String of e-commerce bills struggle to keep pace

A new withholding tax on online sales would hit online business of retailers, the fastest growing division over the last years. [Pexels]

This article is part of our special report Cross-border business in the digital era.

One-and-a-half years after the European Commission proposed a string of new laws aimed at making it easier for e-commerce businesses to sell and for customers to buy across the EU, negotiations on those bills are trudging ahead at different speeds.

The Commission wanted to get rid of discrimination against e-commerce businesses and online shoppers, based on where they are in the EU, and to help companies expand by making it easier for them to sell across the bloc.

Now, some observers say the piecemeal approach means it will take a long time until the market is less fragmented.

There have been snags in some of the Commission’s marquee proposals: member states have barely touched a proposal on the sales of goods, a handful of countries are objecting to a plan to lower VAT rates for digital content like ebooks and a duo of small states were overruled last year when they protested against a high-profile ban on geoblocking, the practice of restricting users in certain countries.

One idea behind the the EU executive’s proposals was to boost cross-border sales. Another goal was to make it easier for business to sell online in general and for shoppers to buy from e-commerce sellers.

The Commission has cited 2014 figures showing that only 37% of EU-based retailers sell online in their home countries, while 12% of total retailers sell online to consumers in other member states.

“Not all is perfect,” said Agustin Reyna, leader of digital policies at the European Consumer Organisation. Geoblocking, high delivery costs and restrictions on debit cards make it hard for some consumers to shop online, he added.

“350 million people per day use the internet and so many of those people buy online. If sales channels change like that we have to adapt our rules,” said Belgian centre-right MEP Pascal Arimont (EPP), who is responsible for the European Parliament’s report on a draft bill affecting online sales.

Last week, the Parliament’s in-house research service backed Arimont’s plan to expand the law to apply the same rules to offline sales, so the two areas fall under the same rules for warranties and liability. The Commission proposed that bill and another, separate piece of legislation affecting sales of digital content like video games on the same day in 2015.

Arimont and the lead MEPs on the digital content bill have coordinated their meetings on the two files. If MEPs approve the extension to cover offline sales, the two bills together will cover purchases made in offline stores, goods bought online and digital content.

“If we have one set of rules for the three kinds of sales, a consumer doesn’t have to ask himself, ‘What am I doing right now, which one of the three laws do I have to comply with?,” Arimont said.

“In my view this is a huge step towards the digital single market.”

MEPs want to lift online geoblocking for Spotify and ebooks

MEPs in the Internal Market Committee approved geoblocking rules that could open up access to music streaming sites and ebook sales across the EU, going beyond the European Commission’s proposal and setting up a fight with industry groups.

So far, member states are moving more slowly on how the bill applies to goods. A spokeswoman for the Estonian Council presidency, which will take over at the helm of member state negotiations next month, said talks on that part of the proposal are planned to continue.

“Estonia seeks to move forward with negotiations on a contract law package to ensure legal certainty and clarity for entrepreneurs and consumers engaged in cross-border trade,” the spokeswoman said.

Industry groups argue that if the proposals on online and offline goods sales, as well as for digital content aren’t agreed in tandem, ecommerce businesses will have to keep dealing with different national rules across the EU.

“It will not boost e-commerce in a very strong way if you cannot extend the scope of this proposal” to apply the same rules to online and offline sales, said Luca Cassetti, a policy adviser at lobby group Ecommerce Europe.

Big retailers like Amazon have more resources and legal staff to comply with different national laws across the EU.

“But if you’re a small or medium-sized enterprise, you don’t have the same resources. You might have a very limited team managing a web shop. The more you have to go cross-border, the more you have to think about that,” he said.

Other pieces of the Commission’s e-commerce strategy have hit rocks early on in negotiations.

The bill to get rid of geoblocking on e-commerce websites has moved into three-way discussions between member states, the Commission and MEPs. Last year, Austria and Luxembourg opposed the legislation, arguing that it would hurt SMEs.

Ministers are currently fighting over the Commission’s proposal to overhaul how VAT is applied to ebooks, games and other digital products. France pushed for the reduction after it faced pressure from the European Court of Justice over its lower national rate for ebooks.

Under pressure from national governments, Commission lowers VAT rates for e-books

Booksellers will be able to sell e-books with low VAT rates to match the discounts already applied to paper books under a change to EU tax law announced today (1 December).

Andrus Ansip, the Commission vice-president in charge of digital policies, called the VAT proposal “the last piece in the puzzle” when he proposed the change last year.

“The Commission is following through on its vow to unlock e-commerce in Europe,” Ansip boasted at the time.

But there were signs last month that the Commission is now starting to look at new problems in the e-commerce sector.

A report from the executive’s competition department DG Comp found that online retailers increasingly rely on contract rules to restrict price comparison tools or other marketplaces that compare prices with competitors.

The Commission will use the data to enforce “competition law on e-commerce business practices that have the most damaging consequences for competition and cross-border trade”.

Reyna of the European Consumer Organisation predicted that there will be limits to what competition authorities can do to police how companies use algorithms to control prices.

“It will be one of the challenges of the years to come to tackle price fixation when companies use price tracking technologies to link its prices to those of their competitors,” he said.

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