Digital Single Market

At a Glance

As noted in the European Commission’s Digital Single Market Strategy of May 2015, European SMEs still struggle to reap the full benefit of technology-enabled commerce. There is a key role for the EU to play in addressing the new challenges standing in the way between SMEs and digital growth opportunities:

  • Target  interoperability, transparency and competition to address concerns about the price structure for cross-border parcel delivery
  • Actively use EU competition law to promote intra-EU online trade
  • Take steps to modernize the application of consumer protection policy, and to streamline VAT and customs administration
  • Support the digital economy through a balanced intermediary liability framework and the upholding of the “Home Member State” principle

Issue in Detail

There are more than 20 million (SMBs) in the EU, and they represent an astonishing 99% of businesses. These firms operate mainly at the national level, with only relatively few SMBs engaging in cross-border activity, even within the EU. These businesses forsake the economic opportunities that lie in a European market of about 500 million people, not to mention the potential customers found in the rest of the world. For the last six years, EU policymakers have looked to e-commerce as the tool that will open up foreign markets to SMBs. However, the statistics seem to suggest that this is not happening quickly enough. Instead, only 15% of companies in the EU sell online7 and no more than 7% of them sell cross borders.

But this is not the full picture. European small businesses are increasingly taking advantage of lower trade costs enabled by technology. In the EU, 93% of small businesses using the eBay marketplace in the EU export – in contrast to an average of 26% of traditional firms. These technology-enabled exporters reach on average 18 different countries annually, and 10 of those are EU countries. Some 77% sell to five or more foreign countries. In short, the goal of dramatically increased rates of cross-border sales by European SMBs is being realised in the context of technology-enabled small enterprises engaged in commerce over platforms like eBay.

Cross-border trade within the EU is growing fast and steadily for SMBs on the eBay Marketplace. For the period 2010 to 2014, it grew by 61%, outpacing traditional trade by four times. This means that a lot of the aspirations inherent in the EU’s vision for the Digital Single Market are already being realised in the online marketplace.

However, imperfect government policies have a particularly negative effect onSMBs. The International Organisation of Employers finds that proportionate compliance costs can be 10 to 30 times greater for small firms than for larger firms. For example, small online businesses wishing to trade in another EU country face around €9,000 extra costs for having to adapt to national laws. Moreover, small online businesses are a relatively new business phenomenon, which means they have never before been a meaningful part of trade negotiations. This means that policies needed to facilitate trade by global small businesses have not been proposed, let alone implemented within the traditional trade regime.

The full potential of the Digital Single Market is not yet reaped, neither by businesses nor consumers. For that to happen, certain issues need to be addressed within a regulatory framework supportive of technology-enabled small businesses. 

In order to ensure such supportive framework conditions, the EU needs action to:

  1. Target interoperability, transparency and competition to address concerns about the price structure for cross-border parcel delivery: We propose that action at EU and national level should set out to increase (1) interoperability and standardisation; (2) price and service transparency; and (3) competition between different players in the delivery value chain.
  2. Actively use EU competition law to promote intra-EU online trade: We call on the European Commission to actively use EU competition law to promote intra-EU online trade by (1) opening a case against manufacturers’ distribution contracts that prevent retailers from using online sales channels such as online marketplaces, (2) removing the “logo clause” from paragraph 54 of the Guidelines on Vertical Restraints, and (3) instituting an EU hotline for merchants to report discrimination and practices harming the development of technology-enabled trade.
  3. Take steps to modernize the application of consumer protection policy: We recommend that the European Commission provides guidance on the ultimate objectives behind consumer information requirements. Such guidance should be accompanied by confirmation on the following issues: (1) traders’ information requirements are the sole responsibility of the traders, not of intermediaries such as online marketplaces; (2) greater flexibility on how to achieve the objectives of consumer protection legislation should be encouraged; and (3) legally mandated consumer information, and not limited to the CRD, should simply be “made available to the consumer in a way appropriate” to the channel, screen and device used; and the trader and/or commerce service provider should have flexibility to judge how the particularities of certain channels, screens, devices and interfaces are most effectively leveraged to achieve the objective behind the information obligation in question.
  4. Uphold the “Home Member State” principle: We want to see the European Commission encourage Member States to use existing information sharing tools and support a process of improving the level of their cooperation in order to allow businesses to deal with a single regulator (the regulator of their “Home Member State”) within the EU.
  5. Support the digital economy through a balanced intermediary liability framework: We call on the European Commission to rigorously uphold the current balanced intermediary liability framework. In particular, the Commission should take action to ensure that injunctions against intermediaries do not amount to monitoring obligations.
  6. Streamline VAT and customs administration: We urge the European Commission to streamline the current EU VAT framework by allowing businesses, which cross the threshold for cross-border sales into another EU country, to make a single VAT declaration and payment in their own Member State, rather than having to declare and pay VAT to each individual Member State where their customers are based. Such one-stop-shop system should be accompanied by SME-friendly rules on audits, VAT thresholds, registration, and payment systems. Furthermore, the EU should establish itself as an international leader in e-Commerce friendly customs policy by aligning the customs duty threshold for goods bought online (currently 150e) with that of personal imports offline (430e), establishing a simplified fast-track customs procedure for e-Commerce, and maintaining the current Low Value Consignment Relief (LVCR) VAT threshold.

Downloads

Empowering People and Creating Opportunity in the Digital Single Market: an eBay Report on Europe's Potential

2015 Small Business Growth Reports

Driving a Digital Single Market