Leg. Dev.: Scope of the E-Commerce Directive 2000/3 1/EC of June 8, 2000

7 Colum. J. Eur. L. 473 (2001)

Thomas Livolsi.

On June 8, 2000, the Council and the European Parliament adopted the Directive on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (“the E-Commerce Directive”), after  months of discussion. The Member States must bring into force the laws and regulations necessary to comply with the E-Commerce Directive by January 17, 2002.2 The Directive aims to establish a coherent legal framework for the development of electronic commerce within the single market by ensuring that “information society services” benefit from the fundamental European Union law principles of free movement of services and freedom of establishment.

The E-Commerce Directive was adopted for two principle reasons. Firstly, the combination of the Single Market’s legal framework and single currency has given the European Union “a unique opportunity to facilitate the development of electronic commerce which this Directive is supposed to address. Secondly, the E-Commerce Directive was put forth in order to reap the more immediate benefits that electronic commerce can provide. Then Commissioner Mario Monti asserted that:

[electronic commerce adds a new dimension to the Single Market for consumers in
terms of easier access to goods and services of better quality and at lower prices.
Electronic commerce will promote trade, stimulate innovation and competitiveness
and create sustainable jobs. This proposal should ensure that the Union reaps the full|
benefits of electronic commerce by boosting consumer confidence and giving
operators legal certainty, without excessive red tape.

Thus the E-Commerce Directive is an attempt to take advantage of both the unique situation of the Single Market, and the unique commercial possibilities of the Internet.

The future of e-commerce and its regulation is of substantial importance to Europe. The global electronic commerce market has grown extremely fast and it was estimated that it had become worth 200 billion euros by the year 2000. Worldwide, 86 million people were connected to the Internet by the end of 1996 and by 2000, this number was expected to reach 250 million. Within the European Union, it is estimated that more than 400,000 jobs related to the information society were created between 1995 and 1997 and that one in four new jobs is currently derived from these activities. As such, considerable benefits have been expected for small and medium-sized enterprises.

Acknowledging the economic stake in e-commerce, the European Commission put forth in 1997 a communication entitled A European Initiative on Electronic Commerce (“the Initiative”). It identified four key areas where action had to be taken by the year 2000 in order to help Europe benefit from e-commerce. First, it stated that widespread, affordable access to the infrastructure, products and services needed for electronic commerce must be provided through secure and easy-to-use technologies and services and reliable, high-capacity telecommunications networks. Second, the Initiative asserted the necessity of a coherent regulatory structure within the EU, based on Single Market principles. Third, it emphasized the importance of fostering awareness about e-commnerce and skills necessary to participate in e- commerce. Finally, it stated that there must be a compatible and coherent regulatory framework at the global level.

Taking the guidelines of the Initiative into account, the Commission presented a proposal for the E-Commerce Directive in November 1998 (“the First Proposal”). An amended proposal was later put forth in September 1999 in the light of the European Parliament’s favorable opinion of May 1999 (“the Amended Proposal”). The Amended Proposal clarified the following four aspects of the First Proposal: (1) the definitions of “information society services” and of consumers; (2) the link between the first proposal and existing consumer protection and data protection directives; (3) the treatment of unsolicited commercial communications via electronic mail; and (4) determination of the moment when an on-line contract is concluded. However, the Commission maintained the proposed rules limiting the liability of on-line service providers who act as intermediaries. The Council of Ministers reached a political agreement on December 7, 1999 on a common position for the E-Commerce Directive.

The phrase “information society services” has been previously defined by Directive 98/34/EC16 and 98/84/EC17 as including any service normally provided for remuneration at a distance, by means of electronic equipment for the processing and storage of data, and at the individual request of a recipient of a service. Thus the E-Commerce Directive covers all “information society services”: business-to-business as well as business-to-consumer; services provided free of charge to the recipient, e.g. funded by advertising or sponsorship revenue; and services allowing for on-line electronic transactions such as interactive tele-shopping of goods and services and on-line shopping malls.”‘ Examples of sectors and activities covered include on-line newspapers, on-line databases, on-line financial services, on-line professional services (such as lawyers, doctors, accountants, and estate agents), on-line entertainment services such as video on demand, on-line direct marketing and advertising and services providing access to the World Wide Web.

The main provisions of the E-Commerce Directive show a concern for favoring free trade. A prior authorization regime for information society services is excluded. Regulated professions (such as lawyers or physicians) are free to provide information society services, provided they respect their own professional codes of ethics. States are required to remove restrictions to electronic contracts. Finally, intermediary service providers are exempted from liability.

The E-Commerce Directive also lays emphasis on the protection of consumers. Minimal information about the service provider and the service that it offers must be provided to the recipients. For instance, the name and the geographic address of the service provider and the commercial nature of the electronic communication, especially if it is unsolicited, should be clearly identifiable.

The E-Commerce Directive also states the basic principles to establish a consumer contract, including the information to be provided and how an order for a service is placed. Thus the service provider must, inter alia, make clear what the steps are to conclude the contract. It must also “acknowledge the receipt of the recipient’s order without undue delay and by electronic means.

This Directive applies only to service providers established within the European Union and not those established outside. The determination of the place of establishment of an information society service provider is made in conformity with the case law of the European Court of Justice in Luxembourg – the provider is established where it pursues its economic activity.

Essentially, a Member State may not take measures that impede provision of  another State’s information society services within the first State’s territory, unless such measures are covered by one of the E-Commerce Directive’s exceptions. Existing European Union legislation makes the country where the recipient is located competent to regulate specific fields such as investment funds and insurance. The requirements of these Directives did not conform to the E-Commerce Directive’s general principle that the country where information society service comes from is competent to regulate them. Therefore appropriate exceptions were required.

The E-Commerce Directive explicitly warns that it creates only a “legal framework to ensure the free movement of information society services” and does not attempt to harmonize the criminal law of the Member States that relate to e-commerce. Taxation is also explicitly excluded from the field of application of this Directive. Nor does the E-Commerce Directive cover State laws regarding safety standards for goods, labeling obligations, delivery and transportation of goods or the exercise of rights of preemption by public authorities concerning certain goods such as works of art. Finally, it does not aim to establish new private international law rules or rules pertaining to the jurisdiction of courts.

The E-Commerce Directive does not stand in isolation. One must read it in the context of the whole body of Community law that protects public health and consumer interests. There are already directives targeting misleading or comparative advertising and unfair terms in consumer contracts.

The E-Commerce Directive is an important step toward an integrated European market in financial services, which the Commission hopes to be achieved by the 2005 Lisbon European Council deadline. The step to follow this Directive will be the adoption of the directive of the European Parliament and of the Council concerning the distance marketing of consumer financial services. Ultimately, if the Union is to realize its true goal of an integrated market, rules protecting consumers against frauds or practices such as “cold calling” – i.e. unsolicited phone calls or emails – will have to be harmonized, and the Member States must eventually coordinate their criminal law more closely.