Cross-border e-commerce

E-commerce is taking off domestically in many European countries, including Germany. But few companies in the region have ventured beyond their home markets to sell their products via the Internet to consumers in other countries.

A patchwork of rules regulating consumer transactions across Europe continues to inhibit many retailers from selling abroad. And, unfortunately, a quick fix is not in sight.

"More than two thirds of retailers in (Germany) say they don't use the Internet to sell abroad largely because they are unfamiliar with the legal situation in the various countries," Nikolaus Lindner, a legal expert at the German subsidiary of Ebay, told Deutsche Welle.

Widening gap

Germany is hardly alone. The gap between domestic and international e-commerce across the EU is widening as a result of cross-border barriers to online trade, according to the European Commission.

From 2006 to 2008, the share of all EU consumers who bought at least one item domestically over the Internet increased from 27 percent to 33 percent, while cross-border e-commerce rose only marginally from 6 percent to 7 percent.

Yet demand for cross-border service exists: One third of all EU citizens indicate they would consider buying a product from another member state via the Internet because it's cheaper or better or not available in their home country.

Consumers and retailers hope the European Commission's proposed Consumer Rights Directive will help clear the way for cross-border e-commerce. The directive tackles, among other things, the prickly issue of legal fragmentation in areas such as product returns, guarantees and intellectual property rights as well as rules for the disposal of electrical and electronic waste.

Big roadblock

Missing in this lineup, however, is value-added tax, which can vary widely from state to state. Many retailers see it as a significant obstacle to selling abroad. The problem is, such taxes are a member-state issue, still outside the scope of EU legislation.

Ebay's Lindner argues retailers would be much more willing to engage in cross-border selling if the risks of failing to comply with various national regulations could be eliminated through rules at the EU-level. The cost of fragmentation, he says, is a heavy burden on business.

For many, full harmonization is the ultimate goal. But it's proving to be a true tug-of-war. Harmonization is among the most debated issues in both European Parliament sessions and meetings of representatives of national ministries in the European Council. Many Parliament members see a form of "targeted harmonization" as the way forward.

"The problem is consumer protection rules have not been developed across Europe in any organized fashion but in a completely uncoordinated way," said Andreas Schwab, a member of the European Parliament. "You can't put into a policy paper that you will always take the highest level consumer protection from all states because that creates a problem."

Finland is a case in point, according to Schwab. Currently, the minimum warranty period across Europe is two and a half years but in the Nordic country it's 10. "This is costly and there is really no proof that a warranty that long is really helpful," Schwab told Deutsche Welle. "But the Finnish say 'this is our law and we won't sacrifice it for Europe.'"

Completely uncoordinated

Even Consumer Protection Commissioner Meglena Kuneva, a big supporter of harmonization, acknowledges that the highest level of consumer protection doesn't necessarily guarantee an optimal solution for consumers – especially if they end up footing the bill.

Schwab expects EU members will initially find agreement in a few selected areas, such as return rights. Policymakers hope to reach some kind of consensus next month to move ahead with legislation early next year, but it's unclear what they will achieve. "We will move where we can and wait for proposals to bring the other areas in line later," he said.

For those retailers unwilling to wait until rules and regulations are harmonized across Europe, Andreas Duscha with the E-commerce Center-Handel in Cologne recommended seeking legal support to be on the safe side. "We urge retailers to work closely with lawyers and not just download some forms from the Internet and draw up their own terms and conditions," he told Deutsche Welle.

Author: John Blau
Editor: Sam Edmonds