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The German retail sector – both stationary and online – relies on good and fair competition conditions. The increasing presence of e-commerce direct sales models from non-EU countries poses a growing challenge. Which ten measures would contribute to more fairness in e-commerce has been summarised by the German Chamber of Commerce and Industry (DIHK) in a position paper.
Equal market conditions and environmental standards for everyone, no dumping prices, clearly defined responsibilities and more: The DIHK explains how local retailers can be better protected against unfair practices by international competitors.
Current Situation
Non-European platforms are currently pushing hard into the European market. Low prices appear attractive to customers. At the same time, allegations of unfair business practices arise. Some competitors fail to comply with product safety regulations or other protection standards or circumvent EU customs regulations. Estimates indicate that over one billion small goods shipments arrive annually in the EU. Around 400,000 parcels from China alone reach Germany every day.
Among some providers, there are extensive under-declarations which, among other things, results in evasion of import and sales tax. Estimates suggest billions in revenue are lost to the exchequer. Furthermore, European product, social, environmental, and branding standards are bypassed. These illegal practices endanger local business models. There are also direct risks to the end consumer. A lack of resources and capabilities at European and national control institutions facilitate these practices.
Activities of Politics and Administration
In view of these developments, the European Union has reacted: Within the EU, the Digital Services Act (DSA) has included specific rules for very large online platforms (Very Large Online Platforms, VLOP) since 2024. These are platforms with more than 45 million monthly users in the EU. In spring 2024, the EU Commission also classified two Asian platforms (Temu and SHEIN) as VLOPs based on these criteria.
Accordingly, these online marketplaces had to implement stricter measures, especially in the fight against illegal products and content, by the end of September and August 2024, respectively. This mainly includes the delisting of counterfeit goods, unsafe or illegal products, and items that infringe intellectual property rights. Additionally, Temu was specifically requested by the EU Commission to outline how the company minimises risks in consumer protection, public health, and the welfare of users.
Implementation of Measures
The EU Commission required the implementation of these measures by October 21, 2024 – results so far remain open. Should the relevant platforms fail to meet the requirements, the EU Commission has extensive investigative and sanctioning powers to align them with EU directives. Initial requests for information have been made to VLOPs and cover, among other things, their control mechanisms and technical measures for risk mitigation. However, the DSA only covers a partial aspect of the overall issue.
Given the enormous impact of platforms on the German economy, further measures are necessary. The German Chamber of Commerce and Industry (DIHK) has developed a 10-point catalogue of measures for this purpose:
DIHK Proposals
The movement of goods is a core issue for the EU. Therefore, it is particularly important to utilise the European instrument of the Digital Services Act and implement its requirements promptly and sustainably. In this context, the EU Commission is urged to analyse the major online platforms in Europe and from third countries in a differentiated manner and to provide or build up appropriate resources and personnel to ensure that mandatory legal obligations are consistently complied with in practice. Effective monitoring of imports regarding the legality of products, product safety and adequate buyer information is necessary. The national coordinator for the implementation of the DSA (in Germany, the Bundesnetzagentur) should particularly consider the concerns of businesses.
Although modern and efficient on-demand production often makes low prices possible, products are currently entering the European market at unfair prices, such as when production is heavily subsidised by the state, making it possible to offer goods at dumping prices. According to the rules of the World Trade Organization (WTO), exports at prices below production costs are prohibited. Future-proof trade regulations must take into account the increasing digitalisation of global trade. WTO rules are mostly geared towards traditional forms of trade. A reform and extension of the rules to address specific challenges of e-commerce platforms is therefore essential.
Shipments from third-country providers must not be undervalued in order to avoid customs costs or, in some cases, import and sales tax. This must be prevented through effective control of imports and associated VAT registration/payment via the Import-One-Stop-Shop (IOSS), coordinated between EU countries. Customs authorities must verify both the general validity of the IOSS number and its assignment to the importing trader.
