Documents considered by the Committee on 22 March 2017 Contents

1Digital Single Market: E-commerce package

Committee’s assessment

Politically important

Committee’s decision

Not cleared from scrutiny; further information requested; drawn to the attention of the Business, Energy and Industrial Strategy Committee

Document details

Commission Communication: A comprehensive approach to stimulating cross-border e-commerce for Europe’s citizens and businesses

Legal base

Department

Business, Energy & Industrial Strategy

Document Numbers

(37817), 9610/16 + ADD 1, COM(16) 320

Summary and Committee’s conclusions

1.1On 25 May 2016, as part of its Digital Single Market (DSM) Strategy, the Commission published a Communication, accompanied by a package of legislative proposals, aimed at increasing cross-border e-commerce in the EU by enabling consumers and companies to buy and sell products and services online more easily and confidently (the e-commerce package). The e-commerce package comprises the following ‘three-pronged plan’:

1.2The former Minister (Baroness Neville-Rolfe) indicated the Government’s support in principle for the e-Commerce package, which consisted of targeted initiatives which it anticipated would reduce barriers to cross-border e-commerce for businesses and consumers and generate growth—the original objective of the Digital Single Market Strategy. The Committee retained the document under scrutiny and sought further information about the implications of Brexit for the affected policy areas.

1.3The Parliamentary Under-Secretary of State (Lord Prior of Brampton) now provides a quarterly update on progress that has been made in relation to the twelve strands of the Digital Single Market Strategy, as well as responses to the Committee’s questions about Brexit. Until the UK leaves the EU, the Minister states that the Government will continue to play a proactive role in DSM negotiations and votes, using its influence to push for an open, flexible digital market. He suggests the UK has played a role in expediting a number of key measures which will encourage cross-border trade and benefit consumers, highlighting agreements that have been reached on geoblocking and portability.

1.4The Minister declines to provide any information about the Government’s negotiating priorities on the grounds that the EU exit negotiations are yet to begin, but does single out data flows as being of particular importance to the operation of the digital economy. He also signals the Government’s recognition of consumer rights in enabling the digital economy. The key passages from the Minister’s response are provided in the final section of this chapter.

1.5The Committee notes the Government’s intention to continue to play an active role in the development of the EU Digital Single Market (DSM) Strategy as long as the UK remains an EU Member State, by taking a proactive role in Council negotiations and votes. We also note the Government’s role in helping to reach quick agreement on DSM proposals which seek to restrict the use of unjustified geoblocking and to facilitate the portability of subscription content when travelling within the EU.

1.6The Minister states that the Government considers the free flow of data as being “fundamental to the functioning of the digital economy” and that it “sees global data flows as being of high importance, hence the desire to tackle unjustified data localisation not just at the EU level, but also in data flows between the EU and third countries”. This assessment tallies with concerns expressed by industry stakeholders, including techUK, that, post-exit, the EU could use certain DSM initiatives, notably the initiative on non-personal data (‘Building a European Data Economy’), to require UK-based digital businesses to relocate part of their operations to the EU. We urge the Government to seek to expedite the bringing forward and agreement of this legislative proposal before the UK leaves the EU, and to ensure that the final regime does not disadvantage businesses operating in third countries.

1.7Greater clarity is needed on the range of issues that the Digital Single Market Strategy seeks to address in the context of the UK’s imminent exit from the EU. Some of these policy issues are inherently cross-border in nature (e.g. abolishing roaming charges for consumers) and necessitate reciprocal commitments from more than one country, entailing an element of regulatory harmonisation or mutual recognition. Post-exit, achieving policy objectives of this kind would appear to require some form of bilateral agreement. On the other hand, proposals that do not contain a reciprocal dimension might be achievable through UK law in the absence of any bilateral agreement.

1.8We request that the Government provide the Committee with a case-by-case assessment of the extent to which, post-exit, the policy objectives of each of the different Digital Single Market proposals could be achieved solely through domestic legislation or would require some form of bilateral agreement with the EU. We accept the Government’s reluctance to provide information “about the nature of future agreements with the EU or on potential changes to domestic law following our EU exit”, but believe that it is appropriate for Parliament to seek clarification of which digital economy issues can be tackled domestically and which will require a bilateral agreement.

1.9We request a response by 9 May 2017. In the meantime we retain the Communication under scrutiny and draw this report to the attention of the Business, Energy and Industrial Strategy (BEIS) Committee.

