Lecture on “EU e Commerce Law”

Lecture on “EU eCommerce Law” Prof. Manuel David Masseno - Beja Polytechnic, Portugal - Isik University – 06/09/2007 LEGIS – Intensive Programme

The Regulatory Framework • The “Constitutional Foundations” • According to the EC Treaty, the “Economic Constitution” of is based on “the principle of an open market economy with free competition” (Art. 4.1 and 2, Art. 98) • “The Community shall have as its task, by establishing a common market and an economic and monetary union and by implementing common policies or activities referred to in Articles 3 and 4, to promote throughout the Community a harmonious, balanced and sustainable development of economic activities, a high level of employment and of social protection, equality between men and women, sustainable and non-inflationary growth, a high degree of competitiveness and convergence of economic performance, a high level of protection and improvement of the quality of the environment, the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member States.” (Art. 2)

The Regulatory Framework • “[…] an internal market characterised by the abolition, as between Member States, of obstacles to the free movement of goods, persons, services and capital” (Art. 3.1 c), plus • Art. 23 – Free Movement of Goods • Art. 43 – Right of Establishment • Art. 49 – Freedom to Provide Services • Combined with a strong Consumer Protection (Art. 153): 1. In order to promote the interests of consumers and to ensure a high level of consumer protection, the Community shall contribute to protecting the health, safety and economic interests of consumers, as well as to promoting their right to information, education and to organise themselves in order to safeguard their interests. 2. Consumer protection requirements shall be taken into account in defining and implementing other Community policies and activities.”

The Regulatory Framework • The Charter of Fundamental Rights of the European Union (Stated at Nice – the 7th December 2000) • Art. 16 (Freedom to conduct a business) “The freedom to conduct a business in accordance with Community law and national laws and practices is recognised.” • Art. 17.1 (Right to property) “Everyone has the right to own, use, dispose of and bequeath his or her lawfully acquired possessions. […]” • But also, Art. 38 (Consumer protection) “Union policies shall ensure a high level of consumer protection.” • Art. 6.1 of the EU Treaty: “The Union is founded on the principles of liberty, democracy, respect for human rights and fundamental freedoms, and the rule of law, principles which are common to the Member States.”

The Regulatory Framework • Markets as legal creations: • The Internal Market as “[…]an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of this Treaty[…]” EC Treaty (Art. 14.2) • The reasons for the EC initiatives regarding eCommerce: • An European Initiative in Electronic Commerce - Communication to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions, the 18th April 1997 [COM(97) 157 final] • Council Resolution of 19 January 1999 on the Consumer Dimension of the Information Society • Also the Report from the Commission to the European Parliament, the Council and the European Economic and Social Committee - First Report on the application of Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (Directive on electronic commerce), 21/11/2003 [COM/2003/0702 final]

The Regulatory Framework • A “dangerous”alternative: “mutual recognition” and “competition among national Legal Orders” • The Cassis de Dijon ruling(Case C-120/78, Rewe-Zentral AG v. Bundesmonopolverwaltung für Branntwein, 1979) “[…] there is therefore no valid reason why, provided that they have been lawfully produced and marketed in one of the Member States, alcoholic beverages should not be introduced into any other Member State.” “Obstacles to movement within the Community resulting from disparities between the national laws relating to the marketing of the products in question must be accepted in so far as those provisions may be recognized as being necessary in order to satisfy mandatory requirements relating in particular to the effectiveness of fiscal supervision, the protection of public health, the fairness of commercial transactions and the defense of the consumer.”

