Examination of Witnesses (Questions 360
WEDNESDAY 8 MARCH 2000
360. Did you want to add anything?
(Ms Marsland) No, save to say that the proposals for
an Information Society Copyright Directive are expected to be
concluded this year, but the signs are that the level of compromise
which will have to be negotiated and agreed in order to get that
through will mean that it is only a partial harmonisation. It
is a harmonisation with many options, with an ability to derogate.
So it has achieved something but by no means what one would have
hoped if one were trying to be a fully harmonised copyright environment
361. The lowest common dominator, is it?
(Ms Marsland) The way it is likely to end up is with
a range of permitted options that Member States can select, and
probably also with additional rights to derogate if necessary
to achieve political agreement. It is harmonisation under one
sort of name, I suppose.
362. With all the complexities of e-commerce
and the international aspect of this business, is it really possible
to have an evaluation which is enforceable, or is it a try-on
and hope for the best?
(Mr Griffiths) In answer to the question: is it possible
to have regulation which is enforceable? the answer is yes, it
is. It is certainly possible because most businesses will be located
somewhere. There will be some physical place where businesses,
so to speak, touch the ground for regulatory purposes. The difficulty
for the law-abiding business is that as they move their services
into additional countries, they have to look at what the laws
are in all those countries, and have to face the possibility that
they will be regulated in all those countries. So the problem
is not so much, to my mind, that business is not regulated but
that it is over-regulated.
363. There is nothing to stop a business of
e-commerce being run by putting a ship 12 miles off the coast
of a country. In whose country would you have regulation? You
could easily work from there. You do not have to be in any country.
(Mr Griffiths) I have not had to look at using a ship
as a base for e-commerce services. We would have to go back and
look at the experience of pirate radio stations to see how that
should be dealt with.
(Ms Marsland) We do know from our experience that
it can be difficult to enforce regulation, where you have somebody
who is a local player in one market having effects in a different
market. Of course, for larger scale businesses who are present
in a number of markets, they are forced to be much more compliant;
and then they get the cost of compliance problems even to the
point, as we have seen in some situations, where it has been almost
impossible to find a way forward which was lawful in every state
in the EU because of competing regulation.
364. It is almost impossibleor very,
very difficultto enforce a judgment of one country on the
(Mr Griffiths) Yes. There are Conventions which you
can use to enforce it but procedurally it is time-consuming.
365. You have to have a big claim to be able
to go through all that Convention. If you have a small claim you
are sunk with legal costs.
(Mr Griffiths) Yes, I would agree with that.
366. Partly following on from Lord Paul's comments,
I have two questions. Are we putting an enormous amount of effort
behind this attempt to harmonise when, in fact, it is doomed to
failure? I sit here for hours and hours and hours listening to
all this very strong information. I just think it is going to
fail. That is the first question. Perhaps you will deal with that
(Mr Griffiths) Is it doomed to failure? I do not think
the efforts are doomed to failure unless you set your standard
as complete harmonisation. I believe every step towards increasing
harmonisation will reduce the costs of the complexity of legislation
so step by step life will get easier. A related point is that
simply the passing of time will mean that more businesses will
have faced these problems and found solutions to them. So the
extent to which the diversity of regulation presents a barrier
to electronic commerce will decline with time because businesses
will understand how to deal with the issues.
367. But in one or two areas, do you not think
that people will continue with practices, regardless of whether
or not there is regulation? For example, if you take language
requirements and the French attitude on it, if you set up a Web
page you will put on that what you want. What can they do about
(Mr Griffiths) They can prosecute you if they can
establish jurisdiction over you. It depends on the nature of your
business. If you are a business, which has subsidiaries or operations
in multiple countries, then it is more likely, in practice, that
the regulators will be able to do something which will persuade
you to comply. If you are essentially a single company, not part
of a group, located in one jurisdiction, and that jurisdiction
is remote from the jurisdiction which is trying to enforce, then
it will be very difficult.
368. We constantly hear about the 2-for-1 offers
being unacceptable in Germany. Have there been cases where people
have been prosecuted for making these offers?
(Mr Griffiths) The German unfair competition rules
are generally enforced by actions from competitors. Typically,
a civil action again the company making the offer is brought by
a competitor or a body representing competitors. I was speaking
to one of my German colleagues today about this. What he said
was that if there is an effect in the German market on the German
competitors, then it is likely that the German courts would accept
jurisdiction and ultimately give a judgment. It would then be
a matter of seeking to enforce that judgment under the Brussels
Convention against the service provider in the Member State in
which they have their domicile.
