Opinion of the European Economic and Social Committee on the Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee — Enhancing trust and confidence in business-to-business electronic markets (COM(2004) 479 final)
Date: 2005-04-06
Institutions: European Economic and Social Committee
Subjects: business policy, commercial law, electronic commerce, small and medium-sized enterprises, trade relations, type of business

14.10.2005

EN

Official Journal of the European Union

C 255/29

Opinion of the European Economic and Social Committee on the Communication from the
Commission to the Council, the European Parliament and the European Economic and Social
Committee — Enhancing trust and confidence in business-to-business electronic markets

(COM(2004) 479 final)

(2005/C 255/04)

On 14 July 2004 the Commission decided to consult the European Economic and Social Committee, under
Article 262 of the Treaty establishing the European Community, on the abovementioned communication.

The Section for the Single Market, Production and Consumption, which was responsible for preparing the
Committee's work on the subject, adopted its opinion on 16 March 2005. The rapporteur was
Mr Lagerholm.

At its 416th plenary session (meeting of 6 April 2005), the European Economic and Social Committee
adopted the following opinion by 131 votes and 4 abstentions.

1. Summary

— Analysis,

in close cooperation with Member States, of
to unfair

legislation which applies

existing national
commercial practices in B2B markets.

The Commission has presented a Communication on
in B2B e-markets. The

1.1
enhancing trust and confidence
Committee is of the opinion that:

— By and large, the report covers important questions on the

acceptance of e-markets and it does so in a fair way.

— However, the Committee would like to stress that this is
not the sole action needed. To a certain extent, it is also
understandable that the market has a somewhat reluctant
attitude. Especially the more advanced forms of e-markets
are different from the traditional business models of SMEs.

— Looking upon cross-border trade, there are other hinders of

much greater importance.

2. The Commission Communication

2.1
The Commission Communication is to a large extent
built on the work of an expert group with representatives from
industry and the providers of electronic markets (‘the expert
group’) (1). The Communication addresses the need to enhance
trust and confidence in B2B e-markets in order to reduce
economic risks stemming from unfair or illegal business prac-
tices in such markets. B2B e-markets have the potential to
enhance efficiency by reducing transaction costs and strength-
ening competition, but such efficiency gains largely depend on
the willingness of enterprises to participate in them. To remove
the potential barriers to the use of B2B e-markets resulting
from a lack of trust and confidence, the Commission foresees
taking the following steps:

(1) Final Report of the Expert Group on B2B Internet trading platforms
http://europa.eu.int/comm/enterprise/ict/policy/b2b/wshop/fin-
report.pdf

— Encouragement of the stakeholders to agree on or review
codes of conduct, with a view to further promoting fair
trade principles in B2B e-markets, as described in this
Communication.

— Launch of a study on the economic impacts of B2B e-
markets on competitiveness and productivity of EU enter-
prises, analysing in particular the direct and indirect costs
and benefits incurred by the e-market participants. The
results of this study will be further discussed with stake-
holders.

— Provision of coherent information on the application of
existing competition rules on B2B e-markets, in order to
provide guidance for pro-competitive behaviour.

2.2
The Communication will encourage a more intense
dialogue between stakeholders involved in B2B e-markets with
regard to respecting fair trade principles and security require-
ments. As a consequence, potential barriers to the participation
in such electronic trading forms should be removed. The
Commission's services will regularly report on the progress
made through the European e-marketplaces portal.

3. Business-to-Business Electronic Markets — definition

3.1
B2B e-markets can be defined as internet-based trading
platforms where enterprises exchange goods and services.
Following this rather broad definition, B2B e-markets can be
grouped into the following categories, according to the
different transaction functionalities offered:

— Pin-boards or message boards, which are the simplest type
of e-markets, offering only limited transaction functionality.
The preparation of transactions is possible by giving the
opportunity to announce a specific desire to buy or sell
something.

