Digital Services Act (english)

The Commission has presented the proposal "Digital Services Act" (DSA), which will introduce new rules for platforms and online marketplaces. There is a need to adapt the legislation to the changed reality that digital services and platforms constitute today. In particular, studies show that unsafe and illegal products are sold from 3rd country sellers on online marketplaces under-mining consumer safety and reputable European traders. The Danish Chamber of Commerce therefore welcomes the proposal. However, in its current form, it leaves the gap in relation to the sale of dangerous products on online marketplaces unsolved.

På agendaen

Online marketplaces are popular among European consumers. They have given sellers easier access to consumers in other countries and consumers have benefitted from a broader range of choices and lower prices.

However, at the same time, the online marketplaces have opened the European market to sellers from 3rd countries that have no experience with EU legislation or the safety net of consumer and product safety rules applying when selling goods into the EU. A study of 50 purchases from online marketplaces documents the problems. As such, these products often do not comply with EU rules on product safety and consumer rights, and the sellers from 3rd countries frequently undervalue their packages to avoid paying EU VAT.

European surveillance authorities do not have jurisdiction or remedies to hold sellers outside the EU liable for these violations and the online marketplaces claim that these violations have nothing to do with them. There are billions of these kind of products for sale on the popular online marketplaces – and it is impossible for enforcement authorities to control.

This situation undermines consumer safety and the internal market as a place where consumers can shop online trusting they are protected by EU consumer and product safety rules. At the same time, it exposes reputable and compliant European traders to unfair competition. In addition, the missing VAT payments undermines the tax revenue of the EU Member States.

The Digital Services Act and the revision of the e-commerce directive

The present situation is unacceptable and call for new and clear legislation. Today, there is a common misunderstanding that the e-commerce directive gives online marketplaces an automatic exemption from liability as they claim they only have the status of intermediaries and therefore cannot be held liable if the sellers in their marketplaces do not comply with the rules.

Therefore, there is a need for a revision and clarification of the e-commerce directive setting up criteria for platform liability regarding product compliance, consumer rights and consumer information on the marketplace. Failing to do this will put consumers in danger and distort competition to the damage of compliant European economic operators such as manufactures, importers, distributors and retailers. Since the DSA revises the e-commerce directive, this issue must be resolved here.

Serious gap in current DSA proposal in terms of product safety

The DSA will oblige online marketplaces to remove illegal and dangerous products more rapidly if they are made aware of it by the authorities. But it is not enough - at that time the product has been put up for sale and many consumers may have bought it. The largest online marketplaces have over a billion products for sale, so it is also unlikely that market surveillance authorities will capture more than a fraction.

It is a fundamental principle of the internal market that no goods should be able to be placed on the European market without an economic operator in the EU being responsible for the legality and safety of the product before it is placed on the market. In practice, this means that if the manufacturer is not resident in the EU, then there must be an importer who assumes responsibility for the safety of the product and is liable to the consumer if it is defective and causes damage.

Online marketplaces in practice place the products on the internal market today, and in cases where they bring goods for sale from 3rd countries no one else is responsible for, they should be considered as digital importer. Thus, they should live up to the responsibility and obligations required of all other importers - including an ex ante responsibility to ensure that the products are safe before they are sold to European consumers. This is crucial to ensure consumer safety and a level playing field between online and offline businesses.

DSA - The position of the Nordic Retail Sectors

As described in the position paper, the Nordic Retail Sector consisting of Swedish Trade Federation, Finnish Commerce Federation, Virke and Danish Chamber of Commerce agree on the need for extended liability for the online marketplaces when facilitating the sale of goods to a consumer on the European market and there is no other economic operator established in the EU that can be held liable.

DSA - Revision of the E-commerce directive - The position of the Nordic commerce sector.pdf

The Nordic Retail Sector’s shortlist of the most important amendments to the DSA proposal to restore consumer safety and level playing field on the internal market. It emphasizes the most important amendments by IMCO rapporteur Schaldemose and lists other suggested amendments.

DSA - The Nordic Retail Sectors’ shortlist of the most important amendments.pdf

The Nordic Retail Sectors full list of suggested amendments to the DSA.

DSA- The Nordic Retails Sector_Full list of amendments .pdf

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The study of 50 purchases on online marketplaces

To illustrate the problem The Danish Chamber of Commerce has made a study of 50 purchases of products, mainly toys, from third party sellers on the three large online platforms Wish, Alibaba and Amazon. Several of these toys have been tested by certified laboratories. Although the purchases are made from Denmark the findings are general.