The Regulatory Framework • The Sources of Law: • Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market ('Directive on electronic commerce') • Directive 97/7/EC of the European Parliament and of the Council of 20 May 1997 on the protection of consumers in respect of distance contracts • Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts • Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market

The Regulatory Framework • Directive 1999/93/EC of the European Parliament and of the Council of 13 December 1999 on a Community framework for electronic signatures • Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data • Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector (Directive on privacy and electronic communications) • And, Directive 2002/65/EC of the European Parliament and of the Council of 23 September 2002 concerning the distance marketing of consumer financial services

The Regulatory Framework • Several of these Directives assign a relevant role to the Self-Regulation of Operators, by the way of “Codes of Conduct”: • “Directive on electronic commerce”, Art. 16 • Directive on data protection, Art. 27 • “Unfair Commercial Practices Directive”, Art. 10 • Recommendation of the European Commission of 7 April 1992, concerning distance selling • The Eurochambres Code • The European Advertising Standards Alliance

The Regulatory Framework • The Direct Regulation of the Market. • In every Market, we find regulation on: • Market Operators: Professional and Consumers • Tradable Goods • Conflicts Resolution

The Regulatory Framework • The Professionals: the so called “Services providers”(“[…] any natural or legal person providing an information society service”, Art. 2 b) of the Directive on electronic commerce) • “[…] free movement of information society services between the Member States” (Art. 1.3 and Art. 3.2) • “Principle excluding prior authorisation” to “[…] the taking up and pursuit of the activity of an information society service provider[…]”(Art. 4.1) • Home country control (Art. 3.1) • Only to EU Operators (Art. 3.2)

The Regulatory Framework • The “Consumers”(“[…]any natural person who is acting for purposes which are outside his or her trade, business or profession”, Art. 2 e) • An high level of protection, however “[…]in so far as this does not restrict the freedom to provide information society services.” (Art. 1.3) • Linked to the Home country control principle (Art. 3.1) and mutual recognition Art. (3.2.), since this is a minimum level of protection Directive (Art. 34.5 and 6) • Exceptions present at Art. 3.3 and 4, in the latter case following the ECJ Cassis de Dijon Doctrine • “Each Member State shall ensure that the information society services provided by a service provider established on its territory comply with the national provisions applicable in the Member State in question which fall within the coordinated field.” (Art. 31.) “‘coordinated field’: requirements laid down in Member States' legal systems applicable to information society service providers or information society services, regardless of whether they are of a general nature or specifically designed for them.” (Art. 2 h)

The Regulatory Framework Art. 3.4 “Member States may take measures to derogate from paragraph 2 in respect of a given information society service if the following conditions are fulfilled: (a) the measures shall be: (i) necessary for one of the following reasons: - public policy, in particular the prevention, investigation, detection and prosecution of criminal offences, including the protection of minors and the fight against any incitement to hatred on grounds of race, sex, religion or nationality, and violations of human dignity concerning individual persons, - the protection of public health, - public security, including the safeguarding of national security and defence, - the protection of consumers, including investors;

The Regulatory Framework (ii) taken against a given information society service which prejudices the objectives referred to in point (i) or which presents a serious and grave risk of prejudice to those objectives; (iii) proportionate to those objectives; (b) before taking the measures in question and without prejudice to court proceedings, including preliminary proceedings and acts carried out in the framework of a criminal investigation, the Member State has: - asked the Member State referred to in paragraph 1 to take measures and the latter did not take such measures, or they were inadequate, - notified the Commission and the Member State referred to in paragraph 1 of its intention to take such measures.”

The Regulatory Framework Art. 3.5 “Member States may, in the case of urgency, derogate from the conditions stipulated in paragraph 4(b). Where this is the case, the measures shall be notified in the shortest possible time to the Commission and to the Member State referred to in paragraph 1, indicating the reasons for which the Member State considers that there is urgency.” Art. 3.6. “Without prejudice to the Member State's possibility of proceeding with the measures in question, the Commission shall examine the compatibility of the notified measures with Community law in the shortest possible time; where it comes to the conclusion that the measure is incompatible with Community law, the Commission shall ask the Member State in question to refrain from taking any proposed measures or urgently to put an end to the measures in question.”

