The Digital Markets Act: Shaping Fair Competition in the Digital Age
The European Union introduced the Digital Markets Act (DMA), a comprehensive regulatory framework to ensure a level playing field in digital markets.
By its very nature, e-commerce is unfettered by geographical boundaries. Customers from all over the world can be reached via an online shop. Once the level of enquiries from abroad increases, reaching out to potential new customers efficiently should be the next step.
Gradually, the online shop offering is adapted to the target country, and an online trader can thus quickly come up against foreign legal systems. When this happens, many traders are unclear as to when foreign law applies to them and when they can be sued abroad.
“When in Rome, do as the Romans do.”
In terms of cross-border e-commerce, this saying brings up the question of whether it is the law of the country in which the retailer resides that is applicable, or the law of the country that they are selling to.
There is no one-size-fits-all answer to this question, as it is the field of law in question that will decide the answer. Some directives follow the country-of-origin principle, while others follow the principle that the law of the place where relevant performance occurs is applicable (lex loci solutionis).
According to the country-of-origin principle, the legislation that applies is the law of the country in which the retailer is resident. The counter principle says that the legislation that holds sway is the law of the country to which the retailer directs their offering.
When selling to consumers
Now, for B2C contracts, laws of third countries may become relevant for the UK retailer. Insofar as there is a focus on the country of consumption, pursuant to Art. 6 Paragraph 1 b) of the Rome I Regulations, the legislation that applies is the law of the country in which the consumer is ordinarily resident.
Prior to Brexit, the United Kingdom was bound by the EU Regulations Rome I and Rome II, which determine the applicable law for contractual and non-contractual obligations within the EU. As a general rule, these regulations stipulate that consumer contracts are governed by the law of the country where the consumer has their habitual residence.
Following Brexit, the UK Parliament incorporated both regulations into domestic law through The Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc.) (EU Exit) Regulations 2019. Apart from minor exceptions, Rome I and Rome II continue to apply as UK law.
Shutterstock/Victor Moussa
UK retailers may agree with consumers on the applicability of UK law but only as far as this does not result in the protection afforded by the law prevailing in the country of consumption being repealed. Hence, retailers need to be aware of the particularities of other markets' consumer protection legislation. Especially given that legal prosecution abroad is much stronger than in the UK, this "Rome rule" becomes very relevant to UK retailers.
Know the neighbour's laws
Speaking of particularities, there are quite some areas that are not harmonised across different markets. Contract law, warranty legislation or price information are regulated in different ways. Moreover, penalty systems governing legal infringements are regulated in a variety of ways, and judges and regulatory authorities in a country often interpret laws in different ways, resulting in further deviations.
The principle of lex loci solutionis also applies to competition law. This means that a UK retailer advertising products in Germany must comply with German competition regulations. Be aware, that in Germany so called “Abmahnung” remains a significant threat for retailers. It is a legal instrument that enables competitors to issue legal notice through solicitors to each other, which might result in huge monetary penalties.
Conclusion
Although Brexit has changed certain legal landscapes, the fundamental principles discussed in this article remain relevant. UK retailers must stay informed about foreign legal requirements, especially when targeting customers in different jurisdictions.