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— Exchanges, which represent an extension of pin-boards.
They typically offer mechanisms to match buyers and
sellers, control
interactions and enable them to
negotiate via the platform.

their

— Catalogue-based e-markets, which provide a combined
product catalogue composed of the catalogues of various
sellers.

— Auction services, which are formal price-finding procedures
supported on an internet
trading platform where sales
auctions are initiated by a seller with the aim of selling
products or services at the highest possible price. Reverse
auctions (or ‘procurement auctions’) are initiated by the
buyer with the aim of obtaining products and services for
the lowest possible price.

The number of active e-markets has varied over time and is not
yet stable. It is estimated that currently, about 1,000 e-markets
are active worldwide, which is about 20 % less than two years
ago [SEC(2004) 930].

4.1.4
For business and the public sector, electronic business
is of great importance. It opens up possibilities for increased
competitiveness, for trade across the internal market and for
equal opportunities for SMEs. It is important to promote this
new technology for usage, specifically among the SMEs. The
Committee welcomes and supports the Commission's work in
this area.

The Committee also welcomes the findings of

4.1.5
the
Expert Group on B2B Internet Trading Platforms. The group
has done a thorough work on identifying problems. The expert
group might however seem a bit unclear on the awareness
among SMEs on the benefits. Page 10 says that ‘SMEs are, in
general, aware and convinced of the advantages of e-business’;
page 11 states that ‘SMEs still hesitate to fully engage in them-
selves in electronic trade’ and this is due to a ‘lack of awareness
of the risks and benefits’. However, it is important to note the
difference between e-business and electronic trade. It could be
concluded that SMEs are aware of the general possibilities of
using IT, whereas the more specific electronic trading still is
more distant.

4. General comments

4.1
The Commission Communication covers the area of
‘Enhancing trust and confidence in Business to Business Elec-
tronic Markets’. Electronic markets are an important part of the
more general area of e-business. Some general comments can
be made on this area of e-business.

Basically, well-functioning electronic markets

4.1.1
are
contributing to a more efficient business environment. In the
this is beneficial
longer run,
to European business and to
Increased competition will stimulate European
employment.
business
to improve their efficiency. The EESC therefore
supports actions that are beneficial for the development of elec-
tronic commerce. This has also been stated in previous
comments.

In its opinion on the proposed directive on certain
4.1.2
legal aspects of electronic commerce (2), the Committee noted
that an uncertain legal framework is prohibitive for electronic
commerce. The current communication aims to reduce this
uncertainty and the EESC welcomes this.

The EESC,

‘Helping SMEs

in its opinions on the Commission's
4.1.3
communications
and
‘Adapting e-business policies in a changing environment: The
lessons of the Go Digital initiative and the challenge ahead’ (4),
has commented on the Commission's efforts to stimulate e-
business. Basically, those comments are still valid.

to “Go Digital”’ (3)

(2) OJ C 169 of 16 June 1999
(3) OJ C 80 of 3 April 2002
(4) OJ C 108 of 30 April 2004

Even though there is an awareness of the possibilities
4.1.6
of e-business and many SMEs are at the forefront in using e-
commerce, there are some problems that still prohibit the full
participation of the majority of SMEs in ‘the e-business society’.
These problems are of a more general nature, and do not speci-
fically limit themselves to electronic trading. Nevertheless, these
problems are also relevant for this area.

— SMEs tend to be more focused on the immediate problems.
They hesitate to invest in technology and procedures that
do not have an immediate pay back.

— A lack of solutions, designed and developed particularly for
SMEs. SMEs do not have the same requirements as larger
companies and worse, consultants tend often to be too
expensive for SMEs, so they cannot easily use existing solu-
tions.

— SMEs often do not have the specialists required for many of
the software packages, nor for developing their own inter-
faces to standard software.