Full details of the documents

Commission Communication: A comprehensive approach to stimulating cross-border e-commerce for Europe’s citizens and businesses: (37817), 9610/16 + ADD 1, COM(16) 320.

Background

The Digital Single Market Strategy

1.10The completion of a DSM is Commission President Juncker’s second highest political priority, aimed at creating jobs and growth in the EU.

1.11The Commission published its strategy for boosting the digital single market in May 2015. It proposed a mix of legislative and non-legislative initiatives to be tabled by the end of 2016, with initiatives centred on three ‘pillars’:

1.12On 30 May 2016, one year after the launch of the DSM Strategy, the Commission adopted an e-commerce package, consisting of a range of DSM initiatives with a strong focus on reducing barriers to cross-border trade in the digital economy and an accompanying Communication explaining the relationship between the proposed interventions.5

The Minister’s letter dated 13 March 2017

Responses to Brexit questions

1.13The Minister answers the two questions the Committee raised in its previous report in relation to the Communication. Asked how the Government would continue to approach negotiations on the DSM, the Minister states:

“As the Committee will see from this letter, the UK continues to play an active role in the DSM, influencing negotiations and voting in Council to ensure that the UK’s views are heard. Through developing strong and constructive relationships with likeminded Member States, we have achieved successes on the DSM, both in terms of policy content and the speed at which some key policies have progressed through the EU’s legislative process—for example, the recent agreements on geoblocking and portability represent a near record turnaround in EU decision-making. We aim to maintain this momentum and influence across other DSM files, working with our Member State partners and the EU institutions.

“The UK has been an active proponent of the DSM since the strategy was launched in May 2015, pushing for an open, flexible market with a framework that reflects the dynamic nature of the digital economy.”

1.14In response to the Committee’s second question—which proposals the Government considers a policy priority and would wish to apply regardless of the withdrawal of the UK from the EU—the Minister responds as follows:

“Our EU exit negotiations are yet to begin. It is therefore premature to comment publically on the nature of future agreements with the EU or on potential changes to domestic law following our EU exit.

“Whatever the nature of our relationship with the EU, it is in the UK’s economic interests to work with international partners on building a fully functioning global digital economy. For this reason, we continue to push for an open, competitive and flexible Digital Single Market. For example, the free flow of data is fundamental to the functioning of the digital economy and realising its full potential. The Government sees global data flows as being of high importance, hence the desire to tackle unjustified data localisation not just at the EU level, but also in data flows between the EU and third countries.

“We also recognise the importance of consumer rights in enabling the digital economy. Tackling rogue traders and unscrupulous business practices will remain important to the UK, as our citizens and businesses continue to trade with EU partners.”

Update on progress of Digital Single Market initiatives

1.15In late 2016 the Government committed to sending the House of Commons European Scrutiny Committee and the House of Lords European Union Committee quarterly updates on the DSM, and the Minister now provides the first such update.

1.16The Minister states that “notable progress” has been made on a number of DSM files in recent months. In particular, a General Approach was reached in Council in November 2016 on the Geoblocking Regulation. Furthermore, trilogue agreement was recently reached on the portability proposal, which will allow consumers to access their digital content when travelling in the EU, and the roaming proposal, which will see mobile roaming charges eliminated from the middle of this year. All 3 of these agreements were supported by the UK Government. The Committee is separately scrutinising each of these proposals.

1.17The Minister also provides a detailed overview of the state of play in relation to twelve specific strands of the Digital Single Market package which are currently under negotiation, as outlined below.

Geoblocking

1.18The Commission is proposing a Regulation to ensure that consumers seeking to buy products and services in another EU country are not discriminated against in terms of access to prices, sales or other conditions on the basis of their nationality or place of residence or establishment, unless this is objectively justified for reasons such as VAT or public interest provisions. The aim is to ensure that consumers from other Member States will therefore be able to buy under the same conditions as local customers, improving their access to goods and services in the Single Market.

1.19In relation to the Geoblocking Regulation, the Minister states that:

“The General Approach agreed by Member States met government objectives to (i) achieve the main policy aims of the proposal; (ii) preserve consumers’ rights in relation to choice of law and jurisdiction in cross-border contracts, while avoiding creating legal uncertainty for businesses; and (iii) exempt microbusinesses which fall under the national VAT limit. This agreement is particularly good news for UK consumers, who are the most active in the EU in terms of e-commerce, and have been subject to numerous instances of geoblocking in the past.”

