Upcoming priorities and challenges for the e-commerce sector in Europe Brexit and the Slovak Presidency

by Marlene ten Ham*

Brexit implications for the e-commerce sector

On the United Kingdom (UK)

According to Ecommerce Europe and the Ecommerce Foundation’s joint 2016 European B2C e-commerce report, the UK is in the lead when it comes to the size of their market (€157.1 billion) and the average spending per e-shopper (€3,625). With about 20% of UK online merchants selling cross-border to the EU and 6.12% of UK GDP coming from online sales, a possible Brexit could have noteworthy negative impacts on both the British and the European e-commerce sector.

It is therefore understandable that e-commerce interests on both sides of the Channel will be watching events unfold with a level anxiety. Of course, the level of impact that Brexit has will depend on what the final outcome of Brexit is.

This would considerably affect British consumers, who shop much more online than their European counterparts, spending an average of €3,625 in 2015. The loss of access to the European Single Market is likely to entail higher prices for the UK consumers, as tariffs take their toll. Furthermore, the weakened Pound will also make European prices relatively more expensive, while macroeconomic uncertainty and cuts in interest rates are likely to choke demand.

Finally, not being part of the DSM also means that Commission proposals for harmonized consumer protection, regulations against geoblocking, and efforts to tackle overpriced and inefficient logistics services would no longer apply to the UK, leaving British consumers more vulnerable to exploitation. Secondly, the will also considerably impact British retailers.

The EU is the UK’s largest trading partner accounting for 45% of its exports and cross-border online shopping is popular in the country. Moreover, the upcoming legislation of the DSM for the e-commerce sector will not apply to the UK. It will for instance include simplified rules for the VAT and more transparency on parcel delivery services, among other initiatives, with the aim of making it much easier for online merchants to sell in the EU. Last but not least, the UK will not have to comply with EU Consumer Law anymore which will certainly have a negative impact on consumers’ trust.

On the European Union

The loss of the UK is a setback for European e-commerce. The UK, as one of the most liberal market economies of Europe, has been a proponent of a more liberal approach towards innovative technologies and business models such as online platforms and the sharing economy and has been a major player in the ongoing discussions on the DSM.

The lost access to the Single Market is likely to see this share shrink significantly as demand from EU consumers drops off due to uncertainty surrounding consumer protection, as well as tariff barriers, and possible logistics price-hikes for non-EU delivery services. However, the continued slide in value of the Pound could offset some of the price rises.

However, while there is much cause for pessimism from British people’s decision, one potential upside remains for countries whose e-commerce sectors are on the rise. Indeed, France, Germany, Belgium, Ireland and the Netherlands will be standing ready to snatch a larger share in the wake of Brexit, while UK firms like Fairy Glam Ltd will waste little time waiting for Brexit negotiations to unfold before making their move to the continent.

Geo-blocking Proposal

The geo-blocking proposal has been a hot and controversial topic in Brussels since its publication in May. Slovakia, the new President of the Council, has the ambition of reaching a general approach among Member States on the proposal before the end of its mandate in December.

Ecommerce Europe is pleased to see that the proposal on geoblocking does not contain an obligation for online merchants to deliver everywhere in the EU and that they are free in setting their pricing policies. According to the proposal, foreign consumers will be allowed to shop like local ones under certain conditions. Such cases, according to Ecommerce Europe’s interpretation, will be treated as passive sales, which means that online merchants will be allowed to apply their home country rules and laws.

Ecommerce Europe is pleased that the Commission further clarified this point in the text, even though it might need further fine tuning. Only in this way, online merchants can be sure that they are allowed to apply their national laws, without being forced to deal with laws of countries that they are not actively targeting. Besides that, EU policy makers should be aware that one of the consequences of this proposal might be that consumers end up disappointed with a product that they could buy from a website not directing its sales activities to the country of the consumer and which thus might not have been fit for this market.

Digital Contracts Proposals

In the coming months, negotiations on the legislative proposals in the field of civil law, particularly on proposals for directives on the supply of digital content and the online and other distance sales of goods will continue under the lead of the Slovak Presidency. Slovakia will try to keep the two existing proposals within a single package, even though most of the EU stakeholders prefer to wait for the results of the Fitness Check on Consumer and Marketing Law performed by the European Commission before starting the negotiations on the tangible goods proposal.

That is why the Slovak Presidency is more confident about reaching a Council partial general approach on the supply of digital content by the end of the year, while it will definitely be more challenging to achieve the same result for the tangible goods proposal. 

Cross-border Parcel Delivery Proposal

It is likely that the Slovak Presidency will not be able to reach a Council compromise on the cross-border parcel delivery proposal, in terms of handling different national expectations on price transparency against price regulation. Ecommerce Europe recognizes that the proposal for a parcel delivery regulation has the potential to help create a level playing field for competing postal-, courier- and express operators and thereby in the end for online merchants throughout Europe.

The association has been vocal in opposing any type of price regulation and Ecommerce Europe therefore expresses support for the Commission’s cautious approach which leaves room for case-by-case assessment by national authorities. Ecommerce Europe will however continue its work with service providers and policy makers to ensure that we come closer to a global level playing field accessible to all players through the use of open information- and label standards.

Online platforms

Ecommerce Europe is pleased to see that the European Commission acknowledged the important role that online platforms play in innovation and growth in the Digital Single Market. Ecommerce Europe is also pleased to see that the Commission will not propose an EU regulation, but that it will have a targeted, principles-based approach to fix eventual problems also touching platforms. The Slovak Presidency will discuss it further during a meeting of Telecoms Ministers the appropriate approach to online platforms. 

e-Privacy and VAT for the Maltese Presidency of the Council

Finally, the European Commission is expected to table the review of the e-Privacy Directive and the proposal for modernizing VAT rules for cross-border e-commerce during the last two months of the Slovak Presidency’s mandate. The next Maltese Presidency of the Council is expected to kick off the negotiations in beginning 2017.

* Marlene ten Ham is Secretary General of Ecommerce Europe  

More information : www.ecommerce-europe.eu/position-papers