On cross-border Internet commerce, aggregators, electronic document flows, and threats related to digitalization of the economy

Deputy Head of FAS Anatoly Golomolzin talked about these issues on 5 April 2017 at the “Internet and Law” Conference organized by the “Kommersant” newspaper

Anatoly Golomolzinstated:“Shifting of retail commerce to the Internet simplified  acquiring goods by the buyers in the Russian Federation that are supplied from abroad, mainly in international postal items. In the past five years the share of cross-border trade has increased tenfold (in value terms, up to 219 billion RUB), pushing up the share of Internet-commerce from 8 to 29%”.

According to Anatoly Golomolzin, the main factor affecting the growth of cross-border Internet-commerce is increasingly popular e-trading sites (alibaba, eBay). The situation is also influenced by a possibility to make orders via the Internet for the broadest range of goods and efficient work of the Russian Post on goods delivery that has improved cardinally in the past several years. Other factors, however, also influence the trends.

Legislative and organizational restrictions for parallel import of goods, legally introduced into circulation in other countries, forced consumers and commercial organizations to think about other channels. FAS jointly with colleagues from other countries work on reducing parallel import restrictions, which put commercial companies and consumers in EAEU in the conditions that are worse than in other countries.

Modern forms of Internet commerce have replaced the methods of solving economic difficulties in Russia through delivering cheap goods from abroad by “shuttle traders”.

The most significant economic preconditions for expanding the scale of distant trading via the Internet are considerably different taxation conditions for internal and external distance selling, on-line and off-line trading.

To create equal conditions for operation of Internet-commerce companies, FAS finds it necessary to draft the regulatory acts providing for:

- Establishing the procedure for VAT on foreign persons selling goods via the Internet, in view of the revealed relations, particularly, settlements, between buyers, Internet-sellers and (or) e-trading sites

- Decreasing the norms for duty-free import of goods in international postal items crossing the customs border of the Customs Union to the level comfortable for consumers that will not be a crucial factor to refuse purchasing.

FAS has formed a Working Group comprising the Ministry of Finances,  the Federal Tax Service, the Federal Customs Service, the Ministry of Communications, associations and representatives of the academic community  on reviewing particular decision. In the next six months we intend to put forward proposals in the issue”.

The value of collecting, processing and visualizing information determined entry of new participants on the markets: aggregators (markets of wholesale and retail trade, insurance, education, transportation, tourist services, etc.), and often the same person acts as an “aggregator” on different markets.

The Conference discussed a draft law prepared by Rospotrebnadzor on egulating operations of aggregators. FAS has not yet received the draft law for approval.

In FAS practice, there are cases of exposing and suppressing violations of the antimonopoly law when restrictions on aggregators operations lead to significant adverse consequences.

For instance, operators of mobile wireless communications introduced a settlement procedure with sms-aggregators for the messaging services from end-customers to the operator networks when aggregators pay for sms-traffic, based on client-based accounting of sms-traffic. As a result of accounting for sms-traffic volume of each customer separately, the tariffs for sms-messaging for end customers increased: by 116% (for the network of “MegaFon” PJSC), by 176% (for the network of “MTS” PJSC), by 77% (for the network of “VympelCom” PJSC), by 33% (for the network of “T2 Mobile” Ltd.)

In some cases, it happens through using newly introduced norms of sectoral laws, limiting possibilities of aggregators.

At the moment there is no definition, legal regulation of “aggregators”, which can lead to different approaches to regulating particular sectors, including giving aggregators essentially different obligations.

According to Anatoly Golomolzin, to exclude legal uncertainty a federal law must be drafted to introduce a definition of the “aggregator” concept, its general rights and responsibilities (in No. 149-FZ Federal Law “On information, information technologies and information protection” of 27.07.2006). If there is sectoral specifics in the sectoral law, or in the law regulating the relevant legal relations (for instance, consumer rights protection), specifics of regulating “aggregators” can be set.

Performance of ICT markets require creating the basic infrastructure, electronic document flow, where documents in the electronic from possess all qualifying elements as paper documents.

To create equal conditions for the companies providing e-document exchange, the environment for exchanging e-documents should be common and interconnected: documents should be transmitted across the entire interconnected network of the Russian Federation rather than in local closed networks.

To eliminate the problems, it is necessary, in particular:

- Draft regulatory acts introducing the mechanisms of identifying e-documents (including time, validity, reproducibility), including e-signatures

- Draft regulatory acts determining the procedure for creating, cataloging, ensuring access to e-documents; storing, indexing, searching, creating cross-links between e-documents; reproducing, visualizing, format of presenting e-documents; modifying, correcting, destroying e-documents; copying, reserving, replicating, issuing copies of e-documents.

Along with the obvious usefulness of digitalization of the economy it is important to timely react to the threats related to market globalization: with digitalization of the global economy direct influence of transnational corporations upon competition on Russian markets is increasing.  In the IT field global players have a considerable impact, particularly, because they own the base platform (for instance, Google, Apple, Microsoft operational systems), they use big databases and the modern methods of information processing, and service users have to adjust to their algorithms.

Global giants control pools of intellectual property rights for software, equipment, etc. The existing norms do not allow achieving equal competition conditions for foreign and Russian supplies on the adjacent IT markets. At the same time, many states (including, the EU, the US, Japan) determine the procedure of antimonopoly enforcement to actions and agreements on goods circulation, formed using exclusive rights for the results of intellectual activity.

Deputy Head of FAS emphasized: “If a national jurisdiction is not prepared to withstand non-competitive conduct of transnational companies, significant issues can emerge for market competition and, as a consequence, for consumers. We must develop a common position on the issue. An International Working Group on Digital Economy is already established (transforming the successful Roaming International Working Group), where we discuss these issues”.