The University of Wales, Aberystwyth
Department of Law

Is Europe on the Right Track to becoming Ready for E-Commerce?
How Effective is Recent Regulation?

A Dissertation submitted to the University of Wales, Aberystwyth,
in partial fulfilment of the requirements for the degree of the LL.M.
in International Business Law

by Sandra Vivian Wagner
August 2004

Table of Contents

Acknowledgements ... II
Table of Contents ... III
Abstract ... IV
Table of Legislation ... V
Table of Cases ... VII

Is Europe on the Right Track to becoming Ready for E-Commerce? ... 1

I. Introduction ... 1

II. Outline ... 3

III. Background Information ... 4
1. What is E-Commerce and why is it special? ... 4
2. Why do we regulate? ... 5
3. The History of the EU Approach ... 8

IV. Illustrative Issues of Regulation on E-Commerce ... 12
1. E-Infrastructure ... 13
a) The EU Policy ... 13
b) Practical Implications ... 15
c) Conclusion ... 16
2. Electronic Signatures ... 17
a) The EU Policy ... 17
(1) The E-Signatures Directive ... 18
(2) The E-Commerce Directive ... 28
b) Conclusion ... 30
3. Privacy Protection ... 30
a) The Data Protection Directive ... 31
b) The US Approach ... 38
c) Resume ... 41
d) Spam ... 42
(1) The E-Communications Directive ... 43
(2) The US Approach ... 47
(3) ‘Code’ as an Alternative ... 49
e) Conclusion ... 52
4. Consumer Protection ... 52
a) The Distance Selling Directive ... 53
b) Resume ... 61
c) The E-Commerce Directive ... 62
d) Comparison of the EU and the US Approach ... 67
e) Conclusion ... 69

V. Conclusion ... 69

Bibliography 72

Abstract

This Dissertation aims to assess the effectiveness and suitability of European regulation in respect to E-Commerce.

Taking the European ‘Lisbon Strategy’ as set out in 2000 as a starting point, this paper examines whether Europe is on the right track to becoming “the most competitive and dynamic knowledge-based economy (…) by 2010”.¹
Hereby, the scope of this paper is limited to E-Commerce only as one essential part of a ‘knowledge-based economy’ and an ‘e-ready’ Europe.

After outlining the special nature of E-Commerce, the rationale behind regulation and the historical background of European regulation in this field, this paper concentrates on four issues where the EU has become active in regulating E-Commerce, namely, the essential prerequisite of an existing ‘e-infrastructure’, e-signatures, privacy and consumer protection. The European approach to each of these issues is assessed to reveal its strengths and weaknesses. Moreover, this European way of regulating E-Commerce is then compared with other regulative attempts. Hereby, special attention is paid to the US approach to regulating E-Commerce which is mostly based on self-regulation.

Thus, this paper comes to the conclusion that Europe is on the right track to becoming ‘eready’ in respect to E-Commerce. Basic regulatory decisions have the potential to lead in the right direction, although they do not always provide the most effective solution.
Often European Directives do not reach far enough and are outdated. Thus, they do not address E-Commerce sufficiently, give too much discretion to the Member States and leave prevalent gaps or do not interoperate properly.
Therefore, the European regulation on E-Commerce needs some revision and has to take some brave and innovative steps to establish legal certainty, as well as to create consumer trust and confidence. Following this path active participation can be promoted and consequently, a vibrant E-Commerce market created.

Is Europe on the Right Track to becoming Ready for E-Commerce?
How Effective is Recent Regulation?

I. Introduction

In March 2000 the European Council met in Lisbon and announced its objective

“to make the European Union the world’s most competitive and dynamic knowledge-based economy (…) by 2010”.²

Some aims are realistic – one has a probable chance to reach them; others could be euphorically described as ‘ambitious’ and lastly, there is a category of aims which could rather be defined as ‘castles in the air’ or simply as ‘dreams’.

Did the European Council dream one such ‘dream’ when it made this announcement? Has Europe ever been on its way to becoming the ‘knowledge-based economy’, is it currently on this track, or has it indeed already managed the impossible and built its ‘castle’?

Such a ‘knowledge-based economy’ contains numerous and wide-reaching facets, one of them being E-Commerce. Although its transactions formed only between 0.1% (France) to 1.39% (UK) of all purchases in the retail sector in 2001, it involves huge sums of money (e.g. USD 35.9 Billion in the US) and is growing rapidly.³ Thus, there is a huge and prevalent economic potential which has made it subject to European regulation for about the last decade.

The scope of this paper will be limited to E-Commerce only as one essential part of a ‘knowledge-based economy’.

Furthermore, this work will identify four issues in E-Commerce subject to European regulation and will use them in its main part as illustrative examples to analyse the regulation looking at preliminary policy decisions, competing interests of the involved players and the special nature of e-communications. Overall, it will assess the question of whether Europe is on the right track to becoming e-ready in respect to E-Commerce. Surveys published by the OECD⁴ drew a fatal picture in 2002: the Internet is not at all an accepted means of bargaining in Europe.

Primarily, the use of the Internet in Europe differs drastically. Whereas about 78% of the Swedish citizens use the Internet, only about 20% of the Italians do so. On average, about 50% of EU citizens are online.⁵ Secondly, only a small percentage of those who have Internet access also purchase online; numbers range between 28% of Swedish citizens and 2% of the Italian who buy on the Internet. The EU average may be estimated at around 10%. Moreover, EU businesses use the Internet mainly for marketing or buying, but not for selling.⁶

Consequently, these figures show that on the one hand, there is a strong divergence concerning the access to the Internet throughout Europe, decreasing from the north to the south which impacts on the development of E-Commerce in Europe. On the other hand, there is also high potential for E-Commerce, as a significant percentage of Europeans have online access. Nevertheless, marketing and business-to-business transactions are still prevalent, whereas online consumer transactions are extremely rare.

Evidently, these figures show that Europe has failed to create its ‘castle’ so far. Nevertheless, it must be asked why this is the case. Why is E-Commerce still underdeveloped, when theoretically, there is such potential? Business-to-consumer transactions, especially, seem to face insuperable obstacles.⁷

Primarily, it is obvious that E-Commerce can flourish only, if the essential infrastructure is established within the EU. As outlined, there seems to be a lack of this necessary prerequisite in parts of Europe. Therefore, ‘infrastructure’ as the technical barrier to E-Commerce is the first issue to be assessed within this paper.

[...]

1 European Commission “The Lisbon Strategy” at <http://europa.eu.int/comm/lisbon_strategy/key/index_en.html> (visited 17.8.04), para. “Introduction”

2 European Commission “The Lisbon Strategy” at <http://europa.eu.int/comm/lisbon_strategy/key/index_en.html> (visited 17.8.04), para. “Introduction”

3 OECD “Measuring the Information Economy 2002“at <http://www.oecd.org/dataoecd/34/35/2771139.pdf> (visited 4.3.04), p. 66

4 ibid, p. 62; OECD “The latest official statistics on electronic commerce“, 2001 at <http://www.oecd.org/dataoecd/34/61/2077266.pdf> (visited 4.3.04)

5 OECD (2002) op. cit. n. 3, p. 62

6 see. ibid, pp. 62, 63

7 see Byrne, D. “Cyberspace and Consumer Confidence” 2000, at <http://europa.eu.int/comm/dgs/health_consumer/library/speeches/speech55_en.html> (28.3.04), para. “Foreword”