Compatibility with obligations
arising from membership of the European Union
92. The European Union E-Commerce Directive was adopted
by the European Parliament and Council on 8 June 2000 and was
implemented (except for Article 9) by the UK by the Electronic
Commerce (EC Directive) Regulations 2002.[27]
The purpose of this Directive is to create a free market in electronic
commerce by removing restrictions on the freedom of service providers
based in other EU member states to provide "Information Society"
services in the UK. Information Society services are defined
as being any service normally provided for remuneration, at a
distance, by means of electronic equipment for the processing
(including digital compression) and storage of data, and at the
individual request of a recipient of a service. Directory publishers
who make use of electronic communications to agree entries in
directories with clients will be covered by this definition.
The 2002 Regulations disapply the 1971 Act with respect to directory
publishers based elsewhere in the EU who use websites and e-mail
to make contracts with UK businesses. Such publishers will, of
course, instead be subject to the domestic law of the country
in which they operate. The Department's belief, based on its
consultations on the current proposal, is that this will often
be less stringent that the 1971 Act in the UK.
93. The Department furthermore considers that the
1971 Act is currently incompatible with Article 9 of the E-Commerce
Directive, which requires of member states that their laws do
not create any obstacles to electronic contracting. The Department
believes that the 1971 Act may contravene Article 9 by:
a) Creating a requirement for the prior provision
of detailed information concerning directories and the form of
entries to be published in them where the order for an entry is
subsequently sent electronically whereas no equivalent requirements
apply if an order in writing is sent on the purchaser's own stationery.
b) Creating a series of requirements, through
the 1975 Regulations, which cannot be satisfied by an electronic
document.
c) Creating a requirement that publishers of
on-line directories must provide more information if they contract
for business electronically than if written notes of agreement
are used.
94. The Department believes that its present Regulatory
Reform Order proposal will resolve the incompatibility issue with
respect to points b. and c. above, but not with respect to a.,
and we share this view. This is because the 1971 Act (in its
current, amended form) requires that the purchaser of a directory
entry must be supplied with certain specified information before
an order may be sent as an electronic document. (The specified
information in this case is identical with that recorded at paragraph
11of this report). The Department states that the different arrangement
for electronic contracting was made as result of the belief, at
the time electronic ordering was authorised in the Unsolicited
Goods and Services Act 1971 (Electronic Communications) Order
2001, that there might be particular difficulties in determining
the authenticity and true origin of electronically produced business
orders.[28] Modern communications
technology makes it possible for a person fraudulently to amend
information contained in an electronic document. Requiring the
prior provision of the specified information to purchasers was
therefore seen as a means of preventing e-mail based fraud.
95. The Department's intention is to resolve the
remaining incompatibility through an Order to be made under section
2(2) of the European Communities Act 1972, stating that the purpose
of this will be to allow orders on a business' own letterhead
to be sent electronically.[29]
Annex E to the explanatory statement comprises a separate consultation
document concerning this intended section 2(2) Order. The consultation
period expired on 18 June 2004.
96. We asked the Department why it planned to proceed
in this way, rather than including all of its proposed reforms
to the 1971 Act in the present Regulatory Reform Order proposal.
It indicated that the issue of the outstanding incompatibility
with Article 9 of the E-commerce Directive was not apparent until
after its consultations on the Regulatory Order proposal were
complete, hence to address the matter in the Order would have
required further consultations and a delay in proceeding with
it. It was to avoid this delay in view of the fact that a commitment
to reform the 1971 Act was made in the 1998 White Paper "Modern
Markets, Confident Consumers" and it was felt that not to
proceed at this stage might give rise to negative reactions from
the directory publishing industry.[30]
97. The Department has informed us that it has received
7 responses to its consultations from 58 organisations which it
approached. Bodies representing directory publishers and related
sections of the advertising industry did not consider that the
proposal would have a significant effect at the level of business
practice, as few of their clients made use of unsolicited business
orders to establish publishing contracts. These bodies were nevertheless
anxious that the eventual section 2(2) Order should not create
difficulties for publishers through technical requirements concerning
devices such as electronic letterheads and watermarks, which might
be intended to make electronic orders harder to forge.
98. We understand that the Department intends fully
to analyse and respond to the consultation responses which it
has received and if the present Regulatory Reform Order is approved,
the Minister will sign and lay before each House of Parliament
the section 2(2) Order, which will be subject to the negative
resolution procedure.
99. We are satisfied that no incompatibility exists
between the proposal and obligations arising from membership of
the European Union. In this instance, we also note that the Government
has in hand plans to resolve a related incompatibility between
present UK law and such an obligation.
9 