— Many large enterprises demand from their suppliers that
they implement specific software as a condition for them to
become or stay as suppliers. This creates a lock in situation,
as a SME often can't afford, nor handle the complex tech-
nical situation created if several of their customers each
require specific solutions. This could also be seen as a
problem, due to a lack of general standards.

— eBusiness introduces an economy of scale factor for the
benefit of larger companies, — or even with a regressional
effect as indicated above. The SME cannot set its own rules;
the cost for implementing support is more or less regardless
of size. So the SME might have to implement several
different solutions, whereas the larger company has one.

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has

The Commission

4.1.6.1
for
supporting SMEs using e-business. The Committee supports
these, and would encourage the Commission to add or enhance
initiatives that promote the specific need of SMEs for adapted
software and standards.

initiatives

several

The EESC also would like to make a special note of
4.1.7
the need to stimulate an interest, in SMEs, in learning how to
participate in electronic business. The area of electronic
commerce and electronic business is moving rapidly. Stimulus
to SMEs in life long learning could be worth looking into.

recently

That is well in keeping with the recommendations in
4.1.7.1
the Committee's
adopted opinion on lifelong
learning (5). In that opinion, the EESC recommends strength-
ening the lifelong learning programmes aimed at citizens
currently in the workforce, while also making an immediate
link between these programmes and the achievement of a
knowledge-based economy. The EESC attaches particular
importance to the possibility of SMEs having access to the
programme.

5. Specific comments

5.1 B2B Internet trading platforms

5.1.1
The Expert Group, in its final report, has distinguished
between different forms of trading platforms. The Committee
supports the comment from the experts that ‘it would not be
appropriate to focus only on e-marketplaces’. There are many
different ways to participate in the ‘e-business society’. Different
companies have different needs and different business princi-
ples. As the expert group takes notice of, ‘as most problems for
SMEs are related to e-marketplaces, and here in particular to
reverse auctions, this specific form of B2B Internet trading plat-
form has … earned most attention’.

legislative level of

However, the Committee would at this moment also
5.1.2
to draw attention to the ongoing implementation at
want
national
the two Directives on public
procurement. The two Directives open up new methods for
electronic procurement and, even though we might see some
differences in different countries'
is of
course of great value for business that public procurement can
stimulate the usage of new electronic means. The Commission
has also launched an ‘action plan for the implementation of the
legal framework for electronic public purchasing’, which plays
an important part in making SMEs more familiar with elec-
tronic business.

implementations,

it

towards e-marketplaces, or, for that matter, the more general
concept of B2B Internet trading platforms.

Internet

As the expert group states,

5.1.3.1
‘Enterprise policy can
play a useful role in helping SMEs to adapt to the new chal-
lenges of
trading platforms, by promoting market
transparency, interoperability and fairness. … public authorities
should not promote specific forms of e-commerce but remain
neutral with respect to different sales channels and different
functionalities at Internet trading platforms. … A need for
further actions has been identified in particular in the areas of
awareness building, market transparency, standardisation, trust
and confidence.’

In general, B2B Internet trading platforms have to be
5.1.3.2
fed with information from SMEs. The more advanced, the more
there is a need for standards. These standards are still a far way
from being completed, and when completed, there must be
SME-adapted software using it.

5.1.3.3
The lack of standards is not only technical, but also
with regard to man/machine interface. Considering the amount
trading platforms, and adding the issue of multilingual
of
complexities, it can be understandable that SMEs are reluctant.
This area is needed to look deeper into from standardisation
bodies, as well as from the Commission, especially if it is
desired to promote cross border trade. It is also valid for the
standardisation of product and service classifications and word-
ings, where the ongoing efforts in CEN/ISSS are supported by
the EESC.

5.1.3.4
To a certain extent, there is a problem for SMEs to
participate in electronic auctions and other electronic market-
places due to the size of the requested tender. SMEs have a
limited potential to deliver large volumes. Specifically in public
procurement, this is an issue that should be given attention.

