Select Committee on European Union Written Evidence

Memorandum by the Licensing Executives Society (Britain and Ireland)

  The Licensing Executives Society is the world's leading organisation for those in business and academia involved in licensing intellectual property and technology, and advising on the licensing process. Thee-commerce/Laws committees of LES Great Britain and Ireland are delighted to be asked to comment to the House of Lords Committee on this issue. Mr Dai Davis of the LES, whose views it reflects, has kindly prepared this paper for us. We believe that it reflects the views of a large number (though not necessarily all) of our members.

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

  Very little needs to be done to create confidence as e-commerce is essentially gaining momentum of its own accord. There is a public conception of a large risk being associated with the use of credit card and debit card payments, but this risk is, in reality, misfounded. What risk does exist primarily lies with the banks rather than members of the public. In any event use of encryption technology can reduce this risk to an insignificant level.

  Any residual risk can be removed altogether by changes in the law to protect consumers who use debit cards in the same way as consumers who use credit cards are protected.

  Although there are one or two minor areas of law which could actually be used to stimulate e-commerce—the most obvious being that on electronic signatures—in reality the only way to stimulate e-commerce is to remove, not create, regulations. Internet business is international by its very nature. Business moves to the countries of least risk. Within the Western world, that means the countries with the least regulation. Inevitability, this also means countries of least tax and least overheads. Internet horse-race betting has moved offshore (primarily to Gibraltar) because that country regulates the industry least. US Internet sites which trade internationally (eg Amazon) do particularly well because of the low cost of labour in the US and tax advantages of being situate there.

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?

  Not really. The document is too bland to be "realistic" to promote e-commerce in a meaningful way. Nevertheless, because of its blandness, it is equally impossible to say that it does not promote e-commerce. It clearly does. The real issues are however simply not dealt with, or not dealt with sufficiently vigorously. One ray of hope in the entire document is in the third paragraph of section 3 where it states that "In general terms, regulation of e-commerce should be limited because of the speed of change and the implications of globalisation. More emphasis must therefore be placed on the role of self-regulation and `co-regulation' . . . and global co-operation must further be developed." There are no substantive plans on how global co-operation is to be further developed.

  There is also a statement in section 3 that all remaining e-commerce-related Directives should be in place by the end of the year 2000. This would certainly be a means of promoting e-commerce, if it were achieved and if, within a very short period of time thereafter, those Directives had to be brought into force by local legislation.

  However, it is also important that the European Union does not legislate too much. See my comments in particular in the third paragraph of section 1 above and the second paragraph of section 3 below. See also my comment about ambiguities in Directives in section 4 below.

3.  Will Codes of Conduct and Co-regulation provide Sufficient Protection? Is there a Case for Intervention by National governments and the EU?

  This question is rather too broad to give an answer to. There are certainly areas of commerce where codes of conduct (as opposed to legislation) is perceived to work well eg tobacco and alcohol advertising. There are other areas where it is fair to say that codes of practice could be established for better protection eg Internet banking and general protection afforded to consumers who use debit cards. Since the European Union is increasingly regarded as a single territory, (particularly from outside the European Union) there is undoubtedly benefit in having European-wide consumer legislation. Consumers who buy from a European Union business will then know that they are adequately protected. However, it is undoubtedly the case that all such consumer protection legislation adds to the cost of doing business.

  There is great plethora of consumer protection which is not cost-effective in the sense that the cost to business is not outweighed by the consumer benefit. This is certainly the case with some consumer protection proffered by the European Union eg the proposals by the European Union to allow consumers always to sue in their "home" territory when they buy on the Internet. This will, undoubtedly, severely disadvantage European Union suppliers and will do little to protect consumers from within the European Union buying on the Internet who can equally well buy from abroad.

4.  Do the institutions of national governments, 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?

  Not really Important issues are invariably left ambiguous in Directives and there is therefore little "coherence" in the areas that really matter. Examples of this are the Distance Selling Directive where the really important aspects of law are left ambiguous. For instance, it is not clear under this Directive whether Internet suppliers are permitted to comply with their obligations under this directive (to provide information concerning the contract to the consumer) by e-mail or not. This matter could have been clarified in the Directive but it was not. It is therefore left to the interpretation of each Member State as to whether it permits such confirmation by e-mail or not.

5.  Should existing EU Institutions' internal structures be changed, or new ones created, to improve Policy Development and Co-ordination?

  No direct comment.

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

  It is difficult to see how the European Union will ever be able to deal rapidly enough with e-commerce to make a meaningful impact. The history of the European Union's attempts to legislate technology areas has not been good. Directives particularly take some five years (as a minimum) from discussion to local legislation. Given that most people regard one normal year to be the equivalent of three years on the Internet, this timescale is far too slow. Necessarily, however, massive changes would need to be made to the entire structure of the European Union to overcome this issue. In the current political climate, it is difficult to see how this will ever be achieved.

10 March 2000

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