It’s taken a year and a half for the DTI to produce these proposals for implementing the EU E-commerce Directive. We try to make some sense of the Euro speak and spot the critical provisions for marketers.
The Topic: New Law: The Electronic Commerce (EC Directive) Regulations 2002
Who: The DTI
Where: The UK
When: March 2002
The EU E-commerce Directive was due for implementation across the Union by 17 January 2002. The directive was billed as having far-reaching effects on various aspects of digital commerce, but despite this, 17 January 2002 came and went with only a small minority of EU states having brought it into force. The UK was in the majority in having failed to meet the deadline, and only now, in March 2002, have proposed regulations been published by the DTI.
One area where the directive was expected to bring greater clarity was in the applicability of differing EU member states’ laws to marketing activity. There was hope that the directive would further the cause of “country of origin”. Under this approach, provided marketing material published in one EU country complies with that country’s laws, it should then be free for use throughout the European Union without fear of regulatory action under differing laws in other EU states. Other areas where the directive was to have impact for marketers was in the provision of certain basic disclosures, e-mail marketing and the formation of contracts on-line for the purchase of goods and services.
On publication of the directive, concerns were expressed as to whether the “country of origin” cause would be significantly furthered. This was because it appeared to be hedged about with so many exceptions and caveats. There were hopes that the UK would bring greater clarity to this area when introducing its own regulations based on the directive.
What will change:
So far as “country of origin” is concerned, the general feeling on reading the current draft regulations is that little will change in practice on this front. This is largely because the UK has chosen to slavishly follow the obscure “Euro- speak” of large portions of the directive. Here’s a taster, which is the key clause of the regulations supposed to promote the “country of origin” principle:
“Subject to paragraph (3) below, where the person for whom the services are intended is in another member state, an enforcement authority with responsibility in relation to any enactment or other legal requirement shall ensure that the information society services provided by a service provider from an establishment in the United Kingdom comply with that enactment or legal requirement which applies to an information society service and falls within the co-ordinated field irrespective of whether the service in question is provided in the United Kingdom and any power, remedy or procedure for taking enforcement action shall be available to secure compliance with those requirements”.
Rules of this kind are hardly going to gain top marks for plain English and, if the intention is to promote “country of origin”, the cause is hardly helped by the various carve-outs which appear in the regulations and closely follow the provisions of the underlying directive. These exceptions to country of origin include cases where differing measures in other EU states are for the “protection of consumers”. There is some slight comfort to be derived here from a requirement that such measures can only be applied by such enforcement authorities “in a proportionate manner”, but since most regulatory controls affecting marketing are characterisable as introduced for “the protection of consumers”, one can already see that these regulations are going to bring little or no real relief for pan European advertisers struggling with differing regulatory requirements.
In the area of disclosures, there is slightly less “Euro-speak”, but there is still concern by way of the use of the phrase “information society service”. This is at the very heart of the regulations, but has to be summarised to make any remote form of sense, and even the summary, as it appears in the UK’s draft regulations, is by no means crystal clear. It reads “information society services” means “any service normally provided for remuneration at a distance, by means of electronic equipment for the processing (including digital compression) and storage or data and at the individual request of a recipient of a service”. One’s immediate reaction is that this is intended to cover material accessed on-line, but the “normally provided for remuneration at a distance” wording is strange.
In a marketing context, one questions where the “remuneration” occurs, and so it might be said that perhaps information society services do not include marketing or commercial communications accessible on-line. One suspects that this is not the intention, however.
The disclosure requirements of draft regulation 8 are imposed on all persons “providing an information society service”. These providers must “make available to the recipient of the service and any relevant enforcement authority” various categories of information such as the name of the service provider, its geographic address, details of any professional body or similar institution with which the service provider is registered, VAT registration number and, where the service provider is registrable in a trade or similar register available to the public, the register in which the service provider is entered and its registration number or equivalent means of identification.
Apart from the conundrum of how this information is provided to “any relevant enforcement authority” and when this should occur, the disclosure should also be made available in a manner which is “easily, directly and permanently accessible”. Whether this includes making the disclosure on-line is not clarified and one suspects that this will not qualify. Separately there is a requirement that all those “providing an information society service” who refer to prices must indicate them clearly and unambiguously and in particular “shall indicate whether they are inclusive of tax and delivery costs”. In UK terms this is hardly any advance at all on existing controls such as those regarding misleading price indications contained in the Consumer Protection Act 1986.
