As the ecommerce marketplace continues to grow, the European Union has made some significant and much-needed changes to the way it regulates the industry.
Whether you’re an entrepreneur, ecommerce business owner, or online shopper, it’s imperative that you understand what these changes are so that you know how they impact you.
Exploring and Applying the New Changes
In 2018, the EU made reform of ecommerce rules one of its major priorities. Since then, numerous changes and improvements have been put into law through new directives, regulations, and requirements.
The European Commission’s stated objective is to establish a more harmonized set of rules to help facilitate the supply and sale of digital content and online good across the EU, as well as to make it less costly and difficult for online companies to engage in international commerce. It also touches on the rights of EU consumers and provides additional protections that didn’t previously exist.
Here are a few of the changes that have already been initiated, as well as some that will be implemented in the months to come:
1. Putting an End to Unjustified Geoblocking
Ecommerce works best when it’s unrestricted. This is why many online entrepreneurs move from restrictive platforms to self-hosted domains (which allow them to profit from their sites). But up until recently, the EU was imposing restrictive laws that prevented these same entrepreneurs from reaching consumers across national borders.
Prior to December 2018, many European businesses had systems in place that re-routed and restricted online traffic in order to bolster profit margins. But with recent changes, unjustified geoblocking is no longer allowed. Online sellers are required to treat all EU consumers equally, regardless of where they shop. This gives European consumers a wider selection of products and services to choose from.
2. Cheaper Cross-Border Parcel Delivery
One of the biggest reasons for geoblocking is the fact that cross-border parcel delivery prices are as much as 3-to-5-times higher than domestic delivery costs. But have no fear, the EU has also implemented changes that are intended to make these cross-border deliveries less expensive for businesses and consumers alike.
While the EU has failed to put any caps on delivery prices, they have increased transparency. Prices must be disclosed earlier on in the shopping process and consumers can consult parcel delivery prices directly from the European Commission’s website.
“National authorities will collect information every year from parcel delivery companies. Where parcel delivery is subject to a universal service obligation, national regulatory authorities will also be required to assess where tariffs are unreasonably high,” The Commission explains.
3. Changes to VAT Rules
While the EU clears more than ?602 billion in Value-Added Tax (VAT) each year, VAT fraud reportedly costs member states as much as ?50 billion annually. One of the causes is the fact that VAT rules are often applied differently in each country.
In 2019, the European Council adopted new rules that have made it easier for online companies to comply with VAT obligations. The rule states that, when selling as a European business to an EU consumer, online businesses must take distance selling rules into account. These rules tell businesses precisely how to apply VAT taxes based on predetermined thresholds.
Doing Business the Right Way
At the end of the day, the EU’s ecommerce rules and regulations aren’t intended to be restrictive, oppressive, or challenging to navigate. In fact, it’s quite the opposite. These changes are designed to restructure and reorient the way business is done. They’re intended to encourage businesses to operate in an appropriate manner that helps protect their own interests, as well as the interests of consumers. Ecommerce organizations that respond the right way will see their businesses grow. Those that reject these new rules will become obsolete.