The support measures of the Universal Postal Union are adapted to the specific development stages of the member countries. Postage fees in global postal traffic are particularly low for developing countries. However, this justified support should not lead to companies from countries that have already left this status behind gaining undue competitive advantages. Adjustments were already made at the extraordinary Universal Postal Congress in 2019. Nevertheless, a regular review and update of the applicable postage rates as well as the classification of member states remain necessary to ensure fair competition in transport costs.
The planned introduction of the so-called "fictitious importer" by the European Commission as part of the EU customs reform should be implemented early to hold e-commerce platforms accountable for customs debts. Additionally, extending this concept to sanction measures for violations of EU standards, such as product compliance, could bring significant improvements. Increased revenues and a relief for customs authorities could thus become effective promptly instead of only within the framework of the EU customs reform in several years.
In the long term, the improvement of security and risk analysis planned as part of the EU customs reform can provide advancements through closer cooperation among authorities. This could reduce heterogeneous national customs practices on the one hand and enable better risk assessments through simplified data flows on the other. Considering the significantly increased shipment volumes and new requirements posed by e-commerce, it is crucial for customs authorities in Germany and other EU states to rely on efficient structures and processes. Furthermore, they should allocate personnel specifically for the e-commerce sector and deploy them strategically. In addition, the exchange between the General Customs Directorate and customs authorities in third countries should be intensified.
A high proportion of imported products do not comply with EU regulations and are therefore not fit for circulation, as consumer associations have repeatedly noted. The number of daily reported violations under the 'notice and take down' principle on platforms designated as VLOPs due to illegal content is in the millions. To prevent the circulation of counterfeit products, products that do not conform to European product safety standards, or potentially harmful products, enforcement deficits within market surveillance authorities should be addressed. Furthermore, it is essential to inform consumers about quality differences and risks. Targeted awareness campaigns could help raise consumer consciousness.
Modern direct sales models are not only based on classic web portals but also on internet-enabled applications (apps) that play an important role in customer acquisition. Manipulative (design) techniques such as dark patterns or gamification as well as unauthorized online advertising are frequently used for this purpose. In addition, providers have extensive access to users' private data. Compliance with relevant regulations, including the GDPR and the DSA, should be ensured by the Federal Network Agency or local data protection authorities – including providers from third countries.
Large parts of goods imported into the EU do not comply with the EU's environmental and product safety standards. Examples include substance restrictions in chemical legislation as well as producer responsibility for electrical devices, vehicles, or packaging. These requirements have been significantly expanded legally with the Green Deal, for instance, through extended producer responsibility for disposal. In implementing the numerous new regulations, such as packaging, electrical appliances, or textiles return, labeling, and disposal, the German federal government and the EU Commission should also focus on direct sales from third countries to ensure competition equality.
Sanctions against direct distribution models from non-EU states are currently often impossible or very difficult to enforce due to the need for legal action in the respective non-EU state. It is therefore necessary that all major marketplaces operating in the EU – including those beyond the named VLOPs – are obliged to designate a responsible contact person for authorities and customers in Europe. It should be examined whether these representatives could also be held legally liable.
While European efforts primarily focus on strengthening city-center retail, third countries like China are vigorously working to establish the global standards and structures for the online trade of tomorrow. Europe and Germany need to respond with a forward-looking trade strategy to remain competitive in international e-commerce.
An essential step is creating equal market conditions for European and non-European merchants. Extensive regulations that burden European companies already exist. Instead of introducing additional regulations, the focus should be on the consistent enforcement and monitoring of existing rules. This requires that the responsible authorities possess ample capacity, whether through increased staffing or efficiency gains achieved via digitized processes. Furthermore, it must be ensured that providers from third countries do not gain unjustified competitive advantages through subsidies along their value chain. Policymakers are now required to develop and implement targeted measures swiftly to sustainably secure Europe's competitiveness while promoting an open market.