Explanatory Memorandum to COM(2016)285 - Cross-border parcel delivery services - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2016)285 - Cross-border parcel delivery services. |
|---|---|
| source | COM(2016)285  |
| date | 25-05-2016 |
1. CONTEXT OF THE PROPOSAL
1.1.Background
EU consumers and e-retailers do not take full advantage of the single market. In 2014, only 15 % of consumers bought online from other EU countries, although 44 % did so in their own country; over three quarters (84 %) of online sales in 2014 came from the country in which the selling company was located. 1 A European Parliament study estimated that the potential contribution to European GDP of achieving a fully functioning Digital Single Market could be in the range of EUR 415 billion 2 . The benefits from cross-border e-commerce are estimated at 0.27% of GDP. 3 Cross-border e-commerce also directly benefits citizens and businesses, allowing them to enjoy a wider variety of goods and services and lower prices due to increased price competition.
There are many reasons for not buying from or selling to other Member States. The Commission’s Communication 'A Digital Single Market Strategy for Europe' 4 set out a range of measures to improve access for consumers and businesses to online goods and services across Europe. These measures include: tackling unjustified geo-discrimination and other forms of discrimination based on residence or nationality 5 ; further harmonising consumer contract rules for online and other distance sales of goods and the supply of digital content; and a review of the Regulation on Consumer Protection Cooperation.
The Commission’s 2012 Communication on e-commerce 6 identified improving the physical delivery of goods ordered online as one of the key elements for e-commerce growth. Subsequently, its 2013 Parcel Roadmap 7 set out actions to achieve three sets of objectives: (i) increasing transparency and information for all actors along the e-commerce value chain, (ii) improving availability, quality and affordability of delivery solutions and (iii) enhancing complaint handling and redress mechanisms for consumers. There have been some improvements relating to (i) quality of service, including an interoperability initiative by universal service providers and a fourth standardisation request to CEN/TC331 8 and (ii) in the provision of information for consumers by the development of European Trustmarks for online shopping 9 . However, complementary measures are needed in the areas of price transparency and enhanced regulatory oversight given that the prices for some cross-border services are still high and not all national regulatory authorities have the ability to collect the data needed to monitor the evolution of the parcel markets 10 due to differences in their competences and in the definition of the parcel services. When the current European regulatory framework for postal services, i.e. Directive 97/67/EC, was established, its focus was primarily letter post, and most parcel delivery services were outside the scope of the universal service 11 , whereas now letters account for less than half the European postal sector's revenues. 12
Consumers and small businesses report that problems with parcel delivery, in particular high prices, prevent them from selling more to or buying more from other Member States. 13 Research shows that the public cross-border prices charged by universal service providers are often three to five times higher than the domestic equivalent 14 and that these differences cannot be explained by labour or other costs in the destination country. Prices from seemingly similar originating Member States over comparable distances sometimes vary significantly without obvious explanatory cost factors.
There are multiple reasons for the existence of high prices for cross-border parcel delivery. First, the cross-border parcel delivery market is characterised by relatively high barriers to market entry (e.g. sunk costs). These may limit geographically wide competitive entry as operators incur high fixed costs when developing large delivery networks (and regular or permanent services). Where competition occurs it focusses on high volume senders such as larger e-retailers, who are able to negotiate prices with delivery operators based on individual discounts. Smaller retailers and individual consumers (who often do not send sufficient volumes to qualify for individual negotiated discounts 15 ) pay significantly higher public 16 prices for cross-border parcel delivery and are served by fewer operators, especially in remote areas 17 , where it is even possible that only the universal service provider delivers without surcharges. 18
Second, ineffective, inconsistent or inexistent regulatory oversight creates obstacles to the single market. Divergent national legal frameworks and differences in how Directive 97/67/EC has been implemented by Member States have resulted in many national regulatory authorities having a limited mandate to monitor the cross-border parcel delivery market. They therefore lack the information necessary to identify possible market failures or regulatory concerns. Fragmentation in the postal regulatory landscape also creates complexity for cross-border parcel delivery service providers.
Third, there is a consistent lack of information about the parcel delivery market, including available delivery services, providers and prices. Many businesses and individuals are only aware of a few of the operators that they could use and often default to using the universal service provider. This makes it more difficult for new operators to gain market share and reduces the competitive pressure on existing operators, leading to fewer incentives to improve the quality of service and to higher prices. To tackle the information deficit the Commission is using COSME funding 19 to support the development of an information platform on delivery services. This will help e-retailers to be better informed of possible delivery alternatives and to make better choices. The platform is also expected to develop in the medium term a means of allowing smaller senders to consolidate their shipments, which may make them eligible for lower prices. The dedicated Commission website that is to be set up under the provisions of this Regulation will contain a specific link to this platform.
