4.2. E-Commerce Regulation Development within the EU
The Internet, the most open and democratic communication system, is built on the idea of freedom: freedom of knowledge, information and exchange of views, making this ever-growing network perfectly suitable for the development of actual trade. The net-work providers only offer the means of communication, i.e., the infrastructure to support it, but they cannot considerably influence the flow of opinions and information in the network. Senders and addressees remain relatively anonymous, messages are encrypted and they often remain unreadable to the authorities. The Internet stretches across borders and obviously raises the issue of some form of censorship, which, when conducted in its most reasonable way, leads to the adoption of the regulatory framework that keeps its virtues and prevents the identified risks (European Parliament and Council 1995
The European Union (EU) responded to the need to regulate e-commerce by adopting Directive 2000/31/EC of the European Parliament and of the Council on certain legal aspects of information society services, in particular electronic commerce in the internal market (e-commerce directive) (European Parliament and Council 2000
). The document includes the definition of the information society services as those comprising a wide range of economic activities that take place online.
These activities may consist, in particular, of the sale of goods online, because activities such as the delivery of goods or the provision of offline services are not covered. Information society services are not limited to services that result in online contracts, but, to the extent that they are an economic activity, extend to services that are not remunerated by the recipients, such as online information services, commercial communications or those that provide tools for searching, accessing and retrieving data (European Parliament and Council 2003a
When a customer orders a product from the online store through the exclusive use of an electronically organized sales system, they conclude a distance contract. For the classification of these notions, Directive 2000/31/EC on certain legal aspects of information society services, in particular electronic commerce (European Parliament and Council 2000
), gives certain definitions to participants in the electronic commerce process (Table 1
E-commerce cannot be analyzed apart from the concept of information society, which includes services referring to the transmission of information through a communications network, the provision of access to a communications network or the hosting of information which is at disposal of a certain recipient of the service. In line with this observation, television services are to be mentioned, referring to the meaning explained in Directive EEC/89/552 (European Parliament and Council 2003a
Consequently, the broadcasting services are not under the scope of information society services, as they do not fall under the scope of the services offered on individual request. Instead, point-to-point services, such as video-on-demand or the provision of commercial communications by e-mail, are information society services. The use of electronic mail or other equivalent means of communication by natural persons acting for purposes which are not usually their commercial or professional activities; the use of such means for the conclusion of contracts between such persons included is not under the scope of the concept information society service.
The labor contract, and the rights and obligations derived from it, both for the employee and the employer, are not under the scope of the information society service. Moreover, all the operations which, in consideration of their particularities, could not be executed by remote activities nor by electronic means, such as medical examinations which require the physical evaluation of the patient, are not information society services. Still, it is important to observe that during the COVID-19 global pandemic crisis, different types of services that were considered by considering their inner core particularities outside the scope of information society are now possible using online facilities (such as education, remote medical evaluation and treatment, etc.).
According to the same Directive (European Parliament and Council 1995
), all European Union Member States are competent to create the framework for the development of the information society services offered within their territory, and they may control and sanction the misfunctions eventually proved to be active and relevant in this field. In addition, it should be noted that Member States may not restrict the free movement of information society services in other Member States on the basis of reasons relevant to the coordinated field.
Relevant to the field of electronic commerce is also the definition provided in Regulation (EU) no. 524/2013 of the European Parliament and of the Council on the online settlement of consumer disputes (European Parliament and Council 2003b
) and amending Regulation (EC) 2006/2004 and Directive 2009/22/EC (Consumer SOL Regulation). This regulation is applicable to the sale contract or to the supply of online services, when this online contract refers to the operation of selling or supplying services where the trader or his intermediary offers, through a website or other electronic means, goods or services that the consumer orders on that website or through other electronic means (European Parliament and Council 2013a
Another relevant definition at the European level is the definition of the “distance contract”, provided by Directive 2011/83/EU of the European Parliament and of the Council on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council (European Parliament and Council 2011
). The above regulation states that distance contract means “any contract concluded between the trader and the consumer in an organized distance sales or service system, without the simultaneous physical presence of the trader and the consumer, with the exclusive use of one or more means of distance communication, up to and including when the contract is concluded”.
