The European institutions are gearing up for the revision of the 2000 eCommerce Directive. The Directive has contributed to what is now known as the platform economy in the Single Market. However, at the time of its drafting many of today’s challenges were impossible to anticipate.
The focus of the current debate lies on the complex role platforms play in the economy and in society in general. This role, while bringing benefits, also requires a clearer and updated legal framework, incentivising all players both to abide by the rules of a level playing field and to accept due liability, reflecting today’s challenges and societal expectations. We should aim to establish a framework that encourages actors to play fairly and be compliant, thus giving Europe the chance to lead in this space, as it has done with the GDPR.
One of the main reasons for the need to update the liability regime comes from the dramatic increase in the online availability of illegal or unsafe products. As we look to build a digital economy grounded in European values and based on a fair, competitive and rules-based system, the issue of fake products – or illegal goods, as counterfeits should correctly be termed – should be equally addressed, given that they deceive Europe’s consumers and inflict massive harm to the European economy in general. For example, of the counterfeit products registered in the Commission’s RAPEX database, 97% were found to pose a risk for health and safety – and 80% were products destined for use by children.
Counterfeit or fake goods range from chewing gum and stock cubes, via shampoo and lightbulbs to the highest priced luxury items. They encompass everything from medicines to shoes, from toys to lipstick. They target all groups in society: children, adults, the elderly, and in all countries. The EUIPO and OECD estimate that the trade in counterfeit goods accounts for 6.8% of all EU imports, growing at a global level by over 30% in the period of 2013-2016 alone.
In the EU, this translates to a sum of 121 billion EUR a year. That is larger than the GDP of 11 EU countries, and at a time when we are looking to fund the transition of Europe’s economy, it is significant in terms of lost revenues in jobs, taxes and duties.
What can the EU do?
- Firstly, the legal framework of the eCommerce Directive should be updated. It is possible and necessary, and will not result in the collapse of the online economy. Quite the contrary, we strongly believe we have an ideal opportunity at this time to take the lead in ensuring a competitive, clean and rule-based digital economy in Europe. These updates will most likely have a positive effect across the globe. We have seen the potential of EU policy projection via the General Data Protection Regulation and more. Millions of consumers and businesses will directly see the benefits.
- Technology can be leveraged to prevent illegal goods from reaching the online market and close loopholes that enable offenders to re-offend – ban them permanently from accessing consumers by using payment and business registration details so their accounts and access can be removed. Platforms have these tools and details, and should be able to verify the identity of sellers operating on their platform and with whom they have a commercial relationship. Businesses should be subject to the same obligations online and offline, regardless of whether they are European or not.
- Address the issue of fake consumer accounts – one single purported individual’s account that sells thousands of the same products should surely raise questions. Why not use the same tools applied to business-to-business accounts and thereby eliminate this problem?
- Put algorithms to good use. Platforms – including online marketplaces, social media, search engines, and others – deploy algorithms, Artificial Intelligence (AI) and machine learning to protect their own commercial interests. Let’s strengthen and apply them equally to protect consumers and other genuine businesses to prevent illegal listings.
- Enable under-resourced customs officers to stop counterfeits at the border by giving them access to data so they know which consignments to target. This is possible – there is, or at least there ought to be, a trail of who put the container on the ship, handed the boxes to the courier, what is declared in the shipping documents. These intermediaries – the transporter, shipper, courier, freight forwarder, online marketplace or payment provider – should have that data. At every step in the chain there is knowledge, there is data. With millions of products crossing European borders through our ports daily, sharing data to enable customs authorities to do their jobs should be a priority. GDPR-compliant data-sharing for law enforcement should be the norm, not an impossibility.
- Likewise, when counterfeit is discovered in the EU, the police and national market surveillance authorities also need this intelligence. Income from counterfeiting funds crime, up to and including organised crime: the perpetrators are often sought by many national agencies. Sharing data on illegal activity with law enforcement should be a duty of any legitimate business. Intermediaries who are paid for the movement and sale of illegal products should play their part in this fight.
Why address this now?
The European Commission has rightfully pointed to a future which is digital, sustainable and most importantly, places people at the heart of everything we do. The digital world, with all players, needs to embrace this and accept that what is illegal offline should be illegal online. We need a legislative framework which serves a compliance by design purpose. Everyone has a role and a responsibility to act now and ensure we have a legitimate and strong digital economy for the future.