Down by Law
After years of lagging behind in all things wired, Europe finally appears poised to embrace the Internet. The Continent's on-line population will quadruple by 2004, according to a recent report from Silicon Valley-based Frost & Sullivan, a market-research firm. And the influx, notes the report, is expected to bring about an $8-billion spike in European E-commerce. For U.S. companies angling to sell abroad, it would seem to be a very auspicious time.
Or maybe not.
"Commercial laws often have a very different purpose in Europe from what most Americans are used to," warns Holly K. Towle, an electronic-commerce lawyer with Preston Gates & Ellis LLP, in Seattle. "There's a heavy regulatory burden in Europe that can easily bog down a small company."
Consider, she says, the so-called distance contract directive proposed by the European Union (EU), a loosely configured organization of 15 European states. This rule essentially says that European consumers don't need any reason to return goods within seven days of purchase. Of course, many American companies already abide by a no-questions-asked return policy. But Towle says that there is a huge difference between company policy and rule of law. "When a company voluntarily makes policy, it's easy for it to change the policy or even get it wrong once in a while," she explains. "But if you get it wrong when it's the law, you could be subjected to fines or even a costly class-action suit."
Other directives hamstring companies that want to transmit customer information they've collected over international boundaries. The directive on data protection specifies that companies working in the EU cannot send customer information outside the EU--even to a branch office of an EU company--unless the country in which the information is received has data-protection rules that are equivalent to those of the EU.
It gets worse. In spite of the EU, Europe remains highly fragmented. The EU's directives--unlike, say, U.S. federal law--are merely suggestions that individual countries may or may not choose to adopt. According to Towle, that means U.S. companies must keep a vigilant legal eye on the laws of each country they sell in. And that can result in costly legal bills.
But the news isn't all bad. Towle concedes that the EU, in theory, is trying not to pass new laws that would further hamper the budding E-commerce industry. "There seems to be a recognition that too much regulation could destroy the power of the Internet for small business," says Towle.
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