From this definition, it can be concluded that contracts concluded by electronic means are included in the scope of distance contracts, but there is no perfect similarity between these two concepts, distance contracts being a broader notion, which also includes the contracts concluded by means of remote communication, other than electronically. Thus, starting from the definition of this concept at the European level, it can be concluded that the cumulative fulfillment of certain conditions is essential for the qualification of a particular operation as entering the sphere of electronic commerce (Table 2
The electronic platforms providing sets of tools and specific information environments for collaboration between enterprises, between them and external collaborators and between experts, act as a virtual enterprise towards the outside world. If the platform does not belong to a specific company, the operator must pay special attention to the status of neutrality, data protection and security of communication, in order to prevent the leakage of information of interest to the competition (Walther and Levine 2001
There is a wide list of other normative acts relevant to electronic commerce activity, while there are currently many other regulations at the European level adjacent to the field of electronic commerce. In Appendix B
, we present the most relevant normative acts together with their purpose or object of regulation, and, where appropriate, a brief presentation of the most significant provisions.
4.3. E-Commerce Regulation Development Reflected on Other Regulatory Fields
There are some particularities that out research points out while analyzing the legal framework for e-commerce. We do note the two levels of regulatory act: the European one and the regional/local/national one. As mentioned above, e-commerce is regulated at the European level mainly by Directive 2000/31/EC of the European Parliament and by the Council on certain legal aspects of information society services, in particular e-commerce in the internal market (European Parliament and Council 1995
). In line with the EU law, the notion of e-commerce falls into the legal category of information society services, the relationship being from part to whole. Thus, e-commerce is in fact a kind of information society service.
The act of electronic commerce is the sale of goods or the provision of services or an interposition in the circulation of goods, in order to obtain profit; the formation of the contract being validly carried out by electronic means, the previsions of the e-commerce directive influence other normative acts. Therefore, both information society service providers (i.e., traders) and their customers can be both individuals and legal entities. Although e-commerce legislation does not take into account other actors, in reality, the e-commerce act is carried out not only with the participation of the supplier and the customer, but also with the participation of a whole series of other actors that facilitate the act of commerce.
Among them, there can legitimately be mentioned public regulatory authorities, public control authorities, postal and courier service providers (offering customs clearance, sorting, transport and delivery of parcels), transport service providers, payment solution providers, support service providers (accounting, human resources, etc.), marketing and advertising service providers, security service providers, providers of technical solutions, logistics outsourcing companies, etc.
In Table 3
we show the e-commerce components.
It is our belief that each of these components requires particular regulation, both in EU law and at the level of national regulation. The definition of “consumer” is a key element, especially in the area of regulation for consumers’ protection, as the conclusion of distance contracts raises the issues of abusive contractual clauses, the guarantees of use for the products and the alternative dispute resolution between consumers and traders. However, an examination of the relevant Community legislation shows that such a definition is not consistent with EU law but is also dealt with in particular in the national law of the EU Member States.
From the perspective of Community and national law, the concept of “consumer” presents particularities, addressed not only in the Community acquis on consumer protection, but also in the relevant EU private international law doctrine, in particular in relation to the Rome I and Brussels Regulations I, both including particular pieces of regulation for consumer protection (Mańko 2013
The research points out that, although they are formulated in different documents, the large majority of available definitions for the concept of “consumer” in EU law use a similar pattern. The determinant feature of this definition is negative, in the sense that the precondition for inclusion in the category of “consumer” is that the data subject acts outside the scope of an undertaking. It is commonly accepted that the consumer represents a natural person, whose activity is manifested within the framework of the economic field of action (business, production, commerce or liberal profession). However, a relevant exception to this rule can be found in Directive 2015/2302 of the European Parliament and of the Council on package travel and package travel services, amending Regulation (EC) No. 882/2004, 2006/2004 and Parliament’s Directive 2011/83/EU of the European Parliament and of the Council and repealing Council Directive 90/314/EEC using a broad notion of “consumer”, expanding its scope in order to include companies and business travelers (buyers and users of travel services) (European Parliament and Council 2015a
At the European level, issues related to knowledge of legal obligations towards consumers, knowledge and compliance with consumer protection legislation, as well as views on product safety, consumer complaints and awareness of alternative dispute resolutions have been the subject of many studies developed by the European Commission
Moreover, the Court of Justice of the European Union (“CJEU”) was called to give the interpretation of the law when the obligation to transpose the EU law was not satisfactorily accomplished. In the case of C-421/12 Commission v. Belgium, in which the CJEU found that Belgium had infringed on the obligation to transpose Directive 2005/29/EC on unfair business-to-consumer commercial practices in the internal market by introducing legal provisions in national law transposing on low-priced sales (European Court of Justice 2014
), which involved:
Reporting the notice of reductions in a reference price, defined by Belgian national law as the lowest price charged by the trader in the month preceding the notice of sale at a reduced price.
