Select Committee on European Union Minutes of Evidence

Memorandum by ICL


  We are pleased to present our submission on electronic commerce to Sub-Committee B (Energy, Industry and Transport) of the House of Lords European Union Committee. The views expressed herein are those of ICL plc.


  Electronic commerce in the EU began its growth after that in North America. After some years of lagging behind North America, the EU has, recently and suddenly, accelerated its rate of adoption. The media's enormous interest in electronic commerce and the increasing ability of many more Europeans to gain access to the Internet both bear witness to this change. It is true that the penetration of personal computers (PCs) in European homes still tend to lag behind that of North America, despite the market exceptions such as the Nordic countries. Here PC penetration and Internet connection is on a par with, even exceeds, North American levels, but the overall position across Europe remains behind that of the US. However, Europeans counterbalance this by their much higher levels of digital mobile phone ownership. The impending availability of interactive digital TV to Europeans also marks out an arena in which Europe leads. Both of these will enable a much expanded EU participation in electronic commerce. ICL is active in the development of both mobile telephony and digital TV as access channels to the Internet because we are convinced of the potential of these innovations to engage citizens en masse in electronic commerce.


  As a major European-based supplier of electronic commerce systems to businesses for both "B2B" (Business to Business) and "B2C" (Business to Consumer) applications, we at ICL know that there is no shortage of demand in Europe for electronic commerce. Statistical data on the size, growth and potential of e-commerce are notoriously variable through issues of definition and timing. But the fact that most, if not all, expert commentators agree that EU demand far outstrips the EU's ability to supply the necessary systems is a testament to the current appetite for electronic commerce. The big question is whether EU sources of supply—primarily of electronic commerce engineers and venture capital—can increase sufficiently quickly not only to satisfy domestic demand but also to allow Europe to become a serious competitor in the global markets.


  Although we strongly contend that business should drive the development of electronic commerce, we have no doubt that an appropriate and flexible regulatory environment is necessary to create the optimum conditions for success. Growth will emerge through consumer and business confidence. We strongly believe that the most appropriate environment is one where industry self-regulation is the norm and that governments restrict legislation to supporting that self-regulation. Examples are issues of health and safety which protect the public from dangerous products, the integrity and appropriateness of commercial law in the digital age and control of competition to avoid abuse of market domination. We do not envisage or advocate any diminution of existing consumer protection rules as such, but we know that governments must grapple with the significant variations in consumer protection practice which exist across Europe. All of this underlines the need for an effective dispute resolution mechanism to be put in place across all 15 Union member states. There is also considerable uncertainty in the field of taxation for trans-border consumer trading.


  The very fact that e-commerce is a global phenomenon leads us to promote global rules rather than a patchwork of national or regional rules, which may be inconsistent or cause compliance difficulties. But, as a largely European-based supplier of electronic commerce services, we also want to see the EU create the most benign environment for electronic commerce and, indeed, for commerce in general. Therefore we broadly support the current Prodi/Liikanen e-Europe initiative. But our experience demonstrates the difficulty which the EU faces when it comes to translating rhetoric into actions, particularly in an environment like electronic commerce which requires both speedy and flexible public policy responses.

  We do not doubt that senior people in the Commission are determined to hasten the processes to finalise the current directives on the table. However, the Commission will still find it hard to achieve its ambitious target of passing all the remaining seven e-commerce directives and pieces of legislation by the end of this year. This is a life-time in the chronology of electronic commerce. We consider it wholly unfortunate that the very thing which should help European business to achieve global competitiveness—the single market—is actually acting through its implementation to slow down change for electronic commerce.


  Some of key European Directives, for example on distance selling, were conceived and first drafted up to five years ago, long before electronic commerce was a tangible reality on either side of the Atlantic. Further, we note that there are inconsistencies between directives which need to be resolved, eg with regard to applicable law and with regard to Intellectual Property Rights. We in ICL are electronic commerce practitioners. Our hands-on experience began 1996 when we set up our first Internet "shopping mall". We know how quickly developments occur in this arena. We have great difficulty in defining precisely how this market will develop over the next two years. We are clear though that in the not too distant future most business will be "e-business" insofar as it will be web-based. This leads us to question the validity of much of the legislation that is currently on the table. We do not consider that the Commission and the other European institutions are remiss—rather their processes are simply no longer capable of dealing effectively with the volume and pace of change which we are all facing.


  Given the fundamental changes which are taking place in the market, we consider that it would be more worthwhile putting the legislative programme on hold for a few months, while a comprehensive review of the current situation identifies the issues which need to be addressed and then puts in place "fast track" procedures to introduce the necessary changes to existing legislation. Further, we advocate a minimalist approach which seeks to render charges in the first instance only where necessary to the fundamental health of the single market. Refinement can follow when we have learned more about the true effects of the worldwide adoption of electronic commerce.

  In the meantime, European governments should themselves embrace the "e-revolution" that they are exhorting European industry to join. This would have two beneficial effects. Firstly, growing the domestic market for e-business solutions and thus creating a critical mass in Europe. Secondly, improving the efficiency and effectiveness of public administration in Europe. There are examples of best practice of e-Government in Europe, particularly in the Nordic countries, and we welcome HMG's commitment to accelerate the take-up of web-based public administration solutions in this country. Nevertheless, generally speaking, the public sector has been comparatively slow to emulate the developments taking place in the private sector.

8.  ICL

  ICL is a global IT services company. It designs, builds and operates information systems and services for customers in the retail, finance, government, telecoms, utilities and travel markets. The company has operations in over 40 countries and employs over 22,500 people. Transformed from a manufacturer of computers, today ICL improves business performance and competitiveness through services focused on electronic business, enterprise applications and the implementation and outsourcing of IT infrastructure. For the 12 months to 31 March 1999 the company's revenues were £2,735 billion which generated a profit before tax and exceptional charges of £64.5 million. Headquartered in London, ICL is a wholly owned subsidiary of Fujitsu and plans to float on the London Stock Exchange in 2000.

11 February 2000

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