Germans Back Country-of-Destination Law for Internet Transactions

WIESBADEN, Germany – DDV, the German DMA, has come out in favor of applying country-of-destination law in cross-border e-commerce transactions, a position counter to that of the US, the UK and, to some extent, the European Commission.

The EC had issued an e-commerce directive that opts for application of country-of-origin law to such transactions except for country-of-destination control of contracts and unwanted e-mail (spamming).

The European parliament gave “first reading” approval to a draft law of the directive last May before the European parliamentary election. A second reading is due this fall with prospects of approval uncertain given that a newly elected parliament will consider the draft.

The DDV issued a position paper earlier this summer insisting that applicable law “must be that of the country of destination, that is, the country where the customer has his residence.

“Only such a solution gives the consumer appropriate legal security. You cannot expect legally untrained consumers to deal with the country of origin’s laws after making an Internet purchase,” the statement said.

“On top of that, consumer protection runs on empty if the seller sets up shop in the EU member states with the least amount of consumer protection – something that use of country-of-origin law practically mandates.

“Much more serious objections to the country of origin principal can be found in the discrimination against those doing business in Germany.

“How can you justify the freedom of moving goods and services across the single market when a German Web merchant faces far stricter legal regulations at home than his non-German EU competitor who does not have to meet the same standards when he sells to Germans?”

Holgar Albers, the managing director of the DDV, said that each direct marketer “has to look at that situation from the perspective of his own country.”

German direct marketers, he added, have “to think about the consumer because we need his acceptance of direct marketing, and in order to get it and keep it we have to take the country of destination position on this issue.”

FEDMA, the Federation of European Direct Marketing, is trying to “represent a European consensus (FEDMA has been pushing the EC to favor the country-of-origin principle) but there is no consensus on this issue.

“So it is up to us to become active on this issue and to persuade people in FEDMA that our position is the right one to take,” Albers said. “But if a FEDMA majority is against us, then we will have to take our case directly to Brussels, via Berlin if necessary.”

The DDV position, Albers noted, is close to that of various German consumer protection groups who would add considerable political clout, perhaps enough to persuade the Schroeder government to intervene with the EC.

As for relations with FEDMA, Albers noted that “you can’t always have the same opinion. I don’t have any problem defending the German position within that organization.

“I don’t see this as a test of nerves. I don’t believe that FEDMA would expel the DDV over this issue or that we would leave FEDMA because we have a different opinion on a European issue. We’re entitled to go our own way.”

Differences of opinion, he added, are best handled by talking them out.

The German position does not come as a surprise to US direct marketers. The DMA’s International VP, Charles Prescott, said the Germans want others who come into their market online to be as restricted as they are.

But he said the issue had broader dimensions involving international law and national government attitudes toward it. “At the end of the day no government will give up enforcing its mandatory laws, no matter what the e-commerce directive says.

“The question is on what kinds of subjects are local authorities going to be really, really hard-nosed and seek to extend their jurisdiction overseas.

“A Web site can make any offer it wants and say it is governed by the laws of New York but if France decides that this is against the interest of French consumers it will do something about it, just as the FTC would if US consumer interests were threatened.”

The range of issue here is broad since governments must decide if offering illegal discounts are consumer protection issues or crimes, “and where each country will come out remains to be seen,” Prescott said.

“This is pretty frontier stuff … And the immediacy of Internet traffic makes this issue, which has always been inherent in cross-border DM, more visible.”

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