Finally some e-retailers charge their customers more for delivery than they pay themselves 20 . Mark-ups appear to be higher when sending to other countries or to remote or peripheral regions within a country, for example islands. While some delivery operators do charge higher prices for delivery to more remote areas, this is not the case for all: most universal service providers have a uniform tariff throughout their national territory. 21
1.2.Objectives
The general objective of this Regulation is to address specific issues relating to cross-border parcel delivery services; it is thus complementary to the industry-related, regulatory and standardisation activities outlined above. It also builds on and complements the rules on cross-border parcel delivery services provided by Directive 97/67/EC 22 as amended by Directive 2002/39/EC 23 and Directive 2008/6/EC 24 (hereinafter 'Directive 97/67/EC;).
The specific objectives of this proposal are to:
Contents
- 1) make markets work more effectively by a) making the regulatory oversight of the parcels markets more effective and consistent and b) encouraging competition; and
- Subject matter and scope, definitions (Article 1 and 2)
- Provision of information (Article 3)
- Transparency of tariffs and terminal rates (Article 4 and Annex)
- Assessing affordability of tariffs (Article 5)
- Transparency and non-discriminatory cross-border access (Article 6)
- Penalties (Article 7)
- Review clause (Article 8)
1) make markets work more effectively by a) making the regulatory oversight of the parcels markets more effective and consistent and b) encouraging competition; and
2) increase the transparency of tariffs in order to a) reduce unjustifiable tariff differences and b) lower the tariffs paid by individuals and small businesses, especially in remote areas.
These specific objectives support the wider Digital Single Market objectives of increasing cross-border e-commerce and digital inclusion.
1.3.Political background
Improving online access to digital goods and services is one of the three pillars of the Digital Single Market Strategy, one of the ten priorities for the Juncker Commission. In the Digital Single Market Strategy the Commission committed to launch measures to improve the price transparency and regulatory oversight of cross-border parcel delivery in the first half of 2016.
At their meeting on 25-26 June 2015, the European Council supported the Digital Single Market Strategy and confirmed that it should be used to promote inclusive growth in all EU regions.
Telecoms ministers discussed the Digital Single Market Strategy at a meeting of the Transport, Telecommunications and Energy Council on 11-12 June 2015. They welcomed its objectives and reiterated the importance of a digitised economy to promote jobs and growth and boost the EU’s competitiveness. The need to make parcel delivery pricing more transparent across the EU was highlighted.
In its ‘Towards a Digital Single Market Act’, 25 the European Parliament stressed that accessible, affordable, efficient and high-quality delivery services are an essential pre-requisite for cross-border e-commerce to thrive. It also supported measures to improve price transparency and regulatory oversight directed at the smooth functioning of cross-border parcel delivery markets.
2. RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND IMPACT ASSESSMENTS
2.1.Stakeholders' Views
The Commission held a public consultation on cross-border parcel delivery between May and August 2015 and received 361 responses. The main delivery problems that consumers reported were uncertainty or lack of choice of date and time of delivery, followed by prices. Over two thirds of consumers who had considered an online purchase, but then abandoned it because of delivery-related concerns, had done so because of a high delivery price. Smaller companies were particularly likely to be unsatisfied with the prices of delivery services. National Postal Operators considered system interoperability to be the main feature that could improve delivery services, while many other delivery operators stated that increased competition would lead to progress. 26 Responses to the consultation were in line with a number of survey findings. 27
At a workshop held to mark 18 months since the publication of the 2013 Parcel Roadmap, E-retailers explained that while they felt that the delivery services on offer had improved, there was more to be done. The high tariffs of cross-border deliveries and returns were highlighted as particular concerns, along with low interoperability and the lack of ease of using (and switching between) different delivery operators. At the June 2015 meeting of the Postal Directive Committee the different approaches taken by National Regulatory Authorities towards the parcel delivery market were reported and previous Postal Directive Committee meetings have also been used to discuss the cross-border parcel delivery market following the adoption of the 2012 Green Paper.