Limiting the period of practice of sales at a reduced price by the trader to a minimum of 1 day and a maximum of 1 month.
In arguing its decision, the CJEU noted that Directive 2005/29/EC contains an exhaustive list of commercial practices that should be considered incorrect, a list that does not include the legal provisions of the Belgian national law on discounted sales. Finally, the CJEU established that the imposition by Member States of more restrictive national measures than those provided for in Directive 2005/29/EC constitutes a violation of the provisions of art. 4 of Directive 2005/29/EC, which provides that: Member States shall not restrict the freedom to provide services, nor shall they restrict the free movement of goods for reasons falling within the scope of this Directive (European Court of Justice 2010
Regardless of their origin, the products should respect the Union harmonization legislation applicable when they are made available on the European single market. In advance from being in the possession of the final user of a particular product or service in the EU, products from non-EU countries must successfully exit the procedure for being released for free circulation on the internal European market; all the products must be checked by the authorities responsible for border control, under the prevision of Regulation (EC) No. 765/2008. All national market surveillance authorities are entitled to conduct control missions on the products made available on the market and are empowered to organize, to ensure coordination between institutional structures at the national level and the EU level. The General Product Safety Directive also contains provisions for market surveillance, the relationship between Regulation (EC) No. 765/2008 (European Parliament and Council 2008
) and that Directive is described in detail in the working document of 3 March 2010 (European Commission 2010a
In legal theory, products sold on electronic channels do not differ from those sold on traditional channels. They can take the form of tangible/intangible goods or services. As a separate category, digital goods or products can be defined as tangible and intangible goods produced by scientific or artistic research. Digital goods therefore represent that category of goods which are stored, archived, delivered and/or used in electronic format and which are delivered to the electronic consumer by email or which are downloaded from the Internet. The category of digital goods/products includes books in electronic format (e-books), music files, software, digital images, manuals in electronic format as well as any article that can be stored and archived in one or more electronic files. A product is made available on the market when it is supplied for the purpose of distribution, consumption or use on the market in the course of a commercial activity, whether in return for payment or free of charge (European Parliament and Council 2008
Another important issue in the pattern of organizing e-commerce is the institutional infrastructure created for efficient market surveillance, aiming to ensure that products comply with applicable requirements, thus providing a high level of protection of public interest, in response to the need to protect general health and safety, consumer protection and the free movement of products. Obviously, in this context, the issue of environmental protection is also taken into account (Bostan et al. 2009
; Bostan 2016
Market surveillance ensures that citizens have an equivalent level of protection throughout the single market, regardless of the origin of the product, and it is important for the interests of economic operators, as it helps eliminate unfair competition (European Commission 2016b
). It is our opinion that the existence of harmonized rules on digital products would reduce costs for traders and encourage them to expand across borders, as they would no longer have to deal with differences in each EU country’s regulation when they want to expand the territorial area of their sales operations. Still, as far as digital goods are concerned, there are no EU-wide applicable rules for inappropriate digital content.
The consumers’ need to know what to expect when buying digital content online and that they have specific rights in case of prejudice was considered when formulating the Proposal for a Directive of the European Parliament and of the Council on certain aspects of contracts for the supply of digital content; establishing harmonized rules for the marketing of digital goods and the bodies supervising those rules is being debated at the EU level. The directive does not include specific previsions for e-commerce in particular but for different categories of economic operators, while it describes the various important types of activities, the proposal addresses the security/safety requirements and conformity to the internal marketed products standards.
The Directive defines specific e-commerce concepts, i.e.,:
“Simple transmission activities”, which include the transmission of information provided by the beneficiary of the service or the provision of access to a communications network (e.g., internet service providers);
“Caching activities”, which include the transmission of information in a more efficient manner, e.g., duplicating a database that copies the contents of the original server to ensure global coverage.
Service providers acting as intermediary when carrying out the above described activities are entitled to an exemption of liability for damages or criminal penalties related to the content provided by third parties using their networks. Still, the disclaimer is not complete. With regard to storage activities that are important for security/safety and compliance of products, the exemption shall apply only when the following conditions are met:
The service provider is not informed about the illicit nature of the hosted information;
When the service provider is informed of the illegal content of the information (for example, by a notification that is “sufficiently precise and duly justified”), he/she acts promptly to remove or block access.