Table overview of 50 products bought on 3 platforms.pdf

The study revealed that:

  • 46 did not comply with EU Product Safety rules
  • 50 did not comply with EU consumer rights
  • 0 showed a match between the name of the seller on the platform and the sender of the package
  • 42 products are warned about and/or recalled by national and/or EU authorities. We have received no notification hereof from any of the 3 platforms
  • 38 identical products or products appearing identical to the recalled products were still available after the warmings
  • 46 had a different value written on the package than the price paid.
  • 0 of the 16 VAT-guilty packages had paid the VAT due to an undervaluation of the package

The study also consists of 3 memos which go in detail with the purchase of 3 products on each platform. The memos documents that the EU Voluntary Product Safety does not work:

  • Dangerous toys were sold even though they had been placed on the EU Safety Gate / RAPEX for more than a year – and they are still sold as to this date.
  • If a product link from one seller is taken down, it does not say why. It would say “currently unavailable” and the platform instead recommends the buyer to buy again from other sellers offering the same dangerous toy.
  • After the platform has promised the authorities and medias to remove dangerous toys/products consumers receive marketing e-mails promoting the similar or the same products.
  • The package labels often include a standard text where the seller “certify” that the content is not dangerous and complies with the rules, even when the content is dangerous and non-compliant.

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Memo regarding three examples of unsafe and illegal products (toys) sold on Amazon from third party sellers with severe breaches both in terms of product safety, consumer rights, and VAT. Since the three toys were all non-compliant with EU product safety law , they had all been warned about and/or recalled by authorities such as the EU safety gate. Nonetheless, seemingly identical toys were available.
Unsafe products Amazon 30.04.20.pdf

Similar memo regarding three examples of unsafe products sold on Wish.com, which shows that the issues on Wish regarding product safety, consumer rights, and VAT are similar to the issues of the other major online marketplaces.
Unsafe products Wish 30.04.20.pdf

Similar memo regarding three examples of unsafe products sold on AliExpress, which shows that the issues on Wish regarding product safety, consumer rights, and VAT are similar to the issues of the other major online marketplaces.
Unsafe products AliExpress 30.04.20.pdf

Legal memorandum by the independent Brussels-based law firm Wiggin describing whether the online marketplaces are covered by the exemption of liability in the e-commerce directive. They conclude that the online marketplaces today are too active to be exempted from liability cf. the e-commerce directive: “However, despite their active role, Article 14 is widely, but incorrectly, interpreted and applied to absolve online marketplaces from any legal liability when third parties use their platforms to sell products to consumers in the EU”.
Wiggin - Danish Chamber of Commerce - Online Marketplaces 19 May 2020.pdf

It is our experience that marketing on Wish.com does not comply with the marketing rules and recommendations of the Danish Consumer ombudsman. The memo describes examples of this relating to e.g., misleading marketing of product effects and price discounts. (Danish version)
NOT_Markedsføring på Wish.pdf

Shorter, English version of the memo described above.
MEMO_Examples of misleading marketing on Wish.pdf

Study by Which? of dangerous teeth whitening products on online marketplaces, which found that 58% of teeth whiteners bought from AliExpress, Amazon, eBay and Wish contained illegal and dangerous levels of hydrogen peroxide.
Which study_Dangerous teeth whitening products on online marketplaces_2021.pdf

The judgement of the Bolger v. Amazon.com case ruled that Amazon was liable for the defective product (laptop battery that caught fire) sold by a third-party seller and fulfilled by Amazon. The judges concluded that:“Whatever term we use to describe Amazon’s role, be it “retailer,” “distributor,” or merely “facilitator,” it was pivotal in bringing the product here to the consumer”
Bolger-v.-amazon_full text of judgement.pdf

Similarly, in the case Loomis v. Amazon.com, it was ruled that Amazon was liable for the defective hoverboard (exploded and caused fire) sold and delivered by a third-party seller. The case used Bolger v. Amazon.com as precedent and extended the possibility for holding Amazon liable also when they did not handle the fulfilment. Although both judgements are from California, US, both the issues and legislation relating to online marketplaces seem quite similar. The EU should, similarly, extend the liability of online marketplaces of products sold on them.
Loomis v Amazon.com full text of judgement.pdf

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