The Impact Of The European Union On The Web

The European Union (EU) has been issuing directives that directly affect e-commerce and privacy issues on the web.  They have taken a much more regulatory and pro-privacy position than the United States.  Because the EU is the United State's largest trading partner, and because some EU directives requires reciprocity (meaning that foreign trade with an EU country is restricted unless the foreign country has similar laws), the United States has been forced to deal with issues it otherwise would have ignored.

The EU has issued a number of directives dealing with e-commerce issues and is working on many more dealing with intellectual property.  Three of the most important are: (1) The Data Privacy Directive; (2) The Distance Selling Directive; and (3) The Comparative Advertising Directive.

The Data Privacy Directive

The Data Privacy Directive requires, among other things, that personal data can only be collected if the subject consents to the collection or the data is necessary to protect the subject's important interests.  In addition, it requires that companies register with independent national authorities before collecting or transmitting data collected from persons.  It also prohibits collecting data on race, ethnicity, religious or philosophical beliefs, membership in certain organizations, as well as health and sexual information.

The collecting company must tell the subject who the collecting entity is, the purpose of collecting the information, and any additional information related to processing the information fairly.  The subject also must be told that he or she has the right to access the data and object to information used for direct marketing.

The directive prohibits the flow of information to jurisdictions that do not have 'adequate' laws to protect the interests which are the subject of the privacy directive.  This could not only affect normal e-commerce but any data flow across national borders, including data from a subsidiary to a parent company located outside the EU.

Because of the potential impact of this directive on the flow of data across national boundaries, the EU agreed with the US Commerce Department on October 26, 1999, not to interrupt the flow of data between the EU and US marketers.  However, this is not a permanent agreement and negotiations are continuing.

The EU Privacy Directive put the US on the defensive.  Companies were worried about doing business with the EU.  In April, 1999, The US created a document called "International Safe Harbor Privacy Principles" to identify rules that are hoped will be accepted as "adequate" by the EU for protecting data privacy.  The rules track closely the EU rules and require, among other things, notice to individuals that information from them is being collected and that they have an opt-out provision.  The EU Privacy Directive, however, differs significantly, in that you cannot collect information without first obtaining consent, which is the reverse of opt-out provisions.  Whether this ends up being acceptable is not known at this time.

Congress is also considering numerous bills on this subject.  On the American judicial scene, a $50 billion class action suit has been filed against Yahoo! and broadcast.com claiming that cookies violate, among other laws, various anti-stalking statutes.  

The Distance Selling Directive

This directive was supposed to go into effect on January 4, 2000, and relates to rules relating to information that must be provided to consumers in transactions where the parties do not meet face to face.  This includes contracts entered into via any electronic means, including e-mail, telephone, fax, radio or television.  Further directives are aimed at "spam" (unsolicited advertising e-mail).  Efforts to combat spamming in this country have focused on the Computer Fraud and Abuse Act and Federal Trade Commission programs to counter deceptive and fraudulent e-mail.  `

Efforts to adopt a new Article 2B of the Uniform Commercial Code in the United States have many similar provisions.  A comparison of the two proposed regulations is beyond this website.  See the Electronic Signature section of this website for more information on Article 2B, particularly with regard to the State of Maryland.

The Comparative Advertising Directive

The laws governing advertising varied widely before the EU passed its Comparative Advertising Directive.  For example, Germany did not allow "buy one, get one free" advertising, while United Kingdom law was much less restrictive.  The directive now requires that advertising be fair in the information that it presents and this brings EU law closer to the United States rules on advertising and provides a certain uniformity that is needed.

In addition to the above examples, there are many more directives being issued by the EU than are discussed in this website.  The United Nations is also weighing in with proposed regulations.  And there are laws being passed by individual nations that can have an unforeseen impact on internet commerce.  For example, the Toubon Law passed by France in 1994, requires that all advertising, contracts or commercial communication in France be in French or accompanied by a translation in French.  This law was used to shut down an English-language website hosted by a French branch of an American university.  The website went back up with a French translation.  These examples show that it will be quite some time before the rules on e-commerce evolve into a settled body of law.

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