Select Committee on European Union Minutes of Evidence

Memorandum by the Joint Honours Students, Imperial College, London, on Supplier Issues


  We, the students of ICMS, have analysed the evidence presented by the various industries with regard to promoting growth in European E-Commerce. Below we summarise the key issues, as seen from the perspective of businesses, which need to be addressed so as to create confidence and utilise the full potential of the new E-Commerce platform.


  The case for government intervention:

    —  Small companies will benefit from tax benefits, funding, sharing of relevant information, etc. (PwC)

    —  An appropriate legal framework can promote growth. (BT Cellnet.) AOL believes that government intervention is necessary to provide harmonised IPR rules, encryption rules, a liberal trading environment and open and competitive access.

    —  Deceit, fraud and other malpractice cannot be left to self-regulation. (BT Cellnet, The Consumer's Association, IWF)

    —  A stable tax and regulatory environment will keep entrepreneurs in the EU. (EICTA)

    —  Simplification and consistency of rules across the EU is possible. (Italy country report, AOL)

    —  Cross-border consumer redress procedures can be made statutory. (Consumer's Association)

    —  Suppliers and consumers will know with clarity, their obligations and rights.

  The case for Self-Regulation:

    —  Intervention will increase regulatory risk. (BT) Businesses will move to regions of less regulatory risk. (The Licensing Executive Society)

    —  Investment incentives may be lowered by increased regulation. (BT)

    —  Over-regulation may damage business opportunities. (PwC)

    —  Competitiveness is reduced through increased costs due to regulation. (The Licensing Executives Society)

    —  Regulation slows down innovation. (EICTA)

    —  Regulators can't keep up with the pace of change. (Professor Angell, AOL)


    —  Some government intervention required for certain issues such as fraud, taxation, intellectual property, privacy, and criminal.

    —  A stable, legal, framework required to promote business activities.

    —  Self-regulation is required to deal with different national legislation and prevents discouragement of growth.

  There is a spectrum of views on the topic of regulation. Consumer bodies advocate stringent regulation. (CEG, CA) Business organisations promote self-regulation (Robert Shapiro). Hence a trade-off between the encouragement of businesses into e-commerce and the protection of the consumer must be found. Regulations vary greatly across European Borders. (Clifford Chance Ltd) This means that companies may move to less regulated EU countries to avoid taxation, for example. Thus, there must be some consistency between EU member nations. National and cultural differences may prevent EU wide legislation. Laws can have different meanings in different countries. (Computer Crime Working Group)


  The factors that were perceived to encourage e-business regarding privacy and data protection:

    —  Legal protection of private internal corporate information. (BT)

    —  Message encryption, eg SET. (People Energy, TUC)

    —  Legal framework to protect intellectual property rights. (British Music Rights)

    —  Access to individuals' details can be used for direct marketing enhancing supplier business.

    —  The firewalls, for protection of data while on-line.

  The factors that were perceived to discourage e-business regarding privacy and data protection:

    —  Hacking into secure servers.

    —  Viruses and "Trojans" affecting or destroying important information (eg "ILOVEYOU" bug).

    —  Piracy.

    —  Fear of Government monitoring, eg The RIP Bill, which allows police access to data and places the burden of proving innocence on the accused. (Informix Software Ltd)

    —  Denial of service, ie when the servers are flooded with requests that either disable the service or just slow down its connections with the rest of the world.


    —  Need sound legislation and advanced encryption technologies to prevent unauthorised users from access to private information.

    —  Governments should leave it to individuals as to whether or not they want their private details to be accessible by others.


  Security measures that would encourage the uptake of e-commerce activities by businesses:

    —  Co-operation by industry and law enforcement to deal with criminal internet activity. (WIF)

    —  New payment technologies, eg cyber money such as the Belgium Proton system put forward by Ms Felicity Ussher from or the gismo and paypal systems in the US or the smartcard scheme. (Mobile age technology)

  The fears regarding security:

    —  Credit card frauds—UK banks do not cooperate to verify information (Digital Exchange (ISP), EURIM).

    —  Other users of the internet can gain access to company's confidential files.

    —  Electronic signatures not recognised—reduces confidence.

    —  Encryption codes have the possibility to be hacked into.

    —  Conflicts between single market principle of home country rules. Establish a cross border redress. (Barclays, PwC)

    —  Microsoft acted as a 3rd party in the US, but the US government were afraid of their monopoly status—of being too powerful and hence broke it up.

    —  Support for encryption devices to protect on-line intellectual property rights—British Music rights.

    —  Hacking is a problem for cyber money.


  The factors that were perceived to encourage e-business regarding financial incentives:

    —  Tax incentives, especially taxation on stock options. (EICTA, PwC, Italian Country Report)

    —  Incentives for venture capitalists. (ICL, Alan Bates)

    —  Well developed venture capital market. (1st Tuesday club, Alan Bates)

    —  Alternative payment means to credit cards such as smart cards. (FSA)

    —  Increased market via trading globally.

  The factors that were perceived to discourage e-business regarding financial incentives:

    —  Large initial costs of engaging e-commerce activities.

    —  Skilled labour required which leads to increased training costs. (Italy Country Report)

    —  Translation costs in trading across borders.

    —  High risks for investors.

    —  High access costs.


    —  Create tax incentives to ensure companies have access to capital, and keep companies within the country.

    —  Government could subsidise e-business training.

    —  Lower access costs by deregulation of telecommunications market. Decrease trade barriers to encourage global exchange.

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