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EU proposes to regulate e-commerce [1999] PLBIRp 8; (1999) 47 Privacy Laws and Business International Report 14

EU proposes to regulate electronic commerce

THE EUROPEAN COMMISSION has proposed a directive on electronic commerce which would cover all information services, and ensure businesses' and individuals' legal redress. The proposal suggests that both business-to-business and consumer services be included.

Online services that would be affected include newspapers, financial services, direct marketing, Internet service providers and professional services such as estate agents operating on the Internet. The proposal, published on 18th November 1998, covers services that normally require payment. The directive would apply to the providers of these services established within the EU.

The proposal aims to protect individuals' privacy over and above the protection provided by the Distance Contracts Directive (97/7), and the Telecommunications Data Protection Directive 97/66 which EU member states were supposed to have implemented by 24th October last year. The new proposal for e-commerce requires that recipients of unsolicited e-mail can immediately identify the messages as direct mail without opening them. This approach to deal with "spamming," the sending of unsolicited commercial communications, is clearly a step forward. The proposed directive does not apply to areas regulated by the general Data Protection Directive (95/46), which is currently being transposed by the member states into national legislation.

SPACE FOR SELF-REGULATION

The proposed directive would take a light-handed approach. Rather than creating new rules, it aims to ensure that existing national legislation and EU directives are enforced. Selfregulation is emphasised; the directive encourages the development of codes of conduct at European level.

MAIN ISSUES

The five main issues in the Commission's proposals are:

1) Establishment of information society service providers

The proposal would define as place of establishment the place where the operator actually pursues an economic activity through a fixed establishment. The location of the websites or servers would not affect this decision.

2) Direct marketing

Transparency requirements: marketers have to identify themselves by providing their name, address, e-mail address, and place where registered. Any offers such as discounts must be clearly identifiable.

3) On-line contracts

Member states would be obliged to remove any restrictions on the use of electronic media for concluding contracts. A contract is concluded when the recipient of the service accepts the offer and receives a confirmation from the provider.

4) Liability of intermediaries

The European Commission suggests that on-line service providers would not necessarily be liable for transmitting and storing information from third parties. Much depends on whether they have an active or passive role.

5) Implementation

Member states will be asked to ensure fast and efficient legal redress for individuals, and to decide on sanctions. It is also planned to establish cross-border dispute settlement systems.

UK BUSINESS PREDICTS TRADE RESTRICTIONS

The negotiations on this proposal within the European Union were planned to start mid-January 1999. To influence the position their country takes, organisations should contact the respective ministries. In the UK, the Department of Trade and Industry (DTI) has been gathering views on the proposal since December.

The UK business community immediately expressed its disappointment in the proposed directive. The Alliance of Electronic Business, which consists of five representative organisations (the Computing and Software Association, the Confederation of British Industry, the Direct Marketing Association, the Electronic Commerce Association and the Federation of the Electronics Industry) said in a press release last year that the proposals do not address the interests of business or consumers. They make the point that applying the laws of the destination country to contractual obligations will impact heavily on business confidence in electronic commerce. This is in contrast with the internal market principles which apply the laws of the country of origin.

"These expectations will impact most heavily on small and medium sized enterprises which will not be able to afford the complex legal research necessary to comply with 15 sets of national legislation," said Colin Lloyd, Chief Executive of the Direct Marketing Association. "This derogation of the single market principle was not in the original draft of the proposal, and is counterproductive. It could also result in restriction of trade as companies withdraw their products and services for cross-border transactions, a move which cannot be in the best interest of consumers," he continued.

For further details, contact DGXV at the European Commission, e-mail E4@dg15.cec.be. A summary of the proposal is available on the Internet in English and French at http://www.europa.eu.int/geninfo/whatsnew.htm. An unofficial version of the text (subject to legal and linguistic review) is available on DTI's website at http://www.dti.gov.uk/cii/ecomdirective/index.htm.