E-Commerce
1. Basics
The law of e-commerce touches on various sets of legal problems concerning civil law, competition law, conflicts of laws, intellectual property rights, law of telecommunication, tax law and data privacy. These legal provisions respond to the diversity of new distribution methods for goods and services made possible by modern technology. In particular, internet and mobile services have led to an expansion of the accessible recipients and a differentiation of the services offered. Additionally, transaction costs can be lowered. Through automation and direct supply, the supplier can reduce branch offices and distributors, while the customer saves on search costs.
Direct and indirect e-commerce need to be distinguished. Examples of indirect e-commerce are online mail-orders and internet auctions. Conversely, direct e-commerce takes place solely within the data networks, eg via access to electronic press, internet TV, databases, downloading of music and software, remote maintenance and electronic payment. Additionally, e‑commerce comprises the corresponding advertising and correspondence, eg via e-mail, text message, fax or phone.
Due to the rapid progress and global nature of e-commerce, supranational law has a particularly high impact. It has contributed to the modernization of private and economic law as well as the law of information. At a European level, this can be illustrated by the reform of private international and procedural law. Deriving from the law on distance contracts, the criterion of ‘direction’ to a Member State was expanded to all contracts under Art 15(1)(c) Brussels I (Reg 44/ 2001) and Art 6 Rome I (Reg 593/2008) (consumer contracts (PIL)).
2. Directive on electronic commerce 2000/31/EC
a) Overview
The Directive 2000/31 of the European Parliament and of the Council of 8 June 2000 (Council and the European Council) is the most important instrument for ensuring the free exchange of information society services between the Member States and for increasing the trust in technology-based distribution. This internal market instrument is also based on the free movement of goods and services as well as the freedom of establishment. The directive’s title expresses that it only lays down rules on ‘certain legal aspects of information society services, in particular electronic commerce’. In fact, the directive, which had to be implemented by 17 January 2002, covers various aspects such as the identification of service providers, price transparency and the time of receipt of an order (Art 11(1)). In its structure, the directive follows the different activity levels of a service: starting at the exclusion of prior authorization and the freedom of establishment (Art 4(1)), continuing with the commercial communication (Arts 6–8) and electronic contracts (Arts 9–11) as well as the liability of intermediary service providers and concluding with questions concerning dispute settlement (Arts 17 ff).
The implementation of these provisions was predominantly effected in a quite literal manner by single legislative acts like the German Telemediengesetz (TMG), the French Loi pour la confiance dans l’économie numérique and the British Electronic Commerce (EC Directive) Regulations 2002. (Regarding questions of implementation see COM(2003) 702 final.)
b) Material scope
The directive governs natural or legal persons that provide an information society service (Arts 2(a) and (b), not limited to professionals). This is any service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services. This includes online sales of goods and services (eg online travel agencies), but also economic activities that are free of charge for the receiver (recital 18), eg electronic journals, online databases, access to data networks and commercial communication via e-mail.
The directive does not cover television or radio broadcasting on individual request (recital 18). However, since the directive is applicable to video-on-demand, one needs to distinguish it from the newer directive on audio-visual media services (originally Television Dir 89/552, amended by Dir 2007/65). Besides television and teleshopping, this directive now also covers television broadcasting on individual request. Questions of overlaps exist regarding media services with moving images which feature editorial responsibility and a general orientation towards the public. Under Art 3(8) of the new directive (Dir 2007/65), the E-commerce Directive can be applicable. Nonetheless, in case of a conflict, the Audio-visual Media Services Directive overrides the E-commerce Directive since the directive includes content-oriented minimum requirements intended, for example, to protect minors or human dignity.
c) Personal scope
The E-commerce Directive does not only cover consumer cases. It is different from the Consumer Law Directive (Dir 97/7) on distance contracts since it is also applicable to relations between professionals. This is why the E-commerce Directive mainly speaks of the ‘recipient’ (instead of the ‘consumer’) as being any natural or legal person who, for professional ends or otherwise, uses an information society service, in particular for the purposes of seeking information or making it accessible (Art 2(d)).
