses would use an optional European contract law: 14 percent would trade with 6 or more additional countries, 32 percent with 3 to 5 new countries and 32 percent would trade with 1 to 2 new countries. Start-ups and innovative companies are most likely to benefit from an early entry into a truly borderless internal market.
Supporting SMEs would also be crucial for the creation of new jobs in the EU. Figures show that 85 percent of new jobs in the EU between 2002 and 2010 were created by small enterprises. The proposal on the Common European Sales Law alone could lead to the creation of between 159,000 - 315,000 new jobs in Europe.
Now I am well aware that the Common European Sales Law is not a silver bullet that will miraculously and single-handedly bring Europe back on the path to economic growth. It is one of several initiatives - each playing its part - that can help. You will today hear about some of the other initiatives as well, such as Alternative Dispute Resolution and the Unfair Commercial Practices Directive. All these initiatives are important specific parts of a bigger picture.
The Common European Sales Law will play its part as one of many other initiatives. It will encourage people. Encourage them that it is safe to buy, online and abroad. Encourage companies, big or small, to sell in other Member States. Because it is cheap, simple and sound.
A new form of harmonisation
The negotiations on the Consumer Rights Directive showed the limits to harmonisation as we knew it. The traditional way of harmonisation may not be always the best solution in facilitating cross-border trade. I understand that Member States are very attached to their national contract law traditions. Each Member State has its own tradition of protecting consumers. But is this a reason to accept a second-class Single Market?
So I have thought hard about how best to reconcile our Single Market objectives and the demands of subsidiarity and proportionality. Many traders are happy with the national law they know well. Perhaps they have a purely local business. And their local customers are also happy with the status quo.
So let us not interfere with well established ways of doing business.
But what about those traders that would like to find new customers in other Member States? Or consumers on the internet searching for the best deal or for new, innovative products or simply for something a bit different from what they find in their domestic market? I believe that these people can rightly expect the European Union to go further in breaking down national barriers.
That is why the proposal I have put on the table is deliberately designed to be a new form of harmonisation. The Common European Sales Law will adapt to national laws in the least intrusive way. It does this by introducing in each Member State's legal order an identical set of contract law rules - a second regime. But this second regime only applies if both parties opt for it. In other words, traders and consumers can, if they wish, stick with the national law. Choice is the keyword here: nobody will be forced to use the Common European Sales Law.
So, no costs or any other burden for those who do not want it, but an additional option for those who do want to use it.
Moreover, the proposal only deals with areas where we have identified the problems to be solved. Our solution does not go beyond what is necessary to overcome the problem. We do not deal with domestic contracts. Instead the Common European Sales Law is targeted at cross-border contracts. The proposal does not deal either with contracts between large businesses. But in Business to Business contracts, at least one of the parties should be a micro, small or medium-sized business. Because these are the businesses who are most affected by differences between national contract laws.
Quite understandably, many have rightly insisted on a high level of consumer protection as a condition for their support of the Common European Sales Law.
I think we have succeeded in protecting consumers well with our proposal. Now that the Common European Sales Law is on the table, most experts tell us that it achieves a level of protection that is laudable.
Consumers need to have the confidence that they do not take risks when shopping abroad under the Common European Sales Law. And they can have that confidence.
The Common European Sales Law provides a comparable or higher level of protection than most national laws. For example, if goods delivered are faulty, it offers consumers a choice between repair, replacement, price reduction or cancelling the contract. There is no notification period for faulty products, so even a consumer who has not immediately notified the seller of this problem is protected. These rules allow consumers to cancel contracts that were concluded by means of fraud or threat or simply as a result of a mistake. In these cases, consumers can simply notify the trader, they no longer have to go to court. The Common European Sales Law provides for a long list of unfair terms – longer than in any national law!
Moreover, the proposal is fit for the on-line economy - with a complete set of remedies for digital content products and other rules specific to e-commerce.
We want to make sure that the Common European Sales Law will develop into a trademark in our internal market. I am convinced that it will become a competitive advantage for traders who use it.
Ladies and gentlemen,
This initiative can be a real win-win scenario: businesses will have lower costs and the opportunity to export to more countries. Consumers will have a greater choice at cheaper prices and better protection.
The European Parliament and the Council have now started to examine the proposed Common European Sales Law. The Danish Presidency has made the growth agenda a top priority. The European Parliament has scheduled several workshops to analyse the details of the proposal before the summer break.
I know that both the European Parliament and the Council will want to make sure that the final text strikes the very best balance between opportunities for businesses and consumers, for legal certainty and the necessary flexibility. I am firmly committed to maintain a high level of consumer protection during the forthcoming negotiations, while ensuring that the new legislation will be an attractive solution for businesses to choose.
I believe Europe is full of opportunities and potential. And the optional Common European Sales Law is one of these opportunities.