The Regulatory Framework • The Goods, or the “information society services”(Art. 2 a) that receives the definition present at Art. 1.2 of Directive 98/34/EC laying down a procedure for the provision of information in the field of technical standards and regulations as amended by Art. 1.2 a) of Directive 98/48/EC of the European Parliament and of the Council of 20 July 1998: “[…]any service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services” • As a general rule, all are included (Art. 1.1) • Some are excluded for Public Policy reasons (Art. 1.5): • Legal professional services • Gambling, including lotteries and betting transactions, but excluding “promotional competitions or games” (Art. 6 d)

The Regulatory Framework • Others may be excluded by Member-States (Art. 9.2): “(a) contracts that create or transfer rights in real estate, except for rental rights; (b) contracts requiring by law the involvement of courts, public authorities or professions exercising public authority; (c) contracts of suretyship granted and on collateral securities furnished by persons acting for purposes outside their trade, business or profession; (d) contracts governed by family law or by the law of succession.” • This exclusion has to be justified every 5 years to the EC Commission (Art. 9.3)

The Regulatory Framework • Conflicts Resolution: • Guaranteed access to Out-of-court dispute settlement, “[…]including appropriate electronic means.” (Art. 17) • Rapid adoption of measures in Courts (Art. 18.1) “Member States shall ensure that court actions available under national law concerning information society services' activities allow for the rapid adoption of measures, including interim measures, designed to terminate any alleged infringement and to prevent any further impairment of the interests involved”

The Regulatory Framework • IndirectRegulation: • Conceiving Markets as decentralized Information Systems that do not achieve spontaneously an Optimum Allocation of the Resources • Regarding the Principle of Transparency: since information has to be certain, complete, true and costless • As well as the Principles of Informational Symmetry, Proportionality, Subsidiarity, Liability, Effectiveness and Instrumentality

The Regulatory Framework • Principle of Symmetry: all parts of a transaction should have the same information • Principle of Proportionality: the information provided should be proportionate with the actual trust and credit • Principle of Subsidiarity: State should regulate Markets in order to overcame information gaps • Principle of Liability: the liability standards should be linked to the levels of transparency • Principle of Effectiveness: since the transparency standards have to be dully enforced • Principle of Instrumentality: transparency is only an instrument to achieve a greater protection of the weaker player, among others (Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market)

The Regulatory Framework • As stated by Art. 4.2 of Directive 97/7/EC “The information referred to in paragraph 1, the commercial purpose of which must be made clear, shall be provided in a clear and comprehensible manner in any way appropriate to the means of distance communication used, with due regard, in particular, to the principles of good faith in commercial transactions, and the principles governing the protection of those who are unable, pursuant to the legislation of the Member States, to give their consent, such as minors.”

The Regulatory Framework • Even more clearly than in National Laws, EC Market Regulation is closely linked to the “liberty of contract” • European Contract Law is a result of the harmonization intents to put in action the EC Treaty Freedoms, is accordance with the high level of protection guaranteed to consumers

Commercial Communication and Spamming • Commercial Communication in a Broad Sense • The Principle of Transparency in action: • The Provider has to render accessible: • His identity, including his address (Art. 4.1 a) of Directive 97/7/EC and Art. 5.1 b) and c) • Authorisations and registrations involved (Art. 5. 1 d) and e) in special for regulated professions (Art. 5.1. e) • The contractual terms and conditions (Art. 10.3) • The price and associated costs and charges (Art. 4.1 c) and d) of Directive 97/7/EC and Art. 5.2)

Commercial Communication and Spamming • Technical aspects involved, including “[…]the technical means for identifying and correcting input errors prior to the placing of the order” (Art. 10.1) • Procedural arrangements, e.g. for payment, delivery or performance (Art. 4.1 e) of Directive 97/7/EC) • Relevant Self-Regulation Schemes (Art. 10.2) • Procedural rights available to the recipient, e.g. the right to withdraw from the contract (Art. 4.1 f) of Directive 97/7/EC)

Commercial Communication and Spamming • Form • Art. 5.1 of Directive 97/7/EC “[...]in writing or on another durable medium available and accessible to him.” Art. 2 f) of Directive 2002/65/EC of the European Parliament and of the Council of 23 September 2002 concerning the distance marketing of consumer financial services “‘durable medium’ means any instrument which enables the consumer to store information addressed personally to him in a way accessible for future reference for a period of time adequate for the purposes of the information and which allows the unchanged reproduction of the information stored;” • Art. 5.1 just says that it has to be “[...]easily, directly and permanently accessible to the recipients.” • However, “[...]the service provider has to acknowledge the receipt of the recipient's order without undue delay and by electronic means.” (Art. 11.1)