Other issues that might prohibit the use of Internet
5.1.3.5
trading platforms are different national legislations and imple-
mentations of EU directives. It is regrettable that many direc-
tives allow for national options from the point of view of
harmonising,
e-Signatures being a major problem. The
Committee welcomes and strongly supports the initiative from
the Commission on analysing existing legislation.

5.2 Electronic markets including electronic auctions

5.1.3
The Committee agrees with the notion that e-market-
places have specific potentials that would be unwise not to
support. The Communication is welcomed. It does, however,
believe that lack in trust and confidence, although important, is
the only reason for the reluctant attitude from SMEs
not

(5) OJ C 133 of 6 June 2003

5.2.1
Different B2B Internet trading platforms are suitable
for different purposes. Electronic markets tend to promote
‘lowest price’. This is in many cases not the most important
factor. Just in time delivery, service costs and cost for custo-
mising are as important — or even more so. These factors are
difficult to include in more or less automated e-markets, which
might explain part of the relatively slow uptake of the more
automated versions of e-markets.

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5.2.2
SMEs are often not primarily competing only with
‘lowest price’, but also with flexibility and customising. For
SMEs, the personal relation is important. The use of e-markets
represent a new ‘business culture’, to which SMEs not always
Internet might scare SMEs.
are adapted. The anonymity of
Psychological reasons might well be of
importance for the
reluctance to use more advanced electronic markets. Codes of
Conduct must take these circumstances in consideration.

5.2.3
In the discussion on competition rules for B2B e-
markets, it is referred to the concern that the ‘so called network
effects’ may result
in a dominant position of a network
operator. It is debatable to what extent this should be a matter
of concern. The risk for abuse of such a dominating position
seems to be limited in most cases. However, the Committee
does support that the Commission follows this issue, in order
to notice possible abuse arising from a significant power, but it
for electronic
strongly advocates
markets in this respect should not be introduced. The regu-
lation for e-markets shall, as much as possible, be equivalent to
the rules for the traditional markets. Rules and directives must
be neutral to technology and service delivery mechanisms.

specific regulations

that

5.3 Trust and confidence

5.3.1
The Committee supports the Commission in encoura-
ging stakeholders to agree on or review codes of conduct. It
also wants to support the ideas, brought forward by the expert
group, on the usage of a check list.

The Commission remarks

5.3.2
in the Communication
(page 4) that many enterprises may ‘perceive it as difficult to
distinguish between a shift of market power that has to be
accepted for economic reasons, and unfair practices which do
not comply with legal provisions of code of conduct’. When
new business models are introduced, it often takes some time
for the market to adapt. The Commissions remark is certainly
valid, and more emphasis should be put into trying to explain
the new market mechanisms.

Brussels, 6 April 2005

5.3.3
Even though some suppliers might be negative to
reverse auctions, this is certainly a tool of great potential for
commodities (extremely well defined products with a low
degree of service content and a low possibility for branding).
The Committee agrees with the Commission that there must be
more strict rules to this kind of auctions, be it electronic or by
any other means.

5.3.4
sions:

The issue of trust and confidence has many dimen-

— trust in the concept of marketplaces, that it is of benefit to

my business;

— the specific marketplace as such, being the ‘best’ market-

place for my purpose;

— trust in that there is no ‘small letter text’ (rules that are

hidden);

— trust in the rules of the marketplace, and that the rules are

followed by all participants;

— trust in the supporting technology, including security;

— trust in the access to relevant information on the buyer or

seller;

— trust in that relevant dimensions are the dimensions that

define the outcome.

These, and other, dimensions of trust and confidence should be
taken into consideration.

it does consider it

5.4
In summary, the Committee does not disagree on any
major subject with the conclusions in the Communication.
However,
important to realise that this
might be an important or even necessary step to promote the
usage of B2B Internet Trading platforms, and specifically e-
markets, but it is not the only step needed. Standards, suitable
software, awareness building, national and EU legislation are
other areas.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND