COVID-19 Slovenia Update

E-commerce in times of COVID-19: Good business opportunity or expensive administrative nightmare?

Last Updated on 10 April 2020 18:00 CET

With the impact of increasing and more restrictive anti- measures being introduced, recent research shows that online grocery and healthcare purchases have grown for more than 20%, with an expectation for online sales to surge an additional 20% in the near future. Following the limitations on the offering and sale of goods and services to consumers in , switching to e-commerce has become the only option for certain businesses and for some (even) their last resort. The current situation also represents a motivation for the digitalization of regular commercial routes. E-shopping is increasingly popular in the EU, with the proportion of individuals aged 16-74 having shopped online in 2019, according to Eurostat, being 63%.

Going online. How?

From a legal point of view, setting up an online shop is not connected with many administrative obstacles, neither is it time-consuming since it can be done in a couple of days. Nevertheless, there are several legal aspects to be considered.

Registration of a domain name

A domain name is obtained by registration in one of the registers by an accredited registrar, acting as an intermediary between the end-user and register. Several top-level domain names (e.g. .com, .org, .si, etc.) exist and each of them has its own register.

The decision on a domain name, choice of the registrar and a top-level domain name depends on personal preferences, type of business and territorial goals. Even though prices for a domain name vary, it is possible to obtain one for only a few euros a year. Registration and maintenance are rather simple. If the domain name fulfils conditions for registration as a trademark, it may be beneficial to do so in order to further increase and protect its value.

Preparation of the e-platform

Contacting several service providers will be necessary to start with e-commerce. You will have to negotiate different agreements for website hosting, designing, programming and maintenance of a website, as well as an agreement with payment service providers and/or online payment platforms. There are also some providers who offer entire e-commerce platform packages. If you are new to these endeavours, special caution should be placed on hidden terms of use and pricing formulas. The cheapest short-term solution may not be the cheapest long-term.

Data privacy

Data processing and the use of cookies are integral parts of almost any online activity. Each e-shop will require thoroughly composed data privacy notice, to be prepