European Digital Transformation
Especially during the pandemics, we all faced the importance and impact of digitalization. While the internet and digital technologies are transforming our world, one of the European Union’s priorities is to make the internal market fit for the digital age, by eliminating unnecessary barriers, consolidating a proper regulatory meant to fight Big-Tech abuse, turning from national markets to a single European market. A fair competition environment in the digital economy can only be achieved by consistent proper regulation of platforms, and the EU’s General Court decision imposing a €2.42 billion fine on Google is a clear indication on that.
B2B E-commerce Governing Rules
A turning point in regulating the B2B e-commerce relations is Regulation (EU) 2019/1150 (“P2B Regulation”), effective since July 12, 2020, promoting fairness and transparency for business users of online platforms. The P2B Regulation is applicable to: (i) online intermediate services (platforms) and (ii) online search engines provided to business users and corporate website users established in the EU, when the respective business users and corporate website users offer goods or services to consumers located in the EU through the online platforms or online search engines. Online intermediation services are, for instance, online market places, online software application services or online social media services. Online payment services and online advertising tools are excluded from P2B’s scope of application. In turn, online search engines are digital services allowing users to place questions meant to perform searches of all websites or websites in a particular language.
In order to promote fairness and commercial transparency, business users offering online services are obliged to provide business users with clear, unequivocal and easily accessible information, such as: the effects over the ownership and control of the business users’ IP rights; grounds for decision to suspend, terminate or impose any kind of restriction upon business users; any proposed changes of the terms and conditions, this being also notified to each business user with at least 15 days prior to the enactment of the respective amendments; ranking mechanisms and possibilities to influence ranking; access to data; internal complaint-handling system in relation to business users; mediation as a settlement method in relation to business users.
Government Emergency Ordinance No. 23/2021
To ensure the implementation of this regulation, the Romanian Government adopted the Emergency Ordinance No. 23, effective since April 12, 2021. According to this ordinance, non-compliance by providers of online intermediation services with the provisions relating to: procedures and deadlines for amending the terms and conditions; the procedures, deadlines and justification for restricting, suspending or terminating the provisions of services; ensuring transparency on ranking; ensuring transparency on differential treatment; making retroactive changes to terms and conditions; ensuring transparency on data access; ensuring transparency on data restrictions on the provision of different conditions by other means represent administrative offence and they are sanctioned with a fine between 0.1% to 1% of the turnover achieved by the provider during the previous financial year.
In Romania, e-contracts are valid and effective the same as hard copy contracts if those agreements are signed by extended electronic signature having attached a qualified certificate, which is considered as equivalent of handwritten signature.
EU’s Digital Services Act Legislative Package
This Package is intended as a turning point in Europe’s ambitious plan to reform the information and communication sector and to set global standards for the online environment.
The Digital Services Act
After over 20 years since the enactment of the E-Commerce Directive, i.e. Directive 2000/31/EC, the European Commission made a proposal for a Regulation on a Single Market for Digital Services, namely the Digital Services Act (“DSA”), aiming to strengthen the rules for the providers of online intermediary services and online platforms. According to the DSA, basic obligations are established for all providers of online intermediary services, while specific obligations would only apply to: providers of hosting services; online platforms; and very large online platforms. Also, micro and small enterprises are exempted from certain obligations under DSA. The enforcement of DSA will be monitored both at the level of each member state, as well as at EU level. In this purpose, a new independent authority, i.e. the Digital Services Coordinator, will be created in each member state. Failure to comply with obligations under DSA will be sanctioned by penalties of up to 6% of the annual income or turnover of the respective digital services provider. Furthermore, in case of supply or incorrect, incomplete or misleading information, penalties would be of up to 1% of the annual income or turnover of the respective provider. Besides this pecuniary sanctioned, if the digital service provider continue its DSA breaching behavior, the Digital Services Coordinator will be entitled to ask to the competent court of the respective member state to order the temporary restriction of user’s access to the respective service affected by the said breach.
The Digital Markets Act
As part of the Digital Services Act Legislative Package, the European Commission also made a proposal for a Regulation on contestable and fair markets in the digital sector, i.e. the Digital Markets Act (“DMA”). Under the DMA, obligations are imposed on large online platforms, such as online search engines, cloud computing services, music or video-sharing platform services, which behave as gatekeepers. The concept of gatekeepers is well-defined by DMA, as a company which: has a strong economic position, significant impact on the internal market and is active in multiple EU countries; has a strong intermediate position, linking a large user base to a large number of businesses; has or it is about to have a fortified and durable position in the market.
By applying specific obligations on gatekeepers, the latter would not be allowed to apply unfair business practices to their business users and customers. Consequently, other entities providing similar services would be able to fairly compete on this market, while consumers would have more providers to choose from and they would all enjoy a fairer business environment. In case of breach of DMA provisions, the European Commission will be entitled to apply fines of up to 10% of the company’s total worldwide annual turnover, or period penalty payments of up to 5% of the average daily turnover in the preceding financial year.
New VAT Rules for E-commerce
Since July 1st, 2021, the VAT legislation applicable to cross-border e-commerce has been modernized at EU level by the enactment of the new European VAT rules. These new European VAT provisions on e-commerce have been transposed into the national legislation by the Government Emergency Ordinance No. 59/2021. The new regulations allow companies selling goods online to fulfill certain VAT obligations at EU level through a digital online portal, i.e. the “One-Stop Shop”, OSS. This way, by implementing a centralized submission and payment of VAT, and thus simplifying the procedure for reporting and paying the VAT, the administrative burden for companies is reduced. The new VAT rules also diminish the competitive differences between the EU and non-EU sellers.
Target Group: B2B or B2C
There is a significant difference resulting from the target audience which the online sales are addressed to, namely traders or consumers.
Setting Up the E-commerce Business
An e-shop may be operated in Romania by a legal person, Romanian or foreign. The Romanian legal entity must be duly registered with the Trade Registry as having the intended scope of activity to be performed through the e-shop. Foreign legal entities entitled to operate the e-shop in the country of residence or establishment may run the e-shop in Romania without having to set up a distinct legal entity here. However, under certain conditions, tax obligations may be triggered, so the registration of a permanent establishment is a must. While, generally, no particular authorization, permit or license is required for on-line transactions, in case of particular categories of products, such as food or medicine, specific registrations / authorizations need to be obtained from the relevant authorities.
Law Governing the Contract
The legal system governing the relation between the e-shop operators and their consumers is essential, since this is the framework regulating contractual parties’ rights and obligations, claims, time limitation periods etc. The law governing the contract is to be established based on the provisions of the EU Regulation No. 593/2008 on the law applicable to contractual obligations (Rome I Regulation). The essential difference to be considered derives from whether the contract is concluded between two entrepreneurs in the course of their activity, or between an entrepreneur and a consumer. The consumer is a natural person concluding a contract outside his/her trade, business or profession. As a rule, consumer contracts are governed by the law of the consumer’s country of residence. Exceptions apply, for instance, to contracts for the provision of services where the place of performance lies outside the consumer’s country of residence, to insurance and transport contracts. As regards the contracts between entrepreneurs, the parties are left to decide upon the choice of law, while the EU Regulation establishes certain grounding rules for determining the law applicable.
B2C E-commerce Governing Rules
Consumer protection in Romania is substantially similar to the one granted in all EU countries, since it results from EU law harmonization. The main piece of legislation regulating in Romania consumers’ rights in contracts concluded with traders is the Government Emergency Ordinance No. 34/2014. General consumer protection rules and distance contracts applicable regulations are relevant. The Romanian authority relevant in this area is the National Authority for Consumer Protection.
Consumer Information Requirement
Before concluding a contract, the consumer needs to be informed in a clear and intelligible manner about the following: the identity of the trader, and its address and contact details; main characteristics of the products / services; duration of contract; address where the consumer may send any complaints; total price of the goods / services, all taxes included, or, if they cannot reasonably be calculated in advance, a statement according to which these additional costs may be borne by the consumer; the methods of payment, delivery, execution, the date until which the trader undertakes to deliver the products / provide the services; the procedure to solve complaints; in case there is a right of withdrawal, the terms, conditions and procedure to exercise this right; statement regarding the existence of a guarantee for product conformity; competent authority to settle consumer disputes etc.
All this information should be part of the general terms of the contract, which should be easily accessible on the website where the e-shop is located. The consumer needs to acknowledge the general commercial terms before actually placing the order.
Consumers need to be informed about the specific steps of concluding the contract. The trader must also inform the consumer about the language in which the contract may be concluded, or where the contract is going to be made available for the consumer. Generally, in order to prevent abusive behavior towards consumers, provisions establishing disproportionate unbalance between the rights and obligations of the trader and of the consumer are prohibited. Furthermore, provisions allowing the trader to unilaterally change the parties’ rights and obligations, to withdraw from the contract without reason, or provisions restricting or excluding consumers’ rights for faulty performance etc. are prohibited. Besides all this, provisions regulating distance contracts are also relevant. A distance contract is a contract concluded without the simultaneous physical presence of the parties, by using one or more means of distance communication, such as the Internet. When selling digital content, such as videos, music or online software, consumers also need to be informed by traders about the interoperability of the respective content with relevant hardware or software, about any applicable geographical restrictions, about the functionality of the content or if making copies for personal use is allowed.
Electronic Payment Services
Essential for digital businesses is the possibility to make electronic payments, which are performed in accordance with the provisions of Law No. 209/2019, transposing the Payment Services Directive (EU) 2015/2366 (PSD2). PSD2 seeks to make payments more secure in Europe and contains provisions meant to better protect consumers against fraud and incidents. PSD2 extends its scope of application to payments made within the European Economic Area and to payments to and from countries outside EEA in any currency. It also encourages the occurrence of new service providers, by extending the category of payment institutions, and the development of innovative payment methods. Awaited for a long time, Law 209 mainly reflects the provisions of PSD2, creating an environment for open payment services in Romania.
The Internet and the development of digital platforms have become the real game changer in today’s economy. According to the GPeC Report, based on the estimates of the Romanian Association of Online Shops, the e-commerce market increased in 2020 by 30% as compared to the 2019 percentage, exceeding 5 billion euros. These figures cover transactions generated both by local traders, as well as by foreign online shops located outside Romania and include the sales of tangible goods. Moreover, the pandemics fundamentally changed the role of digitalization in economy and in people’s everyday lives. In critical times like these, we’ve witnessed how innovative tele-medicine, remote care, digital learning or provision of food cultivated by use of technical devices have proven to be the solutions allowing all of us to continue regular lives. Looking forward, digital technologies can empower people to live more independent lives, thus being less exposed to external risks. The number of digital services business is expected to continue to grow largely, and to expand the categories of services offered, while Europeans are expected to become more digitally skilled and capable of making better use of digital opportunities and technologies. In light of European Union’s plans for the Digital Decade, according to which, by 2030, 75% of the European enterprises should have taken up cloud computing services, big data and AI, and more than 90% of European SMEs should have reached at least a basic level of digital intensity, it is anticipated that the adoption and implementation of DSA and DMA at the European Union level would bring all these objectives closer to reality.