April 1, 2011, 3:28 PM

Proposed EU laws concern e-commerce groups

The European Union gives early approval to legislation that e-retailers say will increase their costs.

Lead Photo

Members of the European Union Parliament last week approved proposed amendments aimed at strengthening the rights of consumers when making purchases from e-retailers. E-commerce industry groups, however, say they did not get enough time to provide comment and that the changes will erode e-commerce growth in Europe.

The amendments still have to gain approval from two more EU bodies. It is unclear whether the amendments will affect U.S.-based merchants that ship to Europe from the U.S.

The amendments are proposed changes to the EU’s Consumer Rights Directive. They would give consumers more time to change their minds about purchases and allow merchants less time to make refunds.

Presently, consumers in the 27 nations that make up the European Union have seven days to inform a merchant that they want to return an item, whether purchased online or from bricks-and-mortar stores. The new rule would extend that to 14 days. The amendments also require e-retailers to pay for return shipping for purchases of 40 euros (US$57) or greater. E-retailers will also have to issue refunds within 14 days, rather than 30. Industry groups say those changes would not allow some e-retailers enough time to receive and inspect returned merchandise before they have to issue a refund.

Sales of digital goods such as music and film downloads are exempt from the return rules, with such purchases considered final the moment a consumer begins downloading a purchase. Products purchased from other consumers at auction sites such as eBay also are exempt. Purchases made from professional merchants on auction sites are not exempt.

The language of another amendment to the directive implies that any EU e-retailer must do business with any consumer in any EU nation, which means e-retailers would not be able to choose which markets they wish to sell to. The amendment says consumers can require that merchants deliver goods to them and that the merchant must do so if it is “technically feasible.” The amendment does not provide a definition of what constitutes “technically feasible.”

E-commerce industry groups say there is too much variation among EU member countries for all online retailers to sell to all countries. They cite language barriers, fulfillment capabilities and payment methods as some of the challenges e-retailers face. “If you can select the market you want to sell into, it just makes sense,” says a spokesman for the Interactive Media in Retail Group, an e-commerce trade group based in London commonly known as IMRG. “Some are more appropriate than others and some e-retailers have had pretty bad experiences when shipping to markets far away.”

The EU Parliament says the amendments update existing consumer rights’ and provide better protection for online shoppers.

Retail industry groups, including IMRG and the Paris-based FEVAD, also say the EU Parliament didn’t go through the normal review process and should have asked for industry input before taking up the amendments. FEVAD says the parliament also didn’t conduct an economic impact study.

IMRG says the changes would cost e-retailers 10 billion euros (US$14.2 billion) a year in additional delivery costs, which it pegs at 4% of the value of EU e-commerce projected for 2012. The group says the increased costs would likely drive some small and medium-sized e-retailers out of business. FEVAD says the changes would force e-retailers to pass cost increases on to customers, slowing e-commerce growth in the EU.

“This proposed legislation will bring risk, complexity and cost to trading online, preventing smaller businesses from being able to get established in the market,” says IMRG CEO James Roper. “It is critical that EU politicians carry out in-depth research and consult with those who actually operate the industry before making decisions that can seriously disrupt its development.”

A spokesperson from the EU press office says the EU legislative bodies have already fixed their negotiation positions, but that interested parties can still try to reach out to members of parliament to offer their opinions. The date of the final vote has not been scheduled, but the spokesperson says it could happen as early as May or June.

It is unclear whether any of the amendments would apply to U.S. merchants shipping products in to Europe. The amendments, however, would apply to U.S. e-retailers operating within the EU, such as the European arms of Amazon.com, the No. 1 e-retailer in Europe according to Internet Retailer’s Top 300 Europe research guide.

U.S. e-retailers looking to expand in Europe could interpret the amendments in several ways, says Martin Gill, an analyst who covers European e-commerce at Forrester Research Inc. Right now, many EU nations have their own laws—some strict and some more lenient—concerning consumer rights, return policies and refunds that retailers have to handle on a country-by-country basis. The amendments would create some e-commerce standardization, although an EU member nation can opt for more stringent rules than the ones proposed.

On the other hand, the higher costs the industry groups expect if the amendments become law may compel U.S. e-retailers looking to reconsider plans to set up stores in the EU. “The rigid approach to delivery and returns may encourage U.S. retailers to keep their operations in the continental U.S. and deal with Europe at arm’s length, rather than build a local capability,” he says.

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