In accordance with Article 15 of the Electronic Commerce Directive, Member States are not allowed to impose on such providers any general obligation to monitor content, nor to establish the general obligation to actively seek facts or circumstances which indicate that the activities are unlawful. This means that national authorities cannot impose a general obligation on intermediaries to actively monitor all their internet traffic and to look for elements that indicate illicit activities, such as unsafe products. Not only the regulatory framework at the EU level was influenced by the development of the e-commerce, but also the jurisprudence had to give an interpretation of the legislation in force, solving particular disputes in this area. In case C-324/09, L’Oréal v. eBay, the European Court of Justice
) clarified that the relevant question regarding the conditions necessary for an exemption of liability was whether eBay was aware of facts or circumstances which showed that the illicit activity was obvious (see points 120–123). If they do not meet these criteria, they cannot be exempted and can therefore be held responsible for the content they host.
However, the regulation analyses carried out prove that the prohibition on general monitoring does not restrict the right of public authorities to establish specific monitoring requirements, and it is our belief that the scope of these provisions needs to be defined. As an example of a separate domain, but with some similarities, it is the role of the courts of law to establish when service providers should take the appropriate measures that certain websites, which contain copyrighted or counterfeit content, are blocked for users in the domain by a given Member State.
In real activity management, the national authorities are able to monitor storage and hosting service providers that, consequently of the notification on the illegal activity, remove or block that content, which means that EU consumers are prohibited from accessing the unsafe or non-compliant products through their services. Yet, domestic market surveillance authorities are obliged to organize their activities in accordance with the relevant provisions of Regulation (EC) No. 882/2004 and No. 765/2008 and on the specific Union harmonization legislation and therefore, they must monitor, first and with the most efficient methods, responsible economic operators.
Each member state’s market surveillance authorities are challenged to use the most suitable measures, designed on a case-by-case basis and in accordance with the requirements of the principle of proportionality, considering the specific level of risk, the identity of the economic operator, the degree of safety threat, whether measures have been already taken against a particular product, etc. The notion of “content” describes the online product offering (for instance, a photo or a descriptive text) while the notion of “illicit activity” refers to activities under the scope of the criminal and/or administrative law. The directive seeks to strike a balance between all the interests at stake. The legal basis for the notification and obligation of storage service providers to remove or block access to illegal content is contained in the national transposition of the E-Commerce Directive (European Commission 2016b
The manufacturer’s definition comprises two conditions to be respected simultaneously: the person should make a product (or have it made by others) and should make it available on the specific market of the product, using his name or trademark. Therefore, if the product is available on the market using the name or brand of another person, the latter is the actual manufacturer. To this end, the economic agent who makes the product available on the market using his name or trademark shall automatically become a manufacturer. Consequently, he assumes full liability for issuing the conformity certificate (regarding both design and production of the good), even if this procedure was actually accomplished before by a third party.
In addition, he must possess all the documents and certificates to prove the conformity of the product, whereas they were issued in his name or in the name of a third party. European legislation does not require the manufacturer to be established in the European Union. Therefore, when a product is placed on the European market, the responsibilities of the producer are the same, whether it is established outside the European Union or in a Member State. It is important to note that any person who delivers products within the European internal market has to assume the role of the producer, even if the goods are actually produced in a third country or the product is neither designed nor manufactured for the Union market. The importer who has the online environment as his sales channel has the same obligations as the importer who sells the products in the traditional way. A distributor is a natural or legal person, other than the manufacturer or the importer, who is part of the supply chain and who makes a product available on the market. A distributor purchases products for subsequent distribution from a manufacturer, importer or other distributor.
Under Directive 2001/31/EC, Member States should not impose on providers a general obligation to monitor the information they transmit or store when providing hosting services, nor the general obligation to actively seek facts or information circumstances which show that the activities are illegal (European Parliament and Council 1995
). However, Member States may impose an obligation on information society service providers to inform immediately the public authorities empowered for monitoring the security/safety of the market of any unlawful activities by the beneficiary of their services or of alleged unlawful information which they would provide, or the obligation to disclose to the authorities competent, at their request, information to identify the recipients of the services with which they have concluded a storage-hosting agreement.
The e-commerce Directive (European Parliament and Council 1995
) states the principle that internet service providers should not be responsible for the content they use, make available or store, in all the situations when they act in a strictly passive manner which has been supportive for facilitating the access to the Internet in Europe. Simultaneously, in all the cases in which illegal content is spotted out, regardless of the fact that it is related to illegal activities such as terrorism/child pornography or information that infringes on the property rights of others (e.g., copyright), the intermediary information providers are obliged to use any effective methods to make it unavailable/to eliminate it.
