New Destination for E-Commerce

Last-minute hearings on proposals that could seriously affect e-commerce in Europe have been described as a piece of street theater. And unless backstage – or rather, backroom – lobbying and last-stand amendments are successful, a new law could be passed on Dec. 11 that will significantly complicate online business in the European Union.

The hearings, held in Brussels, Belgium Nov. 4 and 5, were only convened after intense pressure, led by the law firm Dibb Lupton Alsop. It rallied international business support, especially from the DM industry, for its view that the “country of destination” proposals – giving consumers the right to sue a company in their own country – would be a disaster for e-commerce. But the debate proved to be more a matter of show than substance.

The controversial proposal would amend one of the cornerstones of the European Union, the 1968 Brussels Convention. This law already gives consumers the right to sue in their own country if a company solicited them there, either through advertising or a sales visit. However, fewer than 10 cases have ever been brought under this ruling.

Now the European Commission intends to alter the wording so that any company directing activity toward a consumer in another country would be governed by laws in the individual’s home territory. That would extend the initial legislation to include Web sites and e-commerce.

That’s like saying if you get Macy’s phone number from directory assistance, call and place an order for a sweater, it’s the same as Macy’s placing an ad in your country, says Mike Pullen, partner in Dibb Lupton Alsop. He also notes that the proposal contradicts the commission’s own draft directive on electronic commerce, which prefers country of origin.

“We say a Web site is like a shop window. The directive says that e-commerce has to be transparent, saying who the company is and where it’s trading. So if it is Harrod’s Web site in London, then the transaction will be covered by U.K. law because its origin is in England,” says Pullen.

The proposals already have been condemned by U.S. Commerce Secretary William M. Daley and France’s leading economic policy institute, Inse. At the November hearings, IBM and Microsoft were among the companies lobbying to prevent the changes. DM interests were represented by FEDMA, the European association of national direct marketing associations, as well as individual companies.

Among the 400 delegates, however, were representatives of consumer protection lobbies and academic lawyers arguing in favor of the change. There were lots of professors of private international law leaping up saying they need to protect the legislation, and consumer associations raising the fear of consumers being hurt, Pullen claims.

Their legal arguments supporting the proposed change appear to have carried more weight with the European commissioners than the commercial arguments about the damage it might cause. The proposal is still on track to go before the Council of Ministers in December, which simply needs to ratify the plan for it to pass into law.

However, the argument hasn’t been entirely lost. It’s understood that the British government has changed its mind about the proposition and is now preparing amendments that would change its impact. The Irish government is also believed to be lending its support.

The proposal is one of the first tests of new powers given to the European Commission to instigate legislation, rather than draft proposals for the European Parliament to vote on. That’s one reason why normal forms of lobbying have not been possible in trying to alter the plan.

The commission also has the support of Europe’s consumer lobby, which wields a great deal of influence in Northern European states. But it is hoped that commercial pressure on local governments will create more opposition in the Council of Ministers.