Assuming that on-line advertising and marketing are covered, the advertising material in question must be “clearly identifiable” as a commercial communication and must clearly identify on whose behalf the commercial communication is made. If there are any promotional offers including any discounts, premiums or gifts, these must be clearly identified as such and any conditions which have to be met to qualify for them must be “easily accessible and presented clearly and unambiguously”. If there are promotional competitions or games, then again conditions for participation must be easily accessible and must be presented clearly and unambiguously.
Perhaps no major surprises here, but when it comes to unsolicited commercial e-mail, there is a new rule of which all e-mail marketers will have to take note. This is a requirement that any person providing an “information society service” ensures that “any unsolicited commercial communication sent by him by electronic mail, where permitted, is clearly and unambiguously identifiable as such as soon as it is received”. How this will be interpreted in practice is another question, but clearly one might regard this as requiring that the subject box will clearly have to show in some way that the message involved is an advertising message. Again, commercial e-mail will be free of this rule if it is not sent by somebody providing an “information society service”, whatever this may mean.
In a distance-selling context, proposed regulation 11 has something to say which all those selling on-line will need to be aware of.
Essentially, “information society service” providers must, “prior to an order being placed by the recipient of a service, provide to that recipient in a clear, comprehensible and unambiguous manner” four categories of information. It should be noted here that these requirements apply not just in a B 2 C but also in a B 2 B context, unless, in a B 2 B situation, the parties have agreed otherwise.
The required disclosure consists of (1) the different technical steps to follow to conclude the contract; (2) whether or not the concluded contract will be “filed” by the service provider and whether it will be accessible; (3) the technical means for identifying and correcting input errors prior to the placing of the order; and (4) the languages offered for the conclusion of the contract.
What the term “filed” in requirement (2) above actually means is unclear, but one assumes the intention is that following the conclusion of the contract, the purchaser may be able to access the contract and its terms on-line whenever he or she wishes. As for the technical steps required to conclude the purchase contract, one imagines this is going to call for changes to the content in most UK-based websites. Whether tucking such provisions away in a set of terms and conditions, accessible at some remote part of the site, is going to classify as providing the information “in a clear, comprehensible and unambiguous manner” is another question.
Another requirement in this context is that the service provider must indicate which relevant codes of conduct he subscribes to and give information on how those codes can be consulted electronically. How does one “subscribe” to a code of conduct? Would this include, in a UK context, the Advertising Standards Authority’s British Code of Advertising and Sales Promotion? One does not actually subscribe to this by way of, for instance, being a paid-up member in the same way as paying members of the Direct Marketing Association are bound by the DMA’s code. Perhaps the idea is that this only applies to codes by which one is bound as a result of membership of a particular trade or professional body.
An interesting twist is a provision at the end of regulation 11, which is headed “Information to be provided where contracts are included by electronic means”. This states that the disclosure requirements just mentioned, “shall not apply to contracts concluded exclusively by electronic mail or by equivalent individual communications”. One assumes this means that if the offer to sell is not made via a website but via an individualised e-mail sent to a prospective purchaser, these disclosure rules will not apply. There are also other requirements as to how a seller on-line should acknowledge receipt of orders for products and a potentially crucial provision in regulation 16 under the heading “Right to cancel contract”. This provides that if the terms and conditions of an on-line sale contract are not downloadable by the purchaser or receipt of an order has not been acknowledged, or the means of allowing identification and correction of input errors has not been notified, the sale contract which eventuates will not be enforceable, with the purchaser having the right to give notice of cancellation of the agreement “at any time”.
The DTI, conscious that it has already significantly delayed in implementing this directive (a mystifying delay since it appears to have done little more than slavishly follow the Directive). The period of consultation for these draft regulations expires on 2 May 2002.
Our impression is that the DTI intend to introduce these regulations by the summer of 2002.
It should be added that although an 8 week consultation period has been provided, these regulations closely follow the EU directive and, having adopted the directive in the first place as part of the European legislative process, there is little scope for amendment. It is to be hoped that advertisers and agencies will be given reasonable notice of when the regulations are in final form and then, thereafter, when they are to brought fully into force. Advisors such as ourselves will also be working closely with our clients to ensure that the best possible guidance is given as to how the regulations should be complied with.