At present, blocking access to or deleting illegal content by hosting providers might be slow and complicated, with legal factual content risks being mistakenly removed. The Digital Single Market Strategy for Europe shows that 52.7% of stakeholders declare that measures taken against the use of illegal content are often ineffective and lacking in transparency. The gaps among national regulation and practices can hinder compliance, which has a bad influence on the efficiency of the fight against online crime and lowers the general public trust in using the online environment. The digital content available on the Internet increases continuously, so the current provisions are likely to be constantly tested.
Thus, it is not always easy to define the limits of the actions that intermediaries can take in relation to the content they transmit, store or host, without losing the protection created while benefiting from the liability derogations established in the Electronic Commerce Directive. When the seller sends a request for authorization to the buyer, it includes the payment instructions received from the buyer and the summary of the order information (European Commission 2006
). The purchaser uses the summary received from the seller and calculates the summary of payment instructions to verify the double signature (Cunningham 2001
). The e-commerce regulation has affected the regulation concerning the right to be informed (Birkinshaw 2006
; European Commission 2016b
) and, in opposition, the protection of data (European Commission 2006
; European Parliament and Council 1995
In line with the right to have access to certain information, in accordance with art. 5 of Directive 2000/31/EC on electronic commerce (European Parliament and Council 1995
), the person managing activities within the scope of e-commerce (e.g., online store) must enable easy, direct and permanent access for recipients of the provided service and public authorities with prerogatives in the field, at least on the following aspects: the identity of the service provider; the geographical address used by the service provider as his permanent establishment; the contact details, including the e-mail address provided for directly and effectively contacting them; the registration location of the service provider and the particular trade register or similar public register; the registration number or equivalent means of identification from that register; if his specific activity is subject to an authorization scheme, the contact details of the relevant supervisory authority should also be provided.
Starting 25 May 2018, when the General Data Protection Regulation entered into force within the EU, all companies operating on the internal market became subject to the same set of data protection rules, wherever they are based. In this context, online merchants are obliged to inform customers in advance about the processing of personal data. At the request of the person concerned, the trader is obliged to inform if there are personal data used and processed, related to him and, if so, what is their purpose, what are the categories of data processed and who are the recipients of the data (European Parliament and Council 2016
If the person in question requests the application of the right of deletion or the right to be forgotten, then the online store has the obligation to do so. In the event of a privacy incident, the online store is required to report to the supervisory authority within 72 h of receiving this information, as well as to keep a record of privacy incidents. If the incident poses a high risk to the rights and freedoms of the individual concerned, the data controller shall inform that individual without delay. It is also necessary to insert the access path (link) to the SOL platform—Online Dispute Resolution, on the first page of the site. This obligation is incidental from 15 February 2016 for all online commerce sites, in accordance with the provisions of Regulation (EU) No. 524/2013 on the online resolution of consumer disputes (European Parliament and Council 2013a
Our analysis also takes into account the proposal for a Directive of the European Parliament and of the Council on certain aspects of online sales contracts and other types of distance selling of goods, an act relevant to B2C e-commerce (European Commission 2011
). Among the main obligations set out in the proposal for a directive, there are:
The seller’s obligation to ensure that the goods respect quantity, quality and the description provided in the contract, which means that if the seller presents a sample or model to the consumer, the goods possess the quality of the sample or model and correspond to his description; the goods correspond to the special purpose for which the consumer requests them, which the consumer brought to the seller’s notice at the conclusion of the contract and which the seller accepted; the goods have the qualities and operating capacities indicated in any precontractual declaration, an integral part of the contract.
The obligation of the seller to make available to the consumer a guarantee certificate on a durable medium and written in a simple and intelligible language.
This certificate must contain a clear statement of consumer rights, as set out in the proposal for a directive, a precise declaration that consumers rights are not diminished by the commercial guarantee and the conditions of the commercial guarantee which go beyond the consumer’s legal rights, information on the guarantee period, possibility to use a transfer of the liability, territorial area of applicability and existence of any cost that the consumer may be subject to. In order to use the commercial guarantee, the identification credentials of the person insuring the guarantee and, in the case of a third party, other than the guarantor, the person to whom the consumer should address a complaint and the procedure by which the complaint is to be addressed.
As shown above, this proposal for a directive introduces a number of rights and obligations for participants in e-commerce and the right time for better organization of e-commerce activity. Although the Proposal for a Directive of the European Parliament and of the Council on certain aspects of digital content supply contracts does not directly concern the field of electronic commerce, given its regulatory specificity, we consider that this normative act will have a significant impact in this area, particularly in the field of B2C e-commerce, because most of the contracts belong to the e-commerce sphere. Thus, the proposal in question sets out certain requirements regarding contracts for the supply of digital content to consumers, in particular the rules on the compliance of digital content with the contract, remedial action in case of noncompliance and how to exercise such remedial measures and obtain the termination of such contracts.
