ICSTIS Action Raises E-commerce Directive Questions

ICSTIS, the UK Independent Committee for the Supervision of Standards of Telephone Information Services, has taken action to suspend web-related premium rate telephone services provided to the UK by two companies established in Spain and Germany. It barred access to the services for two years, fined the companies £75,000 and £50,000, issued a formal reprimand and instructed them to offer redress to all complainants. ICSTIS' action is the first occasion on which a UK authority has had to consider whether its actions are compliant with the European internal market provisions of the recently introduced Electronic Commerce Regulations, which implement the Electronic Commerce Directive.

The Directive lays down a general principle of mutual recognition of laws within the EEA. So in general an authority in a country in which services are received from a provider established in another EEA State cannot (as ICSTIS has done in this case) take action to restrict such incoming services. It should leave enforcement to the authorities in the State in which the service provider is established. This principle is intended to reduce the exposure to multiple countries' laws of e-commerce businesses providing cross-border services within Europe, and thus reduce their compliance burden; and consequently to provide consumers with increased choice by encouraging cross-border services. This 'country of origin' principle is of critical importance to online traders, given the extreme difficulty of restricting an online offering to a particular geographically defined market.

However, the Directive does set out some exceptions to the general internal market principle. ICSTIS contends that these exceptions legitimise its action in this case. Authorities in a member State are permitted to take measures to restrict incoming services if the measures are necessary for reasons of (among other things) protection of minors and consumers and are proportionate to those objectives. The service must also prejudice, or present a serious and grave risk of prejudice, to the objective. Except in cases of urgency, an authority must first ask the member State in which the service provider is established to take measures, and can only take action if it does not take measures or they are inadequate. The authority must also notify the European Commission and the relevant member State of its intention to take such measures. In case of urgency, an authority may act first and notify the...