2.2.Expertise
FTI Consulting 28 found evidence universal service providers having market power in the cross-border parcel market for small infrequent senders. Copenhagen Economics 29 established that prices for cross-border delivery were often three to five times higher than their domestic equivalents. The University of St Louis concluded that universal service providers' published cross-border parcel prices (paid by individuals and small businesses) were almost five times higher than their domestic equivalents and that labour or other costs in the destination country did not seem to statistically influence the cross-border price differential. 30
The European's Regulators Group for Postal Services (ERGP) has examined a number of issues related to cross-border parcel delivery including legal regimes, 31 the nature of the market and functioning of competition 32 and market analysis. 33 In 2015, a joint working group was created alongside the Body of European Regulators for Electronic Communications (BEREC) to look at whether regulatory insights from the electronic communication sector could be transferred to the parcel sector. 34 A study by the University of Antwerp has noted the lack of data on the EU parcel market. 35
2.3.Assessment of the impact of the proposed Regulation
In line with its ‘better regulation’ policy, the Commission services carried out an impact assessment on policy alternatives.
Five groups of policy alternatives were examined. Additional measures that would lead to the consolidation of parcel volumes from small retailers were rejected because the information platform supported by COSME funding is expected to develop this capability for smaller retailers. Price regulation was rejected as an option as it would risk distorting competition in a complex market environment, particularly given the lack of regulatory and market knowledge of the sector. Moreover there are significant differences between the telecommunications and the parcel sectors, for example in the cost structures, confirmed by the joint ERGP/BEREC Report. Maintaining the baseline scenario was also rejected because action to date has not resulted in improvements in the affordability or regulatory oversight of cross-border parcel services.
Two groups of options were retained, focussing on price transparency and regulatory oversight. Making the prices that postal operators individually negotiate with larger e-retailers more transparent 36 was rejected because larger senders can benefit from discounted and negotiated tariffs. A requirement for e-retailers to publish the prices they pay to delivery operators was also discarded. Requiring all operators to notify national regulatory authorities of any price changes in advance was rejected due to administrative burdens and the possible deterrent to investment and innovation.
The impact assessment recommended a package of measures to improve the transparency of tariffs of universal service providers and strengthen the regulatory oversight of all parcel service delivery providers, complementing wider work to improve the quality and accessibility of cross-border delivery services. 37
The preferred options would have no direct or indirect negative social impacts. Indirectly, increased e-commerce due to improved affordability of cross-border delivery prices would impact positively on growth and jobs and consumer welfare, particularly for vulnerable users in peripheral areas.
No direct environmental impacts are expected. Indirectly, enhanced market efficiency due to increased price transparency may balance possible negative environmental impacts (e.g. more vehicle emissions) with positive impacts (e.g. freight pooling). No negative impact on fundamental rights is expected.
3. LEGAL ELEMENTS OF THE PROPOSAL
3.1.Legal basis
The proposal is based on Article 114 of the Treaty on the Functioning of the European Union as it relates to the internal market of parcel delivery services and its functioning.
3.2.Subsidiarity
The current regulatory framework (Directive 97/67/EC) has not been implemented in a way that delivers affordable cross-border parcel services across the European Union beyond the universal postal service 38 . Cross-border delivery by its very nature involves delivery services in more than one Member State and therefore cannot be overseen by national regulatory authorities acting independently of each other and without information about the cost of delivery in other Member States, such as for example terminal rates that the operator in the destination Member State charges to the operator in the originating Member State. Measures at Union level are needed to tackle the underlying causes of the problem. National Regulatory Authorities will be responsible for assessing whether cross-border services are affordable, in light of market conditions in the relevant Member State.
Furthermore, the divergences in national rules governing the regulatory oversight of parcel operators, while as such not being incompatible with Directive 97/67/EC, create legal uncertainty and barriers to the single market in postal services. Measures at Union level are needed in order to set minimum requirements for the regulatory oversight of all postal operators across the Union and therefore to avoid regulatory fragmentation 39 . The principle of subsidiarity is respected as Union intervention is necessary to remove specified internal market barriers.
3.3.Proportionality
Union action proposed by this Regulation is limited to what is necessary to achieve the objectives identified. Self-regulation by parcel service delivery operators has not led to changes in regulatory oversight, transparency of tariffs and tangible improvements in the affordability of cross-border parcel delivery services for small senders.
The measures to improve transparency of tariffs are proportionate as they are limited and primarily target the segments of the market where there is evidence of limited choice, which, together with structural characteristics of the cross-border parcel delivery markets (e.g. high sunk costs; economies of scale), results in high prices of cross-border delivery services for small volume senders. The individual commercially negotiated prices mainly used by larger e-retailers (and also offered by operators other than universal service providers) are outside the scope of the price transparency measure, although ex-post competition controls will continue to cover all operators and all market segments. The parcels that fall within the scope of the universal service obligation, which requires tariffs to be affordable, cost-oriented, transparent and non-discriminatory, differ between Member States so these services cannot be directly compared across the Union and enforcement of Directive 97/67/EC would not achieve the desired outcome.
