The European Digital Single Market: Benefits and Risks
What is the digital single market (DSM)?
It’s the digital market of goods and services that seeks to open up digital opportunities for people and businesses while establishing the EU as a “world leader in the digital economy.” The principles of the European single market are also extended to cyberspace, where the free movement of people, services and capital are equally important in an online environment where individuals and businesses compete fairly beyond national and geographical barriers. For the European Commission, the digital single market is one of their top priorities, with the possibility of generating an additional €415 billion a year to the European economy and the creation of thousands of new jobs.
The digital single market is based on three principles: access, environment, and economy and society. The purpose is to offer better access for consumers and businesses to online goods and services across Europe, create the right conditions for digital networks and services to grow and, finally, to develop a strong digital economy.
Digital single market strategy: Benefits and current problems
In 2015 the European Commission set out a digital single market strategy in order to unlock the full potential of an increasingly global digital economy. The creation of a connected digital single market will give opportunities to new start-ups and enable existing companies to access a 500 million people market. At the moment, Europe hasn’t fully taken advantage of the possibilities of the digital economy due to fragmentation and barriers. There is a need in investing in ICT infrastructures and technologies (Cloud computing and Big Data), research and innovation to increase competitiveness, and better public services.
From entrepreneurs to businesses, the development of a digital single market will open the whole of Europe to them, but the complex rules to cross-border e-commerce deters many from engaging more in it. The fact that there are 28 different national consumer protection and contact laws doesn’t encourage companies to trade cross-border and prevents consumers from taking advantage of the full benefits, offers and competitive prices online.
According to the European Commission, EU consumers could save €11.7 billion a year if they took full advantage of the wide variety of EU goods and services online. While 61% of EU consumers buy from their own country’s online retailer, only 38% purchase from other EU member states. And only 7% of Small Medium-sized Enterprises (SMEs) in the EU sell cross-border.
This is why it’s necessary that online and digital cross-border e-commerce rules are simplified and apply across all borders so that consumers feel more confident and businesses find it easier to sell online. According to the European Commission’s strategy guidelines, “If the same rules for e-commerce were applied in all EU Member States, 57% of companies say they would either start or increase their online sales to other EU Member States.” Along with a common set of rules, it is also necessary to have in place regulations for consumer protection and alert mechanisms that will detect infringements.
Inefficiency and high prices: Parcel deliver cross-border is also another important factor that needs to be addressed, particularly the excessive costs of shipments and inconvenience for consumers. For example, “Listed tariffs for cross-border parcel delivery charged by national postal operators are estimated to be two to five times higher than domestic prices.”
Geo-blocking is a problem: consumers find it difficult to access websites based in other member states or are unable to purchase products or services from them. Usually this results in the consumers being redirected to a local website where the same product is more expensive or the product itself is different. The geographical discrimination in relation to online cross-border purchases appears to be unjustified and the need for legislation to change this is needed.
There are also restrictions of copyright when it comes to cultural products. There are barriers to cross-border access to services and, in many occasions, consumers are prevented from enjoying services they purchased due to border restrictions. For example, there is the question of portability when it comes to video services, which they were bought in the consumer’s home country but which s/he wants to use in the EU member state they are visiting. Another example linked to territoriality copyright is accessing online content from another member state.
In addition, the digital single market is dependent on a reliable and high-speed network and this necessitates investment in Cloud computing, Big Data tools or the Internet of Things.
According to a Paypers’ article, the digital single market promises to benefit everyone, but the reality is “that many merchants will embrace new sales opportunities without fully understanding the associated risk.” The writer, Monica Eaton-Cardone, argues that while the digital single market’s objective is to remove barriers, geo-blocking might not be such a bad thing because it gives the right to certain merchants to reject purchases from certain high-risk countries. She says that by removing geo-blocking there is more risk to merchants, or, at least that’s how the merchants themselves perceive the dangers. There is a need to avoid an “all-or-nothing” philosophy that either encourages merchants to enter risky regions or “sacrifice the entire European market.”
She explains that certain management strategies are necessary for merchants to have sufficient understanding of region-specific threats so that they avoid risk exposure. For her, the way the digital single market is at the moment threatens “to increase uncertainty, rather than streamline processes as originally intended.”
It appears that by encouraging trade, free movement of goods and services and removing barriers has unlimited potential, but because of this, there are risks and dangers. If this isn’t approached with a responsible legislation and management strategy, global merchants will face more risks instead of maximising their earnings.