Brexit Update: Regulatory Uncertainties for the E-commerce Sector

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The UK vote to leave the EU produces a number of regulatory uncertainties, particularly given the activism of European policymakers in the digital sector. There are a number of regulations that will shortly come into force at European level, and it is not fully clear the extent to which these will apply in the UK post-Brexit. Such uncertainties could prove highly damaging moving forward, especially given the importance of the British market to the European e-commerce sector.

Brexit and Geo-blocking

One area in which the EU has been particularly active in recent months with regard to e-commerce has been the practice of geo-blocking. The Commission published a legislative proposal addressing the issue of geo-blocking in May 2016, and it is currently being considered by the European Parliament and the Council of the EU. Meanwhile, in its preliminary report on its inquiry into the e-commerce sector, DG COMP, the part of the Commission responsible for competition regulation, highlighted geo-blocking as a potential distortion of competition.

Post-Brexit, it is unclear to what extent EU regulations, like the proposed regulation on geo-blocking, will apply to the UK, and there is therefore considerable uncertainty about whether or not UK-based online merchants will be free to geo-block. Meanwhile, should the UK competition regulator, the Competition and Markets Authority (CMA), take a different view of the impact of geo-blocking on competition than DG COMP, then UK-based merchants could be shielded from investigation for geo-blocking practices.

Brexit and the General Data Protection Regulation

The EU is also very active in the area of data protection, and in May 2016, the General Data Protection Regulation (GDPR) entered into force in May 2016. The GDPR will apply from 25 May 2018. At this point, it is expected that the UK will still be a Member State of the EU. However, there has been considerable speculation about whether the GDPR will continue to apply in the UK post-Brexit.

Given the uncertainty, the UK government in November 2016 sought to address concerns by stressing that the GDPR will apply in the UK post-Brexit. Karen Bradley MP, the UK Culture, Media and Sport Secretary, stated in comments to the Parliamentary Select Committee for Culture, Media and Sport that the UK would ‘opt in’ to the GDPR after leaving the EU.

Despite this confirmation, some uncertainty remains. The UK Information Commissioner’s Office (ICO), while welcoming Bradley’s statement as important to safeguarding confidence in data protection in the UK, stressed that there were still ‘questions on how the GDPR would work on Britain leaving the EU.’ In the meantime, the ICO will continue to support UK businesses to prepare for compliance with the GDPR.

Brexit and Consumer Policy

Brexit also raises considerable uncertainty regarding a number of legislative proposals currently being considered in the EU in relation to consumer policy. Of particular interest for the e-commerce sector are the proposal for a Directive on Digital Content, and the proposal for a Directive on Online and Other Distance Sale of Goods. Depending on its post-Brexit settlement, the UK may or may not implement these Directives, once adopted, into UK national law.

If the UK government chooses a relatively ‘hard’ Brexit, and therefore does not implement these Directives, then online retailers would have to comply with two different regulatory frameworks for consumer protection if they wish to operate in both the UK and the EU.

At present, several important divergences exist between the proposals at EU level and the relevant UK legislation, the Consumer Rights Act (CRA) 2015. For example, while the CRA’s provisions on digital content only apply to paid digital content, the proposed Directive also covers digital content exchanged for personal data. In addition, under the CRA, consumers only have the right to remedies for non-conformity for a period of six years from supply, while in the proposed Directive there is no such limit. Meanwhile, in terms of online sale of goods, a hierarchy of remedies is introduced that does not exist under the CRA.

There is great uncertainty regarding the above divergences, given that the EU proposals are subject to amendment by the Council and the European Parliament. However, they demonstrate the potential difficulties for merchants seeking to comply with two very different regulatory frameworks. Such divergences could have stark consequences for e-commerce between the UK and the EU.

Brexit therefore presents considerable uncertainty for regulation in several key areas. Ecommerce Europe’s view is that those negotiating Brexit must consider the potential impact of regulatory divergences on the e-commerce sector.

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