Small and micro enterprises (delivery operators with fewer than 50 employees) which are only established in one Member State will be exempt from this in order to minimise administrative burdens on the smallest companies who do not operate cross-border. For those who are within the scope of the measure, this Regulation will bring improved certainty about legal obligations and avoid fragmentation across the Union.
3.4.Choice of the instrument
The Commission proposes a Regulation as this ensures the removal of single market barriers by complementing the existing regulatory framework for postal services. This notably includes specific, directly-applicable obligations for national regulatory authorities and for parcel delivery service providers; it also includes a mechanism at the European level to establish transparency and assess the affordability of cross-border parcel delivery tariffs. Furthermore, a Regulation allows swift action and minimises the transposition-related administrative burden for Member States, while preventing any further regulatory fragmentation that could result from other legal instruments (such as a Directive).
3.5.Structure of the proposal and main rights and obligations
Articles 1 and 2 contain the general provisions on the subject matter and scope including relevant definitions. The definitions complement those contained in Article 2 of Directive 97/67/EC as far as parcels are concerned; they are fully consistent with those established in the Directive. As laid down in the relevant provisions adopted by the UPU the term terminal rates is used so to encompass both terminal dues (that are applicable for letter mail items 40 ) and inward land rates (that apply to parcels 41 ). In line with relevant practice of parcel service providers and Member States parcels considered for the scope of this Regulation are those with a maximum weight of 31.5 kg. Therefore, this Regulation will not apply to logistics; it will also not apply to transport alone, that is when it is not undertaken in conjunction with clearance, sorting or distribution 42 . Also fully in line with the corresponding provisions of Directive 97/67/EC, notably Article 2, paragraphs 1 and 1a, 43 there is no requirement that all activities under Article 2(2) lit a and b are undertaken cumulatively.
This provision clarifies that the provision of information to national regulatory authorities, applies to all parcel delivery service providers beyond the threshold of 50 employees, and those who are established in more than one Member State. It obliges national regulatory authorities to monitor the market and gather a limited set of statistical data. Only larger operators in addition to those established in more than one Member State and thus providing cross-border services would be included so to ensure that national regulatory authorities have the core data on the range of parcels that are used for e-commerce. The provision obliges all parcel delivery providers with over 50 employees to annually submit a limited set of information. The aim is to unify and clarify the currently fragmented regulatory competences and build on existing best practice. Furthermore, these more consistent obligations are also in the interest of pan-European parcel delivery service providers, who are currently subject to differing information requests from different Member States. Although the basic information requirements are defined in Article 3, the form as such would be adopted by implementing act. In this regard, technical advice should be provided by the ERGP, while it would be for the Commission to establish the form.
Article 4(1) contains a targeted obligation only for universal service providers to annually submit (on 31 January at the latest) to the national regulatory authority the public list of tariffs applicable on 1 January of each calendar year for a specific set of services contained in the Annex. The 15 postal items provided by universal service providers contained in the Annex are the most relevant and used ones for individual customers and small businesses. Other parcel delivery services providers are not in the scope of this targeted provision, given also that they in principle focus on different market segments (namely business-to-business services and larger e-retailers). While not all of the items contained in points (a) to (o) of the Annex might be provided by all universal service providers, the list contains the most relevant non-express items that are used in national and cross-border e-commerce and that are in principle available for all Union citizens, independent from their location. This provision of regular tariff information to national regulatory authorities provides an indisputable data set for (a) the publication on a dedicated website hosted by the Commission and (b) their assessment of affordability under Article 5.
This obligation is limited to public list of tariffs and does therefore not include any discounted tariffs or individually negotiated tariffs (that are subject to commercial considerations). The Commission shall publish tariffs by 30 April of each calendar year on a dedicated section on the Commission's EUROPA website. This website is not commercial in character and is not primarily intended to contain data from other providers, including express delivery service providers. However, delivery service providers other than universal service providers may also voluntarily have tariffs of their delivery services included on the website, as long as that the delivery services in question are comparable and subject to delivery at the home or the premises of the addressee, and as long as other applicable criteria are met (see also Recital 14).
