EU’s New Toy and Packaging Rules Leave Online Marketplaces in Uncertainty
- The DSA and GPSR introduced a clear, horizontal definition of ‘online marketplaces’
- EU legislators are currently undermining this work with toy safety and packaging rules
- The repeated questioning of the legal definition of online marketplace creates unnecessary legal uncertainty – without bringing clear benefits to European consumers
As the wider tech sector is addressing major challenges and making changes to business models in order to comply with new EU rules, online marketplaces are still facing legal uncertainty. While the definition of an online marketplace might seem straightforward to the average consumer, the legal definition of these key enablers of Europe’s digital economy has been questioned repeatedly by EU policymakers in recent years.
For a brief moment, it looked like the landmark Digital Services Act (DSA) and the updated General Product Safety Rules (GPSR) finally provided needed clarity as to what ‘online marketplaces’ are, but two new EU bills – on toy safety and packaging, respectively – that are currently still being discussed have turned things upside down again. At a moment when clarity is much needed, European policymakers are undermining online marketplaces’ pathway to compliance by creating new uncertainty. So, what is the problem and how can it be fixed?
What is an online marketplace in the first place?
You and I might think of our go-to places for online shopping when we talk about ‘online marketplaces’ during a casual conversation. The legal definition, however, focuses on the precise service of operating software – usually a website or an app – that allows consumers to buy from traders at a distance. This specific definition of the activity is used in the European Union’s DSA and the latest update of the GPSR.
In practice, the same company we casually refer to as an online marketplace will also provide other services. For example, many marketplaces also offer packaging and delivery services, which makes them ‘fulfilment service providers’ in addition to, and not instead of, being an online marketplace.
Other marketplaces might choose to develop and sell their own products in addition to those of third-party traders – they would therefore also be ‘manufacturers’. Both the DSA and the GPSR recognised this possibility of companies operating hybrid business models and had adapted their respective obligations to this reality.
Why does it matter?
Far from being a simple battle over semantics, these precise definitions are important because each category comes with its own set of obligations. This is even more useful in the e-commerce and retail sectors, where some definitions are the same for both the online and offline worlds. The categorisation introduced by the DSA and GPSR also makes perfect sense: a company taking care of warehousing actually has access to the products, while a ‘bare-bones’ online marketplace that only provides the core service never even touches the products bought by customers.
Introducing obligations that would require online marketplaces to check products firsthand therefore would not make sense if they never hold the products in question. That is why both the DSA and GPSR ask marketplaces to ensure that traders using the software can comply with their respective obligations, without expecting marketplaces to check every product sold or the information declared by traders.
So, what’s going wrong then?
EU policymakers are currently revamping the bloc’s rules for toys and packaging: the Toy Safety Regulation and the Packaging and Packaging Waste Directive. However, the European Commission’s original proposals for both laws have been modified by the co-legislators (so, the European Parliament and EU Member States) in ways that contradict the definition of an online marketplace, as introduced by the two horizontal sets of rules I mentioned above.
While the DSA and GPSR introduced a clear and precise categorisation system, the revision of the EU’s toy safety rules would suddenly consider online marketplaces as equivalent to any other economic operator, ignoring the precise definition and separation of responsibilities introduced only recently.
In the case of the packaging rules, the co-legislators are proposing that online marketplaces should check traders’ compliance with their extended producer responsibility when even the basic definition of ‘traders’ they suggest using doesn’t match with the DSA and GPSR.
These obvious contradictions between EU rules are not motivated by any rational evidence. Rather they are another example of an alarming trend of incoherent and inconsistent EU policymaking that we’ve seen growing in recent years. Companies who manufacture toys are not the target here, as they would not escape their obligations as manufacturers – based on the horizontal definitions set by the DSA and GPSR – if they also offer an online marketplace service. There simply is no valid reason to depart from the existing categorisation.
Sadly the outcome is yet another attempt to deconstruct the very definitions that the DSA was supposed to harmonise for Europe, once and for all. This is even more problematic given that the DSA and the GPSR are still to fully come into effect given how recently they were adopted.
How do we fix this?
Before reopening the same debate on the obligations of online marketplaces again, EU legislators should wait for the implementation and enforcement of the current rules. That would be the only logical approach to avoid adding a contradictory layer of new rules that would lead to an evermore disrupted Digital Single Market.
Introducing new obligations for online marketplaces should not be a question of ticking a box to score political points ahead of elections. Such decisions should be based on structural evidence that existing rules have been applied and aren’t working. To even assess the situation properly, more time is needed.