Select Committee on European Union Minutes of Evidence

Memorandum by AOL UK

  It is a great honour and privilege to address the Sub-Committee on the European dimension to e-commerce. E-commerce is an inherently cross-border activity, and the role of the European institutions, as well as more global bodies, will be vital in liberating its true potential.

  AOL UK is part of AOL Europe, the leading Internet and e-commerce services company, with a pan-European staff of more than 2,000. AOL Europe operates the leading AOL, CompuServe and Netscape Online services, in nine countries and four languages across Europe.

  From the first service launch in 1995, AOL Europe's AOL and CompuServe membership base now surpasses 3.4 million across Europe and Netscape Online has more than 400,000 registrants in the UK. AOL Europe SA is a joint venture between America Online Inc and Bertelsmann AG with executive offices in London and Hamburg.

  Perhaps the single most important reason for our success in Europe has been our continuous emphasis on building consumer confidence in the online medium. This starts from the ease of use of our software to get you connected to the Internet, through the user friendly e-mail system, our simple to navigate online information—including full access to the Internet—to the consumer friendly "AOL Shopping Channel".

1.  What needs to be done to create confidence and to stimulate e-commerce?

  Confidence is, though, a two way street—both consumers and business need confidence before they embrace online commerce. Both parties want legal certainty about the contracts they form online, including the legal recognition of electronic signatures, and clarity about privacy protection requirements.

  In addition, there is the vexed question about consumer protection legislation, and whether the rules of the country of the supplier or of the consumer should apply to cross-border purchases. Here it is worth drawing a parallel with high street shopping—consumers rarely resort to court actions as most complaints can be dealt with in the shop itself. The same needs to be available online, and this is being developed by business through codes of conduct that web-based retailers are taking up to provide additional consumer re-assurance in addition to the all important brand name.

  As regards legal protection, the EU has already harmonised most of the key parts of consumer protection legislation. Arguably, the remaining idiosyncrasies of national law offer little extra consumer protection but considerably more complexity for SMEs thinking of establishing themselves on the net. As a result, AOL, which is simply an intermediary between buyer and seller, does favour the application of the law of the country of supplier.

  In addition to the legal requirements, there are also practical changes to the online experience that need to be addressed, and in particular AOL has consistently called for the end of per-minute telephone call charges. It is unthinkable that a high street shop would charge for the time you spent browsing, but yet this is exactly what online shoppers face. BT's offer of so-called unmetered access should have been the solution, but at £35 a month, we are not convinced it will get mass market uptake and so more work is needed here.

2.  Does the European Commission's draft Action Plan "eEurope: An Information Society for All" offer a realistic means of promoting e-commerce in the EU?

  e-Commerce is inherently international, and it is clear that action at the EU level is vital, as well as at the global level. The special Lisbon Summit is therefore timely to boost the political momentum to launch the digital economy. The Commission's contribution to this debate has been the eEurope communication released just before Christmas.

  AOL has naturally welcomed the Commission's target of getting every citizen, business and administration online. Nothing could be closer to our own vision.

  However, eEurope is something of a shopping list, and fails to provide a convincing picture that it has understood the European e-economy and what needs to be addressed. In part, this is because it sought briefly to list new initiatives that need to be undertaken, and also because many of the necessary steps do not lie in Commission and European Union competence. Because European decision making processes are slow, it also cannot establish the sort of short deadlines necessary to keep pace with the Internet that were such a welcome feature of the UK Goverment's publication.

  On the other hands, the value of European debate is that everyone can learn from each other, although it is vital that we do not just compare amongst ourselves, but also keep both eyes on the US, which still remains far ahead.

3.  Will codes of conduct and co-regulation provide sufficient protection? Is there a case for intervention by national governments and the EU?

  A basic—and welcome—objective of eEurope is to establish high level political momentum to accelerate the adoption of the remaining EU Directives in the e-commerce area. One of the critical pieces of legislation in the pipeline is the so-called "e-Commerce directive", which regulates certain legal aspects of e-commerce. The Common Position on this Directive is now pending adoption. The Council has not substantially changed the Commission's proposals, but it has quietly loosened many of its provisions and created the possibility of different interpretations by member states when they come to transpose the Directive.

  One such example is the encouragement of self-regulation that was a major feature of the commission's proposals. This is an entrenched part of the British regulatory environment and particularly suitable for the fast moving Internet environment and needs further reinforcement by the Parliament together with countries that recognise the full value of self-regulation.

4.  Do the institutions of national government, on the one hand, and the European Commission, the Council of Ministers and the European Parliament, on the other, function with sufficient flexibility and coherence to promote the EU's objectives in the field of e-commerce?

  Getting the legislation adopted is therefore an important first step towards achieving coherence in the single market, and the Lisbon Summit will help align the political vision. The European Commission then needs to take this vision and work with member states to ensure its effective implementation. This will mean going beyond the traditional monitoring of the transposition of Directives, and could extend to benchmarking the costs of Internet access, the proportions of websites publishing privacy principles, as well as simple measures of the level of e-commerce taking place.

5.  Should existing EU institutions' internal structures be changed, or new ones created, to improve policy development and co-ordination?

  I have already mentioned the e-Commerce Directive, which will shortly return to the European Parliament for its second reading, and the conciliation process might be triggered thereafter. In fact, the Commission adopted its original proposals in November 1998, and it is clear that the legislative process at EU level is slow by comparison to the development of the Internet. (An even more dramatic example is the crucial Copyright Directive which has still not achieved a Common Position and was published a year earlier than the E-commerce Directive.)

  The Amsterdam Treaty will help, and the Commission's emphasis on public consultation should also ensure that future proposals are capable of securing simpler political agreement by Council and Parliament. But only time will tell whether the new procedures can be harnessed to speed up the legislative process of whether institutional infighting will remain the name of the game.

  Following the publication of, the UK government established an "E-Envoy" to oversee co-ordination of government action to promote e-commerce. This was instead of a root-and-branch reorganisation of government departments to ensure the necessary policy coherence. It is not difficult to identify the same sort of need for coordination in the EU institutions, especially in the Commission.

  Another area of particular concern is the multitude of virtually secret EU committee meetings that take place to monitor the implementation of Directives. While most governments now recognise the value to them of private sector consultation on Internet related issues, the arcane procedures of EU committees deliberately exclude the private sector from their deliberations. This needs to be addressed rapidly.

6.  How can structural change be brought about fast enough to accommodate to the growth of e-commerce?

  In conclusion, while there is a lot that the EU could do to facilitate e-commerce, it has to be recognised that this new medium is still very much in its infancy. The most important thing any government can do is to remove inadvertent obstacles to the development of e-commerce. From this perspective, the fact that the EU can be slow to legislate might prove an advantage.

  Meanwhile, the goal of creating a single market is even more vital now that cross-border shopping is so much more readily achievable in the Internet era. It would, in particular, be a catastrophe if consumer protection concerns would lead to a fragmentation of the single market at just the time that the Internet enables citizens to shop all around the EU from the comfort of their own home.

  Thank you very much for providing me with the opportunity to address you today, and I am of course available to answer any further questions you may have.

16 February 2000

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