Shearman & Sterling trainee Andrea Calla explores how and why the EU digital single market benefits us
The recent focus on the digital single market and the e-commerce sector has kept me (as a trainee in Shearman & Sterling‘s antitrust team) fairly busy. I found myself researching a lot into this, primarily to assist my colleagues preparing for the numerous discussions, presentations and talks the Shearman & Sterling antitrust team give, but also to advise many of our clients and keep them up to date on these developments. In truth, it’s not boring research; many of the issues personally affect me, as they do you.
Focus on e-commerce is a recent trend, with the European Commission identifying the ‘digital single market’ as one of its top ten political priorities. Margrethe Vestager, the European Commissioner for Competition, has pledged to break down the ‘digital borders’ which she claims discriminate against all of us.
How does this affect you?
It may be useful to consider some examples to explain the extent of how we are all affected.
You may be travelling to Italy on holiday and want to rent a car to use in Italy from a car hire company via the company’s UK website. You then realise that the Italian version of the car hire company’s website offers the same car, for the same dates, at a much lower price. You try to book the car through the Italian website but, when you try to access it, the website always re-directs to the UK website; or you may be able to access the Italian website but once you go to check-out the prices are recalculated to the higher price as on the UK website. In other words, you are forced to pay the higher price simply because you are located in the UK.
In a real-world scenario, Disneyland Paris was recently caught up in a pricing policy scandal where access to the best offers for tickets was only available through its French website, i.e. only for French customers. Non-French EU customers did not have access to the French website but were redirected to their country-specific website, blocking access to these cheaper tickets. Some payment options for cheaper annual subscriptions were also only available to people with a French bank account.
Geo-blocking
These commercial practices that prevent European users from shopping online cross-border across the EU are known as ‘geo-blocking’.
The most common geo-blocking practices are refusal to deliver abroad, refusal to accept foreign payment methods, and re-routing and website access blocks.
Persons who are nationals of another Member State are therefore potentially discriminated against in terms of access to prices, sales, or payment conditions when shopping online. When consumers enter a brick-and-mortar shop in another EU country, they are not asked for their ID to gain entry or have prices adjusted.
Interestingly, a study conducted by the European Commission found that 37% of websites actually did allow cross-border EU visitors to complete a purchase successfully in 2015. Only 19% of cross-border online shoppers had experienced restrictions at one stage or another of the purchasing process.
Vestager has now concentrated the Commission’s efforts on this issue and launched an e-commerce sector inquiry on 6 May 2015. On 18 March 2016 an Issues Paper setting out the initial findings in relation to geo-blocking practices in e-commerce was published. And on 25 May 2016 the Commission published its proposals for a package of measures to allow consumers and companies to buy and sell products and services online more easily across the EU (the e-commerce package).
What will change?
The e-commerce package proposes EU legislative change to, inter alia, tackle geo-blocking in the digital markets.
The legislative proposals primarily aim to tackle access, trust and non-discrimination. The Commission first considers the need to ensure non-discrimination across cross-border digital markets, protecting the rights of customers from other Member States buying goods and services under the same conditions as local customers. Rules will be implemented against blocking of access to websites and re-routing without the consumer’s consent, and although sellers will remain free to advertise different prices across different websites, the customer will have the right to choose which website they wish to use without being discriminated against.
The Commission will also tackle discrimination in payment methods. The requirement under the initiative will oblige sellers to accept a payment method from another Member State, if they accept the same payment method locally (e.g. credit cards). Sellers will therefore no longer be able to refuse payments, or apply different payment conditions, for reasons of the nationality, place of residence, or business establishment, of the customer.
An additional aspect of the proposal is the Commission’s initiative to harmonise a clear set of mandatory consumer rights throughout the EU. These fixed rights aim to build consumer trust in those participating in e-commerce, setting out clearly the protections consumers have when buying cross-border via the internet.
Lastly, to complete the package, sellers will also need to provide consumers with the same delivery options offered to local customers. Yet the Commission does appreciate that sellers cannot be obliged to deliver goods outside of their capabilities. The cost and efficiency of parcel delivery can therefore become an obstacle to cross-border trade. Measures are therefore proposed (alongside other self-regulatory initiatives) to increase price transparency and regulatory oversight of large parcel operators, in a bid to make high-quality cross-border parcel delivery more accessible, affordable and efficient in the interest of e-commerce.
‘Good for competition, good for consumers’
The Commission believes that creating a truly open Digital Single Market will grant consumers and businesses the ability to get the best value and an increased choice of online goods and services, and also give many businesses the platform to expand sales across Europe — opening the gates to a 500 million plus consumer market.
What could this mean for an EU national? Well, we could soon be able to access the best choice with the best price, hiring a car from an Italian website, whilst planning a holiday to Disneyland Paris with discounted tickets from Disneyland’s French website. Sounds great.
Andrea Calla is a first year trainee at Shearman & Sterling; he studied law at the University of Newcastle before completing his first seat in Finance and is now halfway through his Antitrust seat.