In any discussion of e-commerce in Europe today, the subject inevitably turns to Brexit. Everybody is waiting to see what impact Brexit will have on e-commerce both within Britain and on the EU as a whole, but for the moment Great Britain is still part of the European Union and still subject to their laws.
Let’s set aside the “what-if’s” for now and take a look at the e-commerce laws and regulations that any merchant selling in Europe needs to be aware of.
European E-Commerce Overview
Europe is a major destination for e-commerce. Germany, France and the UK are all among the largest e-commerce markets in the world and the region as a whole is easily one of most mature and developed. With market maturity comes strong infrastructure, high consumer adoption of cross-border e-commerce, and well-defined rules and regulations.
Key to all of this is SEPA – the Single Euro Payments Area. Coordinated by the European Payment Council, SEPA introduced a single payment format for all transactions in the Euro currency in order to harmonize the fragmented European nation states into a single domestic market. With SEPA in effect, all countries dealing in Euros share not only a currency but also a payments network, meaning that money can be transferred freely across borders.
As a result, selling in Europe is simpler than ever. European-based e-commerce operations can sell throughout the region and merchants outside of Europe need only one set of payment tools to begin doing business throughout the Eurozone. But that doesn’t mean there aren’t a few laws and regulations cross-border merchants need to be aware of. Here, we’ve compiled a quick overview of key e-commerce laws within the EU.
Regulations for European Merchants
Online sellers within Europe will need to familiarize themselves with the VAT system. Merchants selling across borders are required to pay the VAT on products sold based on the location of the customer. For example, if a business based in Germany sells products in France, the taxes on those products must be charged at France’s VAT rate, even though it is higher than Germany’s, and paid to the French government rather than their own.
Currently, European e-commerce merchants can choose which EU countries to sell to, meaning that they can opt out of certain countries due to higher VAT rates (or for any other reason). However there is strong support among EU regulators to ban geo-blocking, which allows retailers to decline transactions made with a foreign bank card. The geo-blocking ban, if it is made into law, will make it so that all online merchants in Europe will have no choice but to accept orders originating from any country in the EU. This in turn could have a major impact on how European retailers approach e-commerce.
Regulations for Non-European Merchants
Merchants from outside of Europe will need to familiarize themselves with local legislation. In the place of the VAT system, products imported from outside of the EU are subject to duties depending on the destination country. Additionally, the European WEEE regulation states that for all physical products it is mandatory to register the number of items being put to market as well as the items taken back from the market (as in the case of returns). Merchants who fail to do so risk thousands of Euros in fines.
The EU also has relatively strict rules regarding both the checkout process as well as returns and cancellations:
Checkout Process Regulations
To be compliant with EU regulations, your checkout process must include the following:
- Clear information: “Add to Cart” or “Buy Now” buttons which clearly state the obligation to pay. In other words, buttons must contain text that makes it explicit to customers that, if they continue with the transaction, they are required to pay for it.
- Price transparency: List the total cost of a customer’s purchase, including taxes, fees, shipping & handling, etc. No hidden costs.
- No pre-checked boxes: Boxes in checkout forms cannot be pre-checked and there can be no default settings to add goods or services.
- Timely fulfillment: Products must arrive within 30 calendar days of purchase.
Cancellations and Returns Regulations
As with the checkout process, there are several regulations that govern cancellations and returns as well:
- 14-day cancellation period: Customers in the EU must be given a minimum of 14 days to cancel a purchase penalty-free. Furthermore, if you do not explicitly communicate the cancellation period to your customers prior to making a payment, the cancellation period is automatically extended to one year!
- Prompt refunds: Once an order has been cancelled, you must refund your customer’s payment within 14 days.
- Cost of returns: In the case of returns, it must be explicitly stated at the time of sale whether you or the customer will be responsible for paying the cost of returning the items.
The bulk of European e-commerce laws and regulations comes from the EU E-Commerce Directive. Anybody conducting an online business in Europe should take the time to familiarize themselves with this directive, as failing to comply can result in fines, sanctions, or the ceasing of operations within the EU.
It is also important to be aware of national e-commerce laws within Europe, such as Germany’s “Abmahnungsgefahr”, which states that online retailers must pay a fine if a consumer or organization reports incorrect information found on their e-commerce site. It’s a good idea to conduct focused research on any countries where you’re planning to do business.
Follow Payza on Facebook and Twitter and subscribe to the Payza Blog for more information about building and maintaining a strong cross-border e-commerce operation and how to keep it compatible with new and existing legislation at home and abroad.