This proposal for a directive introduces a number of concepts, such as digital content (Table 4
) and digital environment.
The digital environment, when defined as including hardware equipment, digital content and any network connection, is under the control of the user. It is specified that the directive in question would apply to all contracts in which a provider offers digital content to a consumer or undertakes to do so, and in return the consumer pays a price or actively offers a non-pecuniary consideration, including any type of data.
At the same time, the provisions of this proposal for a directive regulate a number of requirements regarding the conformity of digital content, as well as the conditions of supplier liability. In this regard, it is shown that the supplier will be responsible for:
Any non-provision of digital content requirements;
Any non-compliance existing at the time when the content is provided digitally;
If, according to the contractual provisions, the digital content is provided during a period of time, for any non-compliance that occurs during that period.
The remedial measures provided in the content of this normative act are different depending on the conditions under which the supplier’s liability arises.
4.4. E-Commerce and Fiscal Effects: Payments and VAT Regulation
As a component of the e-commerce process, the payment of products ordered by the consumer generate effects on VAT payments. The EU has established common rules for payments by adopting legislation on payment services, throughout the European Economic Area, including all electronic and cashless payments. The regulation includes specific rules on the information that service providers for the payment option should make available to the consumers and on the rights and obligations related to the use of payment services.
In accordance with art. 5 of Directive 2000/31/EC on electronic commerce (European Parliament and Council 1995
), the person managing e-commerce activity where the supplier carries out operations under the scope of VAT must inform about the VAT number, respectively the number of identification referred to in Article 22 (1) of the Sixth Council Directive 77/388/EEC on the harmonization of the laws of the Member States relating to turnover taxes—Common system of value-added tax. This number is also important in connection to the payment of e-commerce transactions.
When the recipient of the services launches the order by electronic means, the trader must apply the following principles:
The trader must confirm receipt of the order without undue delay and by electronic means;
The order and the confirmation of receipt are considered received when the parties to whom they are addressed can have access to them.
In accordance with the general requirements of the single European market and in line with the specific provisions of the Regulation (EU) 2017/1128 on the portability of online content services throughout the EU (European Parliament and Council 2017a
), the online content service provider must allow its visiting subscribers in another EU country to access its available service in the same way as in their country of residence. If there is a fee, it should respect the non-discrimination principle (European Parliament and Council 2001
). The EU adopted a second Payment Services Directive in 2015 (PSD 2), in order to enhance the existing regulation and to expand its scope to the new types of digital payment services and to simplify and make more secure the use of Internet payment services. Indirect objectives were addressed too, such as better protection for the consumers against fraudulent operation and abusive trade and payment, but also to strengthen consumers trust (European Parliament and Council 2015b
An electronic payment system is the entire process by which a customer chooses the desired products or service and the online merchant accepts card payments, including by using a website with shopping pages and a page or form of payment, through other connected devices or systems connected to the merchant’s bank (also called a payment service provider or payment portal). In line with the regulation in force, the concept of “payment page” designates the web page or form used to gain customer payment card data, willingly provided after they have decided to purchase the product or service.
The processing of card data can be:
Managed exclusively by the merchant using a shopping cart or a payment request;
Partially managed by the merchant with the help of a third party using a variety of methods;
Outsourced entirely to a third party.
Depending on the online merchant’s payment method, an electronic payment system may be outsourced entirely to a third party, partly managed by the merchant with the support of a third party or managed exclusively by the merchant. The most commonly used methods/tools for the payment of products or services for online purchases are internationally recognized debit/credit cards (e.g., Visa, Mastercard, American Express, etc.). The degree of use of this payment method varies significantly from country to country and there are also nationally recognized debit/credit cards, with a lower degree of frequency of use. The merchant accepting an electronic payment instrument is obliged to accept for payment all the instruments in respect to which it has concluded contracts.
The EU Directive 2015/2366 on payment services in the internal market (PSD2) entered into force on 13 January 2018, the date until when the Member States were required to transpose PSD 2 into national law (European Parliament and Council 2015b
). We note that Romania has not transposed PSD2 into domestic law and there is no legislative initiative so far. The new European directive is meant to revolutionize the banking industry through two measures that will encourage the entry into the banking market of new payment service players, the so-called “third party payment service providers” (TPPs), which will be able to offer “payment initiation services” and ”account information services” (AIS). The entry of new players into the banking market, including new financial technology companies (fintech), stores, service providers or online giants such as Google and Facebook, is performed through new applications that banks will be required to provide to new players, so they have access to customer accounts, which will lead to the emergence of a new concept: open banking. As part of the concept of “open banking”, PSD2 will fundamentally change the way of conducting payment transactions and accessing information on accounts by opening the market for payment services to new actors generically called “TPP” or third-party providers.