Commercial Communication and Spamming • Timing • Information should be provided “In good time prior to the conclusion of any distance contract” (Art. 4.1 of Directive 97/7/EC) “The consumer must receive written confirmation or confirmation in another durable medium available and accessible to him of the information referred to in Article 4 (1) (a) to (f), in good time during the performance of the contract, and at the latest at the time of delivery where goods not for delivery to third parties are concerned, unless the information has already been given to the consumer prior to conclusion of the contract in writing or on another durable medium available and accessible to him.” (Art. 5.1) • According to Art.5 the relevant information has to be permanently available, in any case “[…]prior to the order being placed by the recipient of the service.”(Art. 10.1)

Commercial Communication and Spamming • Commercial Communication in a Narrow Sense – advertising and promotions “In addition to other information requirements established by Community law, Member States shall ensure that commercial communications which are part of, or constitute, an information society service comply at least with the following conditions: (a) the commercial communication shall be clearly identifiable as such; (b) the natural or legal person on whose behalf the commercial communication is made shall be clearly identifiable; (c) promotional offers, such as discounts, premiums and gifts, where permitted in the Member State where the service provider is established, shall be clearly identifiable as such, and the conditions which are to be met to qualify for them shall be easily accessible and be presented clearly and unambiguously; (d) promotional competitions or games, where permitted in the Member State where the service provider is established, shall be clearly identifiable as such, and the conditions for participation shall be easily accessible and be presented clearly and unambiguously.” (Art. 6)

Commercial Communication and Spamming • Spamming • What’s Spam? • Unsolicited Bulk E-mail vs. Unsolicited Commercial E-mail • Commercial Speech as ... a special sort of speech • Why Direct Marketing relies on Spam?

Commercial Communication and Spamming • The “Constitucional Framework”: the Charter of Fundamental Rights of the EU • Personal Liberties • Art. 7 (Respect for private and family life) • Art. 8 (Protection Respect for private and family life) • Art. 11(Freedom of expression and information) • Economic Liberties • Art. 16 (Freedom to conduct a business) • Art. 38 (Protection of consumers)

Commercial Communication and Spamming • Enhance the relevance of Article 52.1 (Scope of guaranteed rights) “Any limitation on the exercise of the rights and freedoms recognised by this Charter must be provided for by law and respect the essence of those rights and freedoms. Subject to the principle of proportionality, limitations may be made only if they are necessary and genuinely meet objectives of general interest recognised by the Union or the need to protect the rights and freedoms of others.”

Commercial Communication and Spamming • The “Technical Approach”: • Mark and Block! • Personal filters vs. “industry filtering initiatives” • But... • The confidentiality of communications (Art. 5 Directive 2002/58/EC) • The non monitoring by the providers (Art. 15.1 Directive 2000/31/EC) • The US Communications DecencyAct 1996...

Commercial Communication and Spamming • The “Legal Approch” Opting-out • Directive 95/46/EC – on personal data (Art. 14) • Directive 97/66/EC – on personal data and privacy in the telecommunications (Art. 12) • Directive 97/7/EC – on the protection of consumers in respect of distance contracts (Art. 10) • Directive 2000/31/EC – on electronic commerce (Art. 7.2) • The Spam Can Act of 2003

Commercial Communication and Spamming Opting-in Directive 2002/58/EC – on privacy and electronic communications (Art. 13) “1.The use of automated calling systems without human intervention (automatic calling machines), facsimile machines (fax) or electronic mail for the purposes of direct marketing may only be allowed in respect of subscribers who have given their prior consent. 2.Notwithstanding paragraph 1, where a natural or legal person obtains from its customers their electronic contact details for electronic mail, in the context of the sale of a product or a service, in accordance with Directive 95/46/EC, the same natural or legal person may use these electronic contact details for direct marketing of its own similar products or services provided that customers clearly and distinctly are given the opportunity to object, free of charge and in an easy manner, to such use of electronic contact details when they are collected and on the occasion of each message in case the customer has not initially refused such use.