1.20The Committee is currently scrutinising the Geoblocking Regulation. On 25 January 2017 it produced a report chapter on this subject which requested further information from the Government by the end of March.6

Portability

1.21The Portability Regulation will enable EU citizens to use their online subscriptions to access cultural and entertainment services when travelling within the EU. The Minister states that:

“On Wednesday 8 February 2017 a trilogue agreement was reached that will allow EU citizens to view online content to which they subscribe wherever they are in the EU. These new rules will take effect from the beginning of 2018. The UK was a strong supporter of the proposal and the agreement reached last week shows a real momentum for completing DSM files.”

1.22The Committee is currently scrutinising proposals for a Portability Regulation. On 8 February 2017 it produced a report chapter on this subject which requested further information from the Government by the end of March .7

Roaming

1.23The Wholesale Roaming Regulation will further lower the caps on the wholesale charges that mobile operators in different Member States can charge one another to use their networks when consumers use roaming services when travelling. The Minister states that:

“On Wednesday 1 February 2017 a trilogue agreement was reached that will eliminate roaming charges from the middle of this year, with wholesale roaming prices (the prices telecoms companies can charge each other for use of their networks) capped and reduced incrementally between 2017 and 2022.”

1.24On 8 February 2017 the Committee cleared the Wholesale Roaming Regulation from scrutiny; however, it requested further information about the implications of Brexit for this issue, as well as an account of the fair use policy and sustainability mechanism implementing act that has been adopted by the Commission, which was not deposited for scrutiny.8

Free flow of data

1.25Of the Free Flow of Data initiative, which will seek to prohibit Member State-level requirements that businesses locate data storage facilities within the territory (other than in exceptional circumstances) the Minister states that:

“On 10 January 2017 the European Commission published a Communication and consultation on ‘Building the European Data Economy’. The Communication discusses two main elements: data localisation and emerging issues.

“Data localisation refers to the practice of public authorities requiring that the personal data of citizens of a particular Member State must be stored on servers located in that Member State. This is typically justified on security grounds but can pose a non-tariff barrier to trade, especially for small firms. In that context, this runs counter to Single Market principles.

“We support Commission action to tackle unjustified data localisation, and in December 2016 the Prime Minister joined with 15 other EU Heads of Government to sign a joint letter to European Council President Donald Tusk, calling for a legislative proposal to prevent unjustified data localisation requirements.”

1.26The Committee is currently scrutinising the European Commission Communication ‘Building a European Data Economy’. On 8 March 2017 it produced a report chapter on this Communication which requested further information from the Government by 6 April 2017.9

Audio-Visual Media Services Directive (AVMSD)

1.27The AVMSD is the regulatory framework that governs access to the EU Single Market in broadcasting. The EU proposes to update it as part of the Digital Single Market Strategy. The Minister states:

“The AVMSD has two main principles—that services (broadcast and on-demand) established in one Member State are free to be received in all other Member States, subject to the rules of the country in which they are established (the ‘Country of Origin Principle’); and minimum harmonisation regarding hate speech, protection of minors and commercial communications.

“The Commission published a proposal for a new AVMSD on 25 May 2016. The proposal includes clarifying the existing procedures of the ‘Country of Origin Principle’, changes to the current advertising regime, and extension of scope to include video-sharing platforms such as YouTube, when dealing with illegal content or material deemed harmful to minors.

“Working Groups are ongoing on this file and we expect the Directive could be ready for adoption in mid-to-late 2017.”

1.28The Committee is currently scrutinising the proposed reforms to the AVMSD. On 1 March 2017 it produced a report chapter on the Directive which requested further information from the Government by 27 March 2017.10

Electronic Communications Code

1.29On 14 September 2016 the Commission published proposals which intend to recast the existing EU Telecoms Framework into a new ‘Electronic Communications Code’. The Minister states that:

“Negotiations in the Council Working Group commenced in November 2016. The Commission’s target for completing negotiations is the end of 2017, with implementation into national law by the end of 2019.”

1.30The Committee is currently scrutinising this proposal. On 7 December 2016 it issued a report chapter which requested further information in relation to the Commission’s proposed initiatives in this area.11 The Minister responded on 21 February 2017. The Committee will consider this further in coming weeks.

