Businesses based in the European Economic Zone (EEZ) must comply with regulations set by the European Commission. ECommerce retailers operating in the zone are required to:
- adopt clear pricing policies free of hidden or undisclosed charges.
- clearly identify any added costs including VAT, tax, and cross-border parcel delivery costs.
- disclose this information before the buyer completes their purchase.
According to the EU Commission website, the Commission has adopted a proposal for a Digital Services Act (DSA) that aims to create a safer and more open digital space for all users and ensure a level playing field for businesses.
Online retailers need to adopt seven key compliance requirements to ensure that their websites can operate in the EEZ. Without meeting these requirements, online businesses will be rejected by banks, face fines and even be blocked by government agencies.
All business owners, online and offline, must adhere to the law. As digital retail laws are changing, having a solid understanding of eCommerce Regulations helps to keep your business protected and operational.
Along with the severe fines and legal penalties, you run the risk of losing control over your brand’s reputation and assets.
The primary concerns addressed by the regulations are personal data privacy, financial data security, and deceptive business and advertising practices. These regulations aim to protect the interests of your clients and your business. Despite almost 20 years of eCommerce, the regulations have been slow to recognise vulnerabilities online for both customers and merchants.
GDPR Compliance
The General Data Protection Regulation (GDPR) aims to protect the privacy and personal information of individuals. EU Data Protection Regulations apply to all businesses that handle or keep personal data belonging to people who have accessed the internet from the EU, despite where that company is situated.
All sites must take specific steps to protect client data, such as gaining consent for data collection and guaranteeing it is maintained securely. For eCommerce enterprises, there are additional GDPR compliance steps that must be taken.
Organisations that fail to comply with GDPR Guidelines for eCommerce Websites and Marketplaces may be subject to fines and penalties, including a fine of 4% of their annual global revenue or €20 million, whichever is higher.
While GDPR compliance has improved data protection for those access sites from within the EU, some companies and organisations have faced challenges gathering and processing personal data in compliance with the rules.
eCommerce Directive
The EU’s eCommerce Directive Compliance law outlines rules for content, agreements, and online ads posted on eCommerce websites.
To comply with the directive, businesses are required to provide customers with accurate information and provide access to dispute resolution processes. If these two directives are not followed, action can be taken against the business to stop illegal activity on its website.
The directive, in conjunction with the GDPR, regulates the website’s terms and conditions, privacy policy, and delivery options and must include the company’s written confirmation of its adherence to privacy laws and customer data protection regulations.
Consumer Rights Directive
The Consumer Rights Directive law safeguards eCommerce customers and includes regulations for pricing, delivery, exchanges and returns or cancellations. The EU law provides a comprehensive framework for consumer protection throughout the region, including EEZ members.
By EU law, customers are entitled to a 14-day cooling-off period during which time they can cancel orders, penalty-free (some products and services are not included). To ensure refunds are processed quickly, eCommerce companies must abide by all the Consumer Rights Directives.
In addition to improving protection and trust for online shoppers, the law has also improved standards for online businesses, forcing disreputable actors out of the EEZ marketplace.
Value Added Tax (VAT) Compliance
Value-Added Tax (VAT) is a consumption tax added to a good or service and is payable by the consumer. It must be collected by the business and declared each month to the regulatory body.
All EU companies must register for VAT in the country the business is registered and where their goods or services are offered. Online customers must be charged the VAT rate relevant to the country the product is sold in, and submit VAT returns to the local tax authorities.
VAT rates differ depending on the country and the type of good or service. Some goods and services might be subject to reduced VAT rates in different regions. The typical VAT rate in the EU is about 15%. VAT can be complicated and understanding not only how to automate it’s application to your eCommerce website, but also how to make your VAT declaration each month is an important aspect of running your business.
Payment Services Directive (PSD2) Compliance
The Payment Services Directive (PSD2) regulation for eCommerce aims to enhance online payment security to safeguard customers. Businesses must comply with EU security requirements for payment processing, which includes two-factor authentication for online transactions.
By carefully selecting and collaborating with professional payment service providers it is easier for companies to ensure they are PSD2 compliant. The measure ensures that payments in the EEZ are fast across borders and that customers are protected when making online payments in the region.
Web Accessibility Directive (WAD)
The Web Accessibility Directive (WAD) ensures that websites and mobile applications are accessible to people with visual or hearing disabilities. All sites with EU registration must abide by the guidelines.
Sites need to provide digital accessibility for all people using the internet whether they have visual or physical differences that can make using a traditional computer limiting.
Travel Package Directive
The EU Travel Package Directive rules include prepaid package holidays and customised packages, where the traveller has combined options from a single point of sale online or offline. The rules provide certain protections for linked travel arrangements, such as a traveller booking a flight on a website and is then invited to book a hotel on a different website.
The directive applies EU-wide providing a uniform protection model for the union, giving customers a sense of stability when travelling in the region.
Final Words
ECommerce merchants operating in the EZZ must abide by the EU laws set in place to safeguard consumers online and encourage fair competition.
The main goals of the DSA include:
- protecting consumers and the fundamental rights of consumers online;
- establishing ways to measure transparency and accountability for online platforms;
- fostering innovation, growth and competition within the single market.
It is essential that online businesses in the EU, even those that do not take payments, must comply with the DSA. Hiring an experienced third party to check your site for compliance is a good way to ensure that your company avoids fines.