7 Legal Challenges for e-commerce in Europe

Author info
Edwin Jacobs

The Web’s enormous potential for procuring, selling and marketing products and services is clear; e-commerce in the EU has developed into big business in a relatively short-space of time, with companies able to offer their products and services with greater ease than before.

Amidst this apparently unstoppable trend, time.lex sets out 7 of the legal challenges currently facing e-commerce in the EU.

1. Streamlining data protection policies across Europe

Streamlining the existing various data protection policies remains a notable challenge. While there certainly has been some harmonisation at the EU level, such as the Data Protection Directive, this has been the minimum amount of harmonisation. This situation has effectively meant that some Member States have gone beyond what is required at the European level, while others only require the absolute minimum required.

This outcome poses a problem for companies with e-commerce activities. Implementing the same data protection policy across all of Europe is either too restrictive for some countries or is non-compliant with the law(s) of others.

The optimal route is to have legal experts’ advice on the local data protection policies of each jurisdiction where business is conducted. As time.lex has previously discussed, the proposed new Data Protection Regulation would be a welcome development. Since EU regulations are directly applicable, the rules would be the same throughout the EU, making the streamlining of policies a much easier task for e-commerce companies, whilst also providing the consumer with the same protection level all over Europe.

2. Streamlining customer and consumer policies across Europe

Streamlining customer and consumer policies is another notable challenge. Much like the difference between different countries’ data protection policies, there is a difference between the customer and consumer policies (such as delivery policies, commercial guarantee policies, policies on distance contracts) in various Member States.

Although there has again been some degree of harmonisation, notably through the Consumer Sales Directive and the recent Consumer Rights Directive, differences between national laws remain, since these directives only provide minimum harmonisation. Moreover, national contract laws have not been harmonised and contain even bigger divergences.

Implementing the same policies all across Europe, while it may seem the easiest solution, may therefore not always be the best strategy. Conversely, optimising company policies through the use of legal experts is likely to be a sound long-term investment.

3. Taking the hurdle of language barriers

A third legal challenge for e-commerce in the EU concerns dealing with language barriers. The rate of progress towards achieving the EU single market varies by sector, but increasingly one market is becoming a reality. Yet there is no concurrent movement towards a single European language.

It might seem trivial, but language can be a serious barrier to the development of e-commerce. Moreover, some countries explicitly require some documents to be made available in their local language. While localising policies, it is useful to translate the resulting policies into the local language, even in countries that do not require this step or for purposes where a translation is not normally required.

4. Allowing companies to stay in control of applicable law and jurisdiction

A fourth e-commerce challenge is to allow companies to stay in control of both the law applicable to their activities and the jurisdiction when conflicts arise out of those activities.

While it might seem simple enough to get a website up and running to reach customers across Europe, this step still entails meeting a lot of legal obligations. This is because in consumer contracts, there is no free choice of the law related to the contract. While a company can specify that the law of the country in which the company is based will apply, this statement cannot overrule the provisions of the mandatory law of the country where the customer is habitually resident.

This situation means that a company will need to comply with the mandatory law (e.g. concerning data protection) of all countries where some of its customers are habitually resident. Moreover, unhappy customers will be able to sue before the courts of the jurisdiction in which they are based. This right is an exception to the rule that parties to a contract can choose the courts that are to have jurisdiction in case of a conflict and which cannot be contracted out.

For companies that do not wish or need to conduct business all over Europe, it is therefore wise to specify which countries are being targeted for business and which are not. Geographical restrictions can be achieved through practical measures such as a pre-order approval process or geo-filtering. Still, as shown by the Court of Justice of the European Union’s case-law, determining whether a website does or does not target a certain country remains a complex assessment.

It is advisable to have the website legally audited before making it accessible to the public.

5. Optimally regulating e-Payment: access to the account

The fifth legal challenge for e-commerce is to strike a balance between the different interests involved when considering the different kinds of online payment.

For example, allowing access to and use of payment account information by third party payment service providers (so-called “access to the account”) would certainly open up the market for new forms of payment services and would most probably make electronic payments even more convenient; yet such a decision could have unwarranted and unwanted security implications.

Up until now European legislators, when making this assessment through the adoption of the Payment Services Directive, have drawn the line in favour of protecting the consumer when making online payments.

However, as time.lex has previously discussed, there has been a proposal for a new Payment Services Directive, which, if adopted, is likely to allow a moderate, controlled “access to the account”, combining both convenience and security for the consumer (as well as for the other parties involved).

6. Optimally regulating e-Payment: going mobile

Another example of the challenge of striking a balance between different involved interests is the future regulation of mobile payments.

As mobile phones are so widespread and most people use them daily, they are an ideal channel for new payment instruments and services. However, creating uniform rules for the so-called “mobile payments ecosystem”, which continues to grow, mature and change at a dazzling speed is not a clear matter.

The proposal for a new Payment Services Directive and ECB recommendations also deal with this matter, again trying to combine both convenience and security for all the parties involved.

7. Staying up-to-date

The seventh challenge for e-commerce in the EU might not immediately seem a legal one. However, staying up-to-date is probably the biggest legal challenge of all.

All parties involved in e-commerce are faced with it, although it takes a different form for each of them. Regulators and legislators, on the one hand, have to keep up with the developments in practice, and try to regulate as well as they can. Suppliers, on the other hand, have to make sure that they are in full compliance with all new rules.

Consumers, and their representative organisations, also need to be aware of all developments; only a fully informed consumer can select the “best” goods and services and, if need be, optimally use all their legal rights. An illustration of the need to stay up-to-date is provided by the entry into force of the new Consumer Rights Directive, which also contains important new rules for e-commerce. time.lex has previously discussed those rules here.

Conclusion

When reviewing the legal challenges facing e-commerce in the EU, it is clear that there is a lot more to take into account when conducting business over the Web than first meets-the-eye. If there is one useful piece of advice to give, it would be: get informed, keep informed and, when faced with complex legal challenges, seek appropriate advice.

For further information on this legal development please contact Edwin Jacobs at (edwin.jacobs@timelex.eu).

This publication does not necessarily deal with every important topic or cover every aspect of the topics with which it deals and is not designed to provide legal or other advice.