TPPs can be non-banking institutions, FinTech companies or merchants who may authorize payment service institutions. PSD2 is a recognition of the “FinTech” revolution in the payment services market and eliminates the banks “monopoly on customers’” banking data (de Rosnay and Janssen 2014
According to PSD2, PISP (Payment Initiation Service Providers) are payment institutions that can initiate payment transactions. The introduction of PISP is a major change in the payments industry, as bank transfers (SEPA) and payment cards are currently used, but both are offered only by the bank which opened the bank account or by issuers of e-money. Thus, there are not many payment options through which funds can be transferred from a payment account. Being authorized as a PISP, merchants (i.e., large retailers such as Amazon) will be able to gain access to account data with the customer’s consent. In this way, online purchases will be made directly by the merchant, as a PISP, based on the permission given by the customer, without the need to use a card and without using another payment service provider (such as PayPal) (European Parliament and Council 2017b
In addition, PSD2 introduces increased requirements on security policy, security control and risk mitigation measures to protect customers against fraud and the illegal use of sensitive and personal data, in addition to management procedures, management risks and accounting procedures, as well as internal control mechanisms. “Free” or flexible and convenient deliveries are also important criteria (mentioned by 85–90% of online shoppers, 2017, Copenhagen economics, e-shopper survey). The results of the online shoppers’ preferences for delivery methods are based on an online survey among 3000 online shoppers from Estonia, Germany, Ireland, Poland, Spain and Sweden (online merchant survey conducted by Copenhagen Economics). Regulatory acts in the field of taxation related to the field of electronic commerce are in Council Directive (EU) 2017/2455 amending Directive 2006/112/EC on the common system of value-added tax and Directive 2009/132/EC, as regards certain value-added tax obligations for the provision of services and the sale of goods at distance, implementing Regulation (EU) Council Regulation (EC) No. 282/2011 laying down measures for the implementation of Directive 2006/112/EC on the common system of value-added tax (European Commission 2009
Not only the payment in e-commerce raises the issue of VAT, but also the cost of delivery of the products and/or services. The current rules on user access to postal services, service quality standards and price levels are intended to ensure a cost-effective ratio for citizens and companies, while providing universal postal service providers with a stable environment and the opportunity to invest in products and new services.
The operation of delivery of products purchased online designates a whole and complex business, organized in various business models and combining the action of four main stakeholder groups (Table 5
The VAT included in the cost of transportation could be addressed only in the context of analyzing the relevant EU rules for general delivery services. Postal Services Directive—Directive 97/67/EC requires EU Member States to set quality standards governing access to postal services and delivery schedules. The Directive also imposes quality standards for cross-border delivery and states that users of postal services should have a simple and inexpensive but efficient and responsible compensation system for resolving complaints about access to or quality of services (European Parliament and Council 1997
). In order to promote e-commerce, to facilitate the use of online trade and to develop the European digital market, the EU policy actors have identified as a priority of the EU policy the necessity to improve the quality and accessibility of cross-border delivery.
In contrast to the declining postal letter segment, the volume of parcels and express services increased by 13% annually. There was a trend of increasing the volume of parcels and express services between 2013 and 2016, which became more evident in 2016. The different offer of products and services of postal operators changed—the number of deliveries of parcels and express services increasing from 7% to 11% of the total volume of postal flow in the period 2013–2016 (Janssen 2011
). Moreover, in the context of the global COVID-19 pandemic crisis, the volumes of delivery services increased dramatically.
As expected, the delivery service increase evolved simultaneously with the increase in the number of complaints for various aspects of the delivery process. According to a study published by the European Commission in 2018, between 2013 and 2016, most countries saw an increase in user complaints about deliveries (Okholm et al. 2018
). Eastern European countries recorded, on average, a 170% increase in user complaints between 2013 and 2016. The main cause behind the increase in the volume of complaints is the rapid increase in the volume of deliveries of parcels and packages from e-commerce. The increase in the volume of complaints is associated with products not offered by the universal service and in particular e-commerce shipments. There may be different reasons for a relatively larger number of complaints arising from the delivery of parcels versus letters, such as higher customer expectations regarding the delivery of parcels and more difficult logistics activities for their delivery.