Copyright Directive

1.31As part of its Digital Single Market Strategy, the Commission has proposed to introduce a Copyright Directive, which covers a wide range of measures including: mandatory exceptions for data mining, preservation and education; measures to enable digitisation of out-of-commerce works; measures to improve licensing of Video On Demand rights; a transparency obligation and contract adjustment mechanism; the introduction of a new right for press publishers; and new obligations for online content hosting services.

1.32In relation to the Copyright Directive the Minister states that “Working Groups have started negotiating other parts of the copyright package, and we expect substantive negotiations on the directive to begin this year”.

1.33The Committee issued report chapters on each of the different elements of the copyright package on 14 September 2016.12 The Committee is awaiting a response from the Government in relation to stakeholder reaction and Brexit implications.

VAT

1.34The VAT strand of the Digital Single Market strategy seeks to modernise and simplify VAT for cross-border e-commerce. The Minister states that:

“Proposals were published in December 2016, and detailed discussions have started under the current Maltese Presidency.

“Changes are proposed in two tranches, 2018 and 2021. The 2018 proposals include introducing a common VAT threshold in respect of the place of taxation for cross border supplies; and simplifications to the Mini One Stop Shop single electronic registration and payment mechanism, in order to allow businesses to follow the rules for invoicing and record keeping in the Member State where they are registered, for all their supplies in the EU. The 2021 proposals include the extension of the single electronic registration and payment mechanism (One Stop Shop) from cross-border electronically supplied services to all business-to-consumer cross-border online sales of goods; and removing the VAT exemption for low value goods imported from third country suppliers. These proposals are covered in EM 14820/16, 14821/16, 14822/16 submitted by HM Treasury on 20 December 2016.”

1.35The Committee is currently scrutinising this proposal. On 18 January 2017 it requested further information from the Government.13

Consumer Protection Cooperation (CPC)

1.36The review of the Consumer Protection Cooperation Regulation aims to increase consumer trust in cross border enforcement by improving national coordination, tackling in particular the threat posed to both consumers and legitimate business competitors by rogue online traders and their untrustworthy websites. The Minister states that:

“The CPC regulation seeks to update the formal framework for cooperation between national enforcement authorities on cross-border infringements of EU consumer law. Since the proposal was introduced in May 2016, the UK has supported the need for a reformed framework, which retains sufficient control for Member States and has powers and procedures fit for the digital age.”

1.37He adds that: “Member States agreed a General Approach on the file at Competitiveness Council on 20 February. We sent a full update on the proposal on 1 February in advance of Competitiveness Council, and we wrote again to both Committees after the meeting”.

1.38The Committee cleared this proposal from scrutiny in its report of 2 November 2016.14

Tangible goods

1.39The directive on online sales of tangible goods is designed to reduce barriers to, and increase certainty in, the online and other distance selling of physical goods in the Single Market by harmonising after-sale consumer protection rules. The Minister updates the Committee as follows:

“Working Group meetings are yet to begin under the Maltese Presidency, although discussions have started in the European Parliament, where MEPs have tabled amendments to the rapporteur’s report on the proposal. Like other Member States, we would like to see further evidence from the Commission as part of their ongoing ‘Refit’ review of consumer law before negotiations formally begin on this dossier.

“We will provide an update to both Scrutiny Committees on this file once negotiations commence.”

1.40The Committee retains this proposal under scrutiny. In its report of 18 November 2016 it requested additional information from the Government.15

Cross-border parcel delivery

1.41The Commission is proposing a Regulation that encourages competition and makes the regulatory oversight of the cross-border parcel delivery services market more effective and consistent. It considers that increasing transparency in the parcel delivery market will help to lower costs for consumers and small businesses, as well as create new opportunities for operators to participate more actively in the cross-border market.

1.42The Minister states that “Working Groups are continuing under the Maltese Presidency in 2017, where a General Approach is expected to be achieved”.

1.43The Committee most recently looked at this proposal in its report on 26 October 2016, in which it retained the proposal under scrutiny and sought further updates well in advance of any Council meeting at which agreement to a General Approach was anticipated.16

Digital Content Directive

1.44The Digital Content Directive seeks to extend consumer contractual rights to the supply of digital content (games, streamed films, CDs) and digital services (cloud storage, cloud based apps). While the UK already has domestic rules covering digital content and services generally, currently there is no EU regime covering these rights and obligations. The Commission’s proposal is intended to provide comparable rights across the Single Market, to avoid divergence as Member States address the issue individually, and so to better facilitate cross-border trade.