Commercial Communication and Spamming 3.Member States shall take appropriate measures to ensure that, free of charge, unsolicited communications for purposes of direct marketing, in cases other than those referred to in paragraphs 1 and 2, are not allowed either without the consent of the subscribers concerned or in respect of subscribers who do not wish to receive these communications, the choice between these options to be determined by national legislation. 4. In any event, the practice of sending electronic mail for purposes of direct marketing disguising or concealing the identity of the sender on whose behalf the communication is made, or without a valid address to which the recipient may send a request that such communications cease, shall be prohibited. 5. Paragraphs 1 and 3 shall apply to subscribers who are natural persons. Member States shall also ensure, in the framework of Community law and applicable national legislation, that the legitimate interests of subscribers other than natural persons with regard to unsolicited communications are sufficiently protected.”

Commercial Communication and Spamming Pros and cons • The “respect (for the) essence (of) rights” and the “principle of proportionality” (Art. 52.1 of the Chater) • The Competitiveness of European Industry vs. the USA

Commercial Communication and Spamming • A sort of alternative: the Poisoned Tree Approach • Goin’ up river right to the source: e-mails data bases and consumer profiles • Enforcing the criteria for making data processing legitimate (Art. 7 Directive 95/46/EC) • Enforce a real control of the tranfer of data to third countries.

Electronic Contracting • General Ideas: • Regards Both Consumer Contracts and Non Consumers Contracts • This Directive is not aimed to the harmonization of general principles of the national legal orders in relation to contracts • Within the scope of both EC Directive 97/7 of the European Parliament and of the Council of 20 May 1997 on the protection of consumers in respect of distance contracts and also Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts • EC Directive 97/7 Directive doesn’t care about the techniques involved: Art. 2. “(1)“distance contract` means any contract concerning goods or services concluded between a supplier and a consumer under an organized distance sales or service-provision scheme run by the supplier, who, for the purpose of the contract, makes exclusive use of one or more means of distance communication up to and including the moment at which the contract is concluded;”

Electronic Contracting • “This Directive complements Community law applicable to information society services without prejudice to the level of protection for, in particular, public health and consumer interests, as established by Community acts and national legislation implementing them in so far as this does not restrict the freedom to provide information society services” (Art. 1.3)and “Without prejudice to Directive 97/7/EC[…]” (Art 7.2) • As well as Whereas 11 – “This Directive is without prejudice to the level of protection for, in particular, public health and consumer interests, as established by Community acts; amongst others, Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts (5) and Directive 97/7/EC of the European Parliament and of the Council of 20 May 1997 on the protection of consumers in respect of distance contracts (6) form a vital element for protecting consumers in contractual matters; those Directives also apply in their entirety to information society services; that same Community acquis, which is fully applicable to information society services[…];”

Electronic Contracting • Whereas 29 “[…] in the interests of consumer protection and fair trading, commercial communications, including discounts, promotional offers and promotional competitions or games, must meet a number of transparency requirements; these requirements are without prejudice to Directive 97/7/EC[…]” and • Whereas 30 “[…] the question of consent by recipient of certain forms of unsolicited commercial communications is not addressed by this Directive, but has already been addressed, in particular, by Directive 97/7/EC[…]”, even if this no longer relevant…

Electronic Contracting • In fact, it Aims to remove the obstacles to electronic contracting, according to Art. 9.1. “Member States shall ensure that their legal system allows contracts to be concluded by electronic means. Member States shall in particular ensure that the legal requirements applicable to the contractual process neither create obstacles for the use of electronic contracts nor result in such contracts being deprived of legal effectiveness and validity on account of their having been made by electronic means”, meaning all the Legal Order of each Member-State, but not technical, cultural or economic barriers…

Electronic Contracting • Just remember the few exceptions (Art. 9.2): “(a) contracts that create or transfer rights in real estate, except for rental rights; (b) contracts requiring by law the involvement of courts, public authorities or professions exercising public authority; (c) contracts of suretyship granted and on collateral securities furnished by persons acting for purposes outside their trade, business or profession; (d) contracts governed by family law or by the law of succession.”