The EU VAT Directive stipulates the services provided by “public postal services” and the sale of stamps should be exempt from value-added tax (VAT). The reason for the VAT exemption for certain postal services was for the benefit of the consumer’s protection, given that the burden of VAT, which is a consumption tax, fell on the person at the end of the distribution chain. The current system of exemptions for “public postal services” has its beginnings in a period when competition in the postal sector did not exist. At present, increased competition in the postal sector has created the need to align the VAT system with the competitive dynamics of the market. In this regard, the CJEU stated (Case C-357/07) that the VAT exemption for postal services should be provided to any “universal service provider”, regardless of whether the provider is a public or private operator. However, it must be limited to “universal service”. Service providers for whom the terms have been individually negotiated cannot benefit from the VAT exemption.
In addition to that, when referring to cross-border trade, we have to take into consideration that small and low-value goods subject to import/export operation have a value under the minimum VAT threshold, which will be eliminated by the end of 2021. Some major service providers have started already collecting the handling fee for all non-EU items (e.g., Germany and Sweden), action which is relevant for e-commerce elements, affecting the free competition of actors inside and outside the EU. The VAT exemption might have distortive effects on competition, leading to a negative effect on new postal operators and users in the postal market. A distortion of competition occurs if some companies are required to charge VAT, while others are exempt.
As the rules in force are not in line with the momentum of e-commerce in the internal market, Council Directive (EU) 2019/1995 on a common system of taxation of digital services for revenues from the provision of certain digital services is amended by Directive 2006/112/EC regarding the provisions relating to the distance sales of goods and certain internal supplies of goods (European Parliament and Council 2019
). To avoid this risk, delivery from the supplier who sells goods using an electronic mechanism should be exempt from the liability or pay VAT, keeping the right that the supplier deducts the VAT paid upstream for the purchase or import of the delivered goods. To that end, it is reasonable that the supplier is always registered in the Member State in which he purchased or imported the goods involved in that particular transaction.
In addition, non-Community suppliers using the electronic interfaces to trade goods could have stocks in several Member States and could, as a result of the possibility to opt for intra-Community distance sales of goods, deliver goods from those stocks to customers in any European Union Member State. Our analysis proves that, presently, these supplies are not subject to the special arrangements for intra-Community distance sales of goods and services provided by taxable persons established in the Community but not in the Member State of consumption. The directive states that, by way of derogation from the common regime for VAT, the chargeable event for the supply of goods by a taxable person who is deemed to have received and delivered the goods in accordance with e-commerce regulation and the supply of goods to that taxable person shall take place; the VAT becomes chargeable when the payment has been accepted (Saguna and Tofan 2010
When products are delivered or transported from another Member State than the Member State of identification, the VAT return shall also include the total amount excluding VAT, the applicable VAT rates, the total amount of the corresponding VAT subdivided into quotas and the total VAT. The regulation includes detailed description of the administrative requirements for the VAT return form, for the state of supply and the state of consumption equally. In the case of supplies under the scope of regulation, the VAT return shall also include the individual VAT identification number or tax registration code assigned by each Member State to which such goods are dispatched or transported. The VAT return shall include this information provided by the Member State of consumption.
In order to ensure consistency as regards the payment of VAT and import duty at the time of importation of goods, special mechanisms are used for declaring and paying VAT on importation, aligned with that laid down for customs duties in Article 111 of Regulation (EU) No. 182/2011, 952/2013 of the European Parliament and of the Council. In accordance with the Joint Political Declaration of the Member States and the Commission of 28 September 2011 on explanatory documents, Member States have undertaken one or more transposition measures in justified cases, for respecting the time limit for payment of import VAT to the customs authorities.
Member States shall allow the following taxable persons to use this special scheme (Table 6
The VAT return shall contain the VAT identification number and, for each Member State of consumption in which the VAT is due, the total amount, excluding VAT, the applicable VAT rates, the total amount of VAT corresponding to the quotas and the total VAT due in respect of the following supplies of goods or services covered by this special scheme, made during the tax period:
Intra-Community sales of goods at distance;
Supplies of goods, when the dispatch or transport of those goods begins and ends in the same Member State;
The provision of services.
The special regime for the VAT due in the e-commerce operation in Directive 2019/1995 was meant to be transposed in national regulation by 31 December 2020 at the latest. Many of the Member States have adopted the laws, regulations and administrative provisions necessary to comply with this Directive, but the Council adopted the Decision (EU) 2020/1109 of 20 July 2020 amending Directives (EU) 2017/2455 and (EU) 2019/1995 as regards the dates of transposition and application in response to the COVID-19 pandemic.