369. Two air flights for the price of one being
offered by United Kingdom airlines. Action taken against them?
(Mr Griffiths) I do not know, to be honest.
370. May I explore another way of looking at
the problem. What are the tax benefits that I have by not operating
in the EU? It would begin to throw up the advantages the other
way round, so if I was operating outside the EU what tax advantages
would I have?
(Mr Wong) Let us take the example of a company which
sells software, which you can download via a website. If that
company were to establish itself in Jersey, that is a more favourable
corporate tax regime anyway. It may even be possible to set the
company up in such a way that it is exempt from tax in Jersey.
So that is the first tax advantage. The second tax advantage is
that to the extent that the company has any capital assets if
it were to dispose of those assets, if the company were set up
in the United Kingdom then it would be subject to tax on chargeable
gains. Again, if it were in Jersey, then it would escape UK taxation
on chargeable gains. Thirdly, and this is the part which a lot
of United Kingdom based vendors are complaining about, if the
nature of the product being sold by the Jersey company were something
like software which can be downloaded via a website, then the
Jersey company does not have to charge VAT to European private
consumers whereas European based competitors would have to charge
VAT to European consumers. From not just the tax but also a competitive
commercial perspective, that is one of the more important advantages
for siting the company offshore.
371. Mr Wong, when I hear you outlining it like
that, I become closer and closer to Lord Paul's position, which
I think is that it becomes harder and harder to implement the
tax regulations which the EU is demanding.
(Mr Wong) Agreed.
372. On a point of clarification, Chairman,
I was confused under the heading, Advertising and Unfair Competition
Regulations, in the sense that these regulations are not, strictly
speaking, about the purchase of advertising space, are they? They
are, strictly speaking, about the method by which a product is
(Mr Griffiths) Yes.
373. Are there regulations that apply to the
notional purchase of space, which is different from one part of
the EU to another as it impacts on to e-commerce issues?
(Mr Griffiths) I am not aware of any regulations outside
the regulation of television broadcasting, where under the TV
Without Frontiers Directive we have, essentially, home country
regulation of advertising.
Lord Chadlington: That is what I understand
too. Thank you.
374. [not allocated]
375. Following on directly from the series of
questions, I remember that it was Bernard Shaw who said, "The
politician is someone who has a problem with solutions."
A cynicor perhaps you will regard him and me as heretic
in relation to e-commercewould say, first of all, that
it is only another modern super hyped-up form of mail order and
mail despatch. Point two, a whole lot of national laws and national
regulations already exist in the various Member States of the
EC, so what we really want to know is what is missing? It may
be that we will want to bring them all together. You may want
to, if you were a German, extend the German competition laws community
wide. It may be that you want to extend the British tax laws community-wide.
That is not actually what I am asking. What I am asking is, what
is not there?
(Mr Griffiths) My Lord Chairman, that is a tricky
question because my immediate reaction to that question is that
the problem we face is not what is not there, but what is there.
Let me try and be a little bit more helpful than that. There is
quite a range of laws that make it difficult to enter into certain
types of transactions on-line. In the United Kingdom we can take
the example of our consumer credit regulations, which do not fit
well with electronic transactions. If you look at those, you will
see what is missing is a scheme for regulating consumer credit
in an on-line environment.
376. Why is on-line different? Why is it different
from the mail order company that I run?
(Mr Griffiths) Those regulations, for example, can
contain requirements for the consumer credit agreement to be executed
by both parties. As a practical matter, under a relatively cautious
interpretation, you would say that you have to have a piece of
paper signed by the customer and signed by the supplier. So you
do need, if you want comfort, to change that.
377. With the greatest respect, you can book
your theatre ticket over the telephone and there is no signature
involved at any point?
(Mr Griffiths) Absolutely, but that is not the same
as taking out a loan to buy a car, which you cannot do over the
telephone. There you have to sign a piece of paper at the moment.
378. On the Internet could you buy a car without
a piece of paper?
(Mr Griffiths) You can buy a car without any piece
of paper over the Internet, but to borrow, under a regulated consumer
credit agreement, the money to buy the car would be very difficult.
379. If you had enough money and you did not
want to get a hire purchase or purchase agreement, could you just
say, "I want to buy a car for £12,000 and here is my
(Mr Griffiths) Yes.