Furthermore, under Article 4(3) and i the universal service providers should submit to the national regulatory authorities – and in turn to the Commission - annually their terminal rates (i.e. the payments from the originating universal service provider to the destination universal service provider for the costs of transport, sorting and distribution of cross-border items in the destination Member State). Since these data is of a commercially sensitive character it will not be published and will constitute an input for the overall tariffs only. However, it is essential that national regulatory authorities and the Commission have access to and knowledge about the terminal rates as they provide necessary information for the assessment of affordability under Article 5. Both the provision of tariffs and terminal rates constitute a very limited administrative burden for universal service providers.
Article 5 (1) is to oblige national regulatory authorities to assess the affordability of the tariffs of universal service providers obtained under Article 4(1) on the basis of objective elements. The most common and important input elements for this assessment are subject of a non-exhaustive list in points (a) to (c). These include common criteria such as the domestic tariffs of the universal service providers or origin and destination or the level of terminal rates. They may be complemented by other criteria of particular relevance for explaining the tariffs in question, such as specific transportation or handling costs or bilateral volumes between delivery service providers. If the national regulatory authority concludes that cross-border parcel delivery tariffs are not affordable, it shall ask the parcel delivery service provider in question for further information and/or justification. The deadlines set are operational and are intended to avoid delaying providing information or justification (paragraph 1, 3 and 4). In accordance with Article 5 i the assessment together with the justification, if applicable, are to be communicated not only to the Commission but also to the other national regulatory authorities. Furthermore, the assessment should also be communicated to the relevant authorities entrusted with the implementation of competition law, who are equally bound by confidentiality obligations. This enhanced transparency should create significant pressure to modify those tariffs that are substantially higher and that might be considered non-affordable or even prohibitive. The Union wide transparency should be ensured through Article 5 i that foresees the publication by the Commission on the same dedicated website of a non-confidential version of the assessments and the justifications, which should be provided to it by the relevant national regulatory authorities. This publication would allow all interested parties, including the authorities entrusted with the implementation of consumer law, to be regularly informed about this issue.
The regulatory principles of affordability, cost-orientation, transparency and non-discrimination set out in Article 12 of Directive 97/67/EC apply only to parcels (and letters) that fall within the scope of the universal service obligation. National regulatory authorities should ensure that tariffs for universal services are in line with these principles. National regulatory authorities however focus more on domestic markets than they do on cross-border ones, including when ensuring the affordability of services within the universal service. The present article will thus explicitly extend the regulatory oversight of the national regulators to a set of cross-border services provided by the universal services provider, that are largely similar but not equivalent to the universal service obligation in all Member States.
Article 6 is largely a codification of the principles that have been analysed in the so called REIMS decisions (relating to the multilateral cross-border agreements on terminal dues that universal service providers have established on letters/parcels) 44 , and is inspired by the procedural elements established in Article 3 of Regulation 531/2012 45 relating to wholesale roaming access. It should provide legal certainty for universal service providers – which are the addressees of this provision – and other parcel delivery services providers that might want to access cross-border services. This provision does not address general downstream access issues, which are subject to possible national rules and the fifth indent of Article 12 of Directive 97/67/EC. It also does not cover specific access issues to certain elements of infrastructure as under Article 11a of Directive 97/67/EC. It is necessary for reasons of legal security and to apply the non-discrimination and the transparency principles to grant competing alternative postal operators equal access to the terminal rates applicable to the parties (i.e. the universal service providers) of the multilateral terminal rates agreement. Subject to a case-by-case assessment it may be justified that terminal rates payable by third-party postal operators, in some cases, exceed those payable by universal service providers. This may the case where the parties are able to demonstrate that the cost of setting up, operating and administering the agreement, the extra cost incurred by accepting and handling items from non-designated postal operators and other such costs are not covered by the terminal rates paid by the originating operator. The point at which access is provided is in principle the inward office of exchange determined by the universal service provider. It is also important that the cross-border access should include all related associated network elements, notwithstanding the difference to downstream access at large, including notably software and information elements (paragraph 2 and 3) – as they constitute an integral part of the agreements currently under way such as Interconnect and any similar potential future agreements.
This is a standard provision aiming at providing the national regulatory authorities with effective, proportionate and dissuasive penalties for breaches of EU law.
Article 8 contains a regular review obligation for the Commission. This review notably contains not only the issues related directly to the Regulation (lit. a-c) but also includes other measures to improve the availability, accessibility, affordability of cross-border parcel delivery that have been taken in the context of the 2013 Parcel Roadmap (including industry initiatives, standardisation etc.) and which complement this Regulation.
4. BUDGETARY IMPLICATION
The proposed Regulation has no implications for the budget of the Union.