Electronic Contracting • Contractual procedure: • Pre-contractual information obligations, connected with the identification of the providers (Art.5) and commercial communications (Art. 6) in order to obtain contractual transparency • Art. 10.1 “In addition to other information requirements established by Community law, Member States shall ensure […] that at least the following information is given by the service provider clearly, comprehensibly and unambiguously and prior to the order being placed by the recipient of the service: (a) the different technical steps to follow to conclude the contract; (b) whether or not the concluded contract will be filed by the service provider and whether it will be accessible;

Electronic Contracting (c) the technical means for identifying and correcting input errors prior to the placing of the order; (d) the languages offered for the conclusion of the contract.” • Art. 10. 2 “[…]the service provider indicates any relevant codes of conduct to which he subscribes and information on how those codes can be consulted electronically”, introducing higher standards concerning Objective Good Faith.

Electronic Contracting • According to Art. 10.3, these information “[…]must be made available in a way that allows him [the recipient] to store and reproduce them”, in order to have a proof of the contract and it’s terms • Exception: e-mail contracting or using another individualized communication device, v.g. chat • What happens if it’s not provided? • Will the contract be biding? • A possible answer: the period for exercise of the right of withdrawal will be longer, Art. 6.1 of Directive 97/7/EC“If the supplier has failed to fulfill the obligations laid down in Article 5 [Written confirmation of information], the period shall be three months. The period shall begin: - in the case of goods, from the day of receipt by the consumer, - in the case of services, from the day of conclusion of the contract.”

Electronic Contracting • Is there a statutory form for electronic contracts? • Art. 10.3 don’t to be written, but has to be recordable “Contract terms and general conditions provided to the recipient must be made available in a way that allows him to store and reproduce them” • Even if Art. 5.1 of Directive 97/7/EC, states that “The consumer must receive written confirmation or confirmation in another durable medium available and accessible to him […]” • An additional point of reference can be found in Art.2 f), of the Directive 2002/65/EC of the European Parliament and of the Council of 23 September 2002 concerning the distance marketing of consumer financial services, “"durable medium" means any instrument which enables the consumer to store information addressed personally to him in a way accessible for future reference for a period of time adequate for the purposes of the information and which allows the unchanged reproduction of the information stored;”

Electronic Contracting • Also in relation to Art. 11.1 “[…] the service provider has to acknowledge the receipt of the recipient's order without undue delay and by electronic means.”

Electronic Contracting • Contractual Procedures • Mass vs. individualized contracting • Prior information: • The data stated in Art. 10 • The one referred by Art. 4.1 of Directive 97/7/EC, namely: “(a) the identity of the supplier and, in the case of contracts requiring payment in advance, his address; (b) the main characteristics of the goods or services; (c) the price of the goods or services including all taxes; (d) delivery costs, where appropriate; (e) the arrangements for payment, delivery or performance;

Electronic Contracting (f) the existence of a right of withdrawal, except in the cases referred to in Article 6 (3); (g) the cost of using the means of distance communication, where it is calculated other than at the basic rate; (h) the period for which the offer or the price remains valid; (i) where appropriate, the minimum duration of the contract in the case of contracts for the supply of products or services to be performed permanently or recurrently.” • General Information, Art. 5 • Concerning the arrival of the order and the acknowledgement of receipt, Art. 11.1 states that they “[…] are deemed to be received when the parties to whom they are addressed are able to access them.” Even implicitly determined… • It doesn't applies to individualized contracts (Art. 11.3)!

Electronic Contracting • When is the contract celebrated? • Controversial issue. • It up to National transposing Laws to address this question • However, according to Art. 11.1 it seems that the Directive points to the so called Reception Theory • Both public offer and invitation to deal can be considered • When do we have each • In general, the requirements of an offer are present, since mosts of them are required by the Directive itself, as seen

Lecture on “EU e Commerce Law”