1.45The Minister states that “The Commission adopted the proposal in December 2015. Council Working Groups were held under the Dutch and Slovak Presidencies”. He adds:

“The Maltese Presidency is continuing to prioritise the file and has indicated that it aims to reach a General Approach this year. It is likely that the Presidency will press for a Partial General Approach at the Justice and Home Affairs Council on 27 March. The Government will provide both Committees with a full update ahead of this Council meeting.”

1.46On 15 March 2017 the Committee retained this proposal under scrutiny, but granted a scrutiny waiver for a forthcoming meeting of the Council of Ministers.

Next steps

1.47The Minister states that the Commission will release a ‘DSM mid-term review’ in May 2017, to take stock of progress made on the DSM Strategy, two years on from its publication. He says that the review “will not propose any new legislation but will look forward and suggest potential future areas of work beyond the current DSM Strategy, such as cyber-security or online platforms”.

1.48The Minister undertakes to “continue to update the Committee on the progress of the DSM Strategy on a quarterly basis” and says that he will therefore write to the Committee “shortly after the publication of the mid-term review”.

Previous Committee Reports

Seventh Report HC 71-v (2016–17), chapter 2 (6 July 2016).


1 European Commission, “Proposal for a Regulation of the European Parliament and of the Council on addressing geo-blocking and other forms of discrimination based on customers’ nationality, place of residence or place of establishment within the internal market”, COM(2016) 289 final (30 May 2016) https://goo.gl/NO5Plu.

2 Geoblocking refers to commercial practices that prevent online customers from accessing and purchasing a product or a service from a website based in another Member State, or which automatically re-route them to a local site. As a result, consumers may face price discrimination (i.e. be charged more for products or services purchased online) on the basis of their IP address, their postal address or the country of issue of their credit card.

3 European Commission, “Proposal for a Regulation of the European Parliament and of the Council on cross-border parcel delivery services”, COM(2016) 285 final (30 May 2016) https://goo.gl/fQGWir.

4 European Commission, “Proposal for a Regulation of the European Parliament and of the Council on cooperation between national authorities responsible for the enforcement of consumer protection laws” {SWD(2016) 164 final} (30 May 2016) https://goo.gl/UpqDVp.

5 European Commission, Communication: “A comprehensive approach to stimulating cross-border e-Commerce for Europe’s citizens and businesses” (30 May 2016) https://goo.gl/P0mAQu.

6 House of Commons European Scrutiny Committee, “Digital Single Market: Tackling unjustified geoblocking” (25 January 2017) https://goo.gl/oFUqi9.

7 House of Commons European Scrutiny Committee, “Digital Single Market: Cross-border portability of online content” (8 February 2017) https://goo.gl/hnMVha.

8 House of Commons European Scrutiny Committee, “Digital Single Market: Wholesale roaming charges” (8 February 2017) https://goo.gl/713T9N.

9 House of Commons European Scrutiny Committee, “Digital Single Market: Building a European Data Economy” (8 February 2017) https://goo.gl/JK5fvf.

10 House of Commons European Scrutiny Committee, “Digital Single Market: Audiovisual Media Services Directive” (1 March 2017) https://goo.gl/y07nmJ.

11 House of Commons European Scrutiny Committee, “Digital Single Market: Connectivity (Telecoms) Package—legislative measures” (7 December 2017) https://goo.gl/6GKz7j.

12 Copyright in the Digital Single Market (2 November 2016) https://goo.gl/ZQUeJ8.

Promoting a fair and efficient European copyright-based economy in the Digital Single Market (2 November 2016) https://goo.gl/3phtsh.

EU Implementation of the Marrakesh Treaty (2 November 2016) https://goo.gl/JI50EH (response received 8 November).

13 House of Commons European Scrutiny Committee, “Value added taxation” (18 January 2017) https://goo.gl/7TcZfP.

14 House of Commons European Scrutiny Committee, “Cooperation on enforcement of consumer protection laws” (2 November 2016) https://goo.gl/Yj2aNe.

15 House of Commons European Scrutiny Committee, “Digital Single Market: Consumer contract rights” (18 November 2016) https://goo.gl/evckzx.

16 House of Commons European Scrutiny Committee, “Cross-border parcel delivery services” (26 October 2016) https://goo.gl/mpO629.




24 March 2017