New EU sales law to boost eCommerce

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This article is part of our special report Small Business:driving EU growth?.

If retailers had just one set of contract laws across the bloc, eCommerce would take off exponentially, the European Commission will argue in an upcoming proposal next week. But disgruntled businesses are gearing up against the draft regulation. 

While businesses argue that the EU's draft Common Sales Law will make matters more complicated for cross-border trade, the EU executive argues that the regulation's beauty lies in their estimation that it will cut out expensive legal costs.

"The common sales law will introduce a self-standing and complete set of rules. This will in particular be useful for the online supply of goods," reads a draft report obtained by EURACTIV to be released on 12 October by the Commission Vice-president Viviane Reding.

According to the Commission's findings two of the principal deterrents to cross-border trade, including e-commerce, are the fear of stepping into an unknown legal regime and the cost of hiring different lawyers to debug each regime separately.

'Not a Priority'

However, business and consumer groups are confused about the origins of the Commission's findings and argue that eCommerce has many more tricky obstacles, like language and VAT rules, hampering its growth.

"We don’t know where they are getting any of this from," Dora Szentpaly-Kleis, a legal adviser to a lobby group for SMEs, UEAPME, told EURACTIV.

"The major reasons for a lack of cross-border trade are practical – 62% of consumers cited fears of fraud, 59% feared what to do if problems arose and 49% were concerned about delivery. The ‘28th Regime’ would not address any of these," Ursula Pachl, Deputy Director General of European Consumers’ Organisation (BEUC) said.

"It is a unanimous position among our members that this is definitely not a priority," Szentpaly-Kleis continued.

The proposal has curried some favour among other EU legislators in the parliament who argue its costs savings come just on time.

"In difficult economic times, the Optional Instrument in European Contract Law is a real example of justice for growth. Of course it has to be the right optional instrument. In this case 'right' means a high level of consumer protection, an easy and user-friendly system for SMEs (…) and most importantly no adverse effects on national law," Diana Wallis, a British Liberal Democrat MEP said in a statement.

Practice makes profits

An impact assessment due out alongside the draft regulation next week aims to prove that common sales laws have in practice boosted trade in different regions.

"It has been demonstrated that bilateral trade between countries which have a legal system based on a common origin, such as common law or the Nordic legal tradition, is 40% higher than trade between two countries without this commonality," the draft states.

Under the draft, the set of rules will form a second regime alongside the national consumer law and traders can opt-in or out of the EU code.

One of the provisions of the code will be higher protection for consumers. Consumers unhappy with a service or a good will have a free choice of remedies, including the immediate termination of a contract, according to the draft paper outlining the regulation.

The Commission's impact assessment boasts huge growth potential of eCommerce if companies take up the common sales law. Under half of online consumers would save €380 million in total if they made just one more online purchase than they already do.

The Commission came up with this cost saving in a calculation involving the cost of average online credit card transactions and the average saving made on a cross-border purchase.

"Currently 33% of consumers above 15 years of age shop online, but only domestically. Assuming that 44% out of this group would make at least one cross-border purchase on average of €52 divided by volume of credit card transactions, and that at least half of these consumers would find the product on average 24% cheaper than in their own these consumers would save around €380 million."

Positions

Ursula Pachl, Deputy Director General of European Consumers’ Organisation BEUC said: "When both Europe’s consumers and the businesses have strong reservations we have to halt and say, why is this proposal being pushed when it has so little foundation?”

In favour of the draft regulation, British Liberal Democrat MEP Diana Wallis, said: "This is an optional, voluntary instrument but one that could really open up consumer choice and business possibilities across Europe. Colleagues were very constructive with the report in committee, adding lots of safeguards to the process to ensure that it is evidence based, with strict impact assessment and absolutely full parliamentary involvement. So now at least let's give it a go and get on with it."

Background

Growth in cross-border e-commerce across the European Union continues at a sluggish pace as European Commission consumer surveys have shown, indicating that much remains to be done if the bloc is to meet targets for 2020.

The EU has set itself the target of raising the proportion of EU consumers who shop online across borders to 20% by 2020, as enshrined in its 'Digital Agenda' for boosting the digital economy.

36% of EU consumers shopped online from national sellers in 2010 compared to 34% in 2009, found the 5th edition of the Consumer Conditions Scoreboard, revealing minor growth in the popularity of domestic e-commerce.

Timeline

  • 12 Oct.: European Commission to unveil Draft Regulation of a Common Sales Law

Further Reading

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