However, the E-commerce Directive—which was drafted by the Directorate-General for the internal market—also aims at contributing to effective consumer protection. This is the case regarding mandatory provisions for the benefit of the consumer who is traditionally defined as ‘any natural person who is acting for purposes which are outside his or her trade, business or profession’ (Art 2(e)). Apart from that, the directive relies on the high level of consumer protection already introduced by other Community instruments, explicitly naming the directives on consumer contract law (recital 11).
d) Country of origin principle
The bold stipulation of the country of origin principle is a crucial feature of the directive. As formally stated in Art 1(4) and recital 23, it is not to be understood as a conflict of laws provision. (However, due to a referral by the German Federal Supreme Court, the ECJ will have to deal with the relationship between the principle of country of origin in the E-commerce Directive and private international law in ECJ Case C-509/09) While the rationale of this mutual recognition principle is founded on the Cassis de Dijon case (ECJ Case 120/78 – Cassis de Dijon [1979] ECR 649), the model for the connection between the country of origin principle and the harmonization objective is Art 2(1) Television Broadcasting Directive (Dir 89/552), which now is—as mentioned above—titled Dir 2007/65 on audio-visual media services. Concerning the dissemination of information, the applicable law in the Member States usually is the law of origin. Since the enactment of the Rome I and II Regulations at the latest, it can no longer be claimed that the E-commerce Directive establishes a country of origin principle as a general principle of EU law.
In general, there is a tendency to apply the law of the place where either the collision of interest (competition law) or the impact on the market has taken place. Accordingly, Art 4 of Dir 2005/29 on commercial practices does not stipulate the country of origin principle—contrary to initial plans. Even the E-commerce Directive allows for the law of the marketplace to be applied in cases of unsolicited communication by e-mail (Art 3(3) and Annex).
Article 3(1) states that—besides the aforementioned exception—every Member State has to ensure that the information society services provided by a provider established within its territory comply with its corresponding provisions in the field coordinated by the directive. Therefore, the law at the business establishment and not the one of the server site applies (see Art 2(c)).
The state of establishment has the primary responsibility. If it fails despite a request, the state of receipt can take subordinate actions (Arts 3(4)–(6)). Exceptionally, this state may take action against a certain service if it is necessary for the protection of public policy, public health and security as well as for the protection of consumers and investors. In case of urgency, the request of the receiving Member State and the notification of the European Commission are dispensable.
In any event, under Art 3(3) and the Annex, the country of origin principle is not applicable to copyrights, the emission of electronic money, the terms for cross-border practice of insurance companies, the freedom of parties to choose the applicable law, contractual obligations concerning consumer contracts, rights in real estate as well as the permissibility of unsolicited commercial communications by electronic mail.
e) Information duties and contractual obligations
In order to eliminate the deficit of confidence concerning e-commerce transactions as well as to augment the certainty regarding the authenticity of the service provider, the directive imposes general information obligations on all service providers (eg the name of the service provider, a branch address, details allowing for rapid contact including the address for electronic mail, the number in a commercial register where applicable, the responsible supervising authority or business association where applicable). Additionally, prices must be stated clearly and unambiguously, and it has to be indicated whether they include tax and delivery costs (Art 5(2)).
Generally, the directive does not prejudice online advertisement. However, similar to other forms of commercial communication (Art 6), unsolicited e-mails in particular have to be clearly and unambiguously identifiable (Art 7(1)). Additionally, service providers dispatching such e-mails need to consult regularly and respect the opt-out registers (so-called Robinson lists) in which natural persons not wishing to receive such commercial communications (Spam) can register themselves (Art 7(2)).
Furthermore, the directive provides for special rules concerning contract formation in Arts 9–11. Basically, the Member States have to ensure the possibility of forming contracts via e-commerce. Their legal requirements may neither create obstacles for the use of electronic contracts nor result in such contracts being deprived of legal effectiveness and validity just on account of their having been made by electronic means (Art 9(1)). However, exceptions are acceptable for contracts with a special need for a warning. They include contracts that create or transfer real estate rights (except for rental rights); contracts of suretyship granted on collateral securities furnished by persons acting for purposes outside their trade, business or profession; contracts requiring by law the involvement of courts, public authorities or professionals exercising public authority; as well as contracts governed by family law or by the law of succession.
Like the contract law directives, Art 10 stipulates pre-contractual duties to inform. The information has to be provided prior to the order. These requirements complement other possible ones, eg stemming from Dir 97/7. The Member States have to ensure that the individual technical steps that follow in order to conclude the contract are stated clearly, comprehensibly and unambiguously. The same applies to whether or not the concluded contract is electronically filed by the service provider and whether it is accessible.
As ordering systems are error-prone (eg through typing errors or clicking the wrong button), technical means for identifying and correcting input errors also have to be stated. The same applies to the languages in which the contract may be concluded (Art 10(1)) as well as the indication of any relevant codes of conduct to which the service provider subscribes and information on how those codes can be consulted electronically (Art 10(2); cf Art 16 concerning the encouragement of the codes of conduct by trade, professional and consumer associations). It has to be underlined that contract terms have to be made available to the recipient in a way that allows him to store and reproduce them (Art 10(3)).
On top of that, Art 11 stipulates obligations of the service provider when accepting orders through technological means. He has to acknowledge the receipt of the order without undue delay. Both the order and the acknowledgement are deemed to be received when the addressed party is able to access them (Art 11(1)). The service provider has to make available to the user appropriate, effective and accessible technical means allowing him to identify and correct input errors prior to the placing of the order (Art 11(2)). However, paragraphs 1 and 2 of Arts 10 and 11 do not apply to contracts concluded exclusively by exchange of electronic mail or by equivalent individual communications (as untypical means for e-commerce). Additionally, the stipulated obligations are alterable by contract clauses only between parties who are not consumers.
Like almost any other piece of EU legislation, the directive does not harmonize the Member States’ rules on contract formation. Because of this, Art 11 does not—as with the drafts—speak of the ‘time’ of contract formation. Instead the considered points are the placing of an order or the acknowledgement. According to Art 11(1) order and acknowledgement are deemed to be received when the parties to whom they are addressed are able to access them. Therefore, the sender bears the risk of transmission. Furthermore—as a typical failure of EU Law—rules on consequences in case of breach of Arts 10 and 11 are missing. For reasons of effectiveness, however, the Member State’s law has to grant claims for damages.
f) Liability privileges
Besides the contract law provision, the directive also covers the liability of intermediary service providers (Arts 12–15). This does not imply liability for one’s own information, which continues to be governed solely by national law. The directive rather reduces the liability concerning copyright and fair competition for unlawful acts of third parties. This privilege explicitly includes three service provider activities: ‘mere conduit’ (Art 12), ‘caching’, ie automatic, intermediate and temporary storage of external information performed for the sole purpose of making the onward transmission of information more efficient (Art 13), as well as ‘hosting’, ie providing storage of information on an internet server (Art 14). Article 15(1) prohibits imposing a general obligation on a service provider to monitor or actively seek facts or circumstances indicating illegal activity.
But the provisions remain silent concerning the numerous problems revolving around search engines and hyperlinks leading to external content. Similarly, the liability of providers for user-generated content on electronic platforms is not regulated. Here the German Federal Supreme Court (Bundesgerichtshof)—as a role model for other Member States—has stipulated comparatively low obligations for online auction services to monitor for imitation goods (BGHZ 158, 236 – Ricardo v Rolex (English translation in IIC 37 (2005), 573); concerning media hazardous to youths also BGHZ 173, 188; comparative issues arise in case of expressions in an internet forum, see BGH NJW 2007, 2558). This case law is in concordance with Art 14(3) of the directive and seeks to suppress and prevent unlawful acts once they are discovered.
However, to augment legal clarity, it would be reasonable if the EU legislature established liability principles that balance out the interests of providers, recipients and third parties. Such a comprehensive solution should include a procedure to report and remove unlawful content (so-called ‘notice and take down’).
Finally, the directive also stipulates that possible out-of-court dispute resolution procedures, including appropriate electronic means, must not be hampered (Art 17(1)). In addition, the directive is part of the protection of collective consumers’ interests realized by Dir 98/27 on injunctions.
3. EC Directives concerning distance contracts, advertisement, e-signatures and e-money
In order to increase consumer confidence in the internal market, Dir 97/7 on distance contracts and the parallel Dir 2002/65 on distance marketing of consumer financial services were passed. They cover—besides duties to inform and a right of withdrawal—rules on unsolicited goods (Art 9 Dir 97/7) and unsolicited direct marketing, eg via telephone, fax or e-mail (Art 10 Dir 97/7).
A solution to the spam issue, which is only partly addressed by both the directives on e-commerce and distance contracts, can be found in Art 13 of Dir 2002/58 on privacy and electronic communications. It states that the use of e-mail, fax and automated calling systems for direct advertisement requires the prior consent of the consumer. Article 7 of Dir 2005/29 concerning unfair business-to-consumer commercial practices introduces general duties to inform in case of an ‘invitation to purchase’, eg on websites. This is placed under the title ‘misleading omissions’. According to Art 8 and the Annex I no 26, persistent and unwanted solicitations by telephone, fax and e-mail are aggressive and thus unfair commercial practices.
Another component of e-commerce law is provided by Dir 99/93 on electronic signatures. It facilitates the legal recognition and interoperability of encrypted data that are especially conducive to authentication. The directive distinguishes simple electronic signatures from advanced electronic signatures. The latter have immediate legal effects, are equated with hand-written signatures and are admissible as evidence in legal proceedings (Art 5). Article 6 introduces a minimum liability for certification service providers.
In order to simplify electronic payments, Dir 2009/110 on e-money (replacing Dir 2000/ 46) directs the taking up, pursuit of and prudential supervision of the business of electronic money institutions. The directive aims to establish a basis for the financial integrity of e-money institutions and fair competition between them. E-money, primarily designed for small-value payments, can be stored, for instance, on a chip card or a PC hard drive.
4. Internationally harmonized law
Concerning international law, the United Nations Convention on the Use of Electronic Communications in International Contracts needs to be mentioned. The 25 articles of the Convention, which has not yet come into effect, are meant as a supplement to CISG concerning issues arising out of electronic communication between contracting parties (sale of goods, international (uniform law)). Like the CISG, the Convention is only applicable to contracting parties in different states. Consumer contracts are equally excluded (Art 2(1)(a)). The Convention, which was adopted by the General Assembly on 23 November 2005, was signed by 18 states and needs to be ratified by three in order to enter into force. The EC Member States, including Germany, have shown some reluctance to sign the Convention. The European Commission disapproves of it since it has concerns about the compatibility with EU law and its primacy. The division clause in Art 17 is said to be insufficient (written request BT-Drucksache 16/3710).
The draft is based on a 1996 UNCITRAL model code concerning e-business. Besides that, there is an UNCITRAL model code on electronic signatures from 2001. Space limitations do not allow for its present treatment; likewise, the ‘Internet Corporation for Assigned Names and Numbers’ (ICANN) and its alternative framework on conflict resolution in case of brand and name conflicts concerning domain names are relevant but beyond the instant discussion.
Literature
Lilian Edwards (ed), The New Legal Framework for E-Commerce in Europe (2005); Paul Todd, E-Commerce Law (2005); Alfred Büllesbach, Yves Poullet and Corien Prins (eds), Concise European IT Law (2006); Henry D Gabriel, ‘The United Nations Convention on the Use of Electronic Communications in International Contracts: An Overview and Analysis’ [2006] Uniform Law Review 285; Hannes Rösler, ‘Anti-Counterfeiting in Online Auctions from the Perspective of Consumers’ Interests’ (2006) 37 IIC 771; Andrea Schulz (ed), Legal Aspects of an E-Commerce Transaction (2006); Francesco G Mazzotta, ‘Notes on the United Nations Convention on the use of Electronic Communications in International Contracts and its effects on the United Nations Convention on Contracts for the International Sale of Goods’ (2007) 33 Rutgers Computer & Technology Law Journal 251; Jean-Pierre van Cutsem (ed), E-Commerce in the World—Aspects of Comparative Law (2nd edn, 2008); Ian J Lloyd, Information Technology Law (5th edn, 2008); Vincent Fauchoux and Pierre Deprez, Le droit de l’internet—Lois, contrats et usages (2009); Zheng Sophia Tang, Electronic Consumer Contracts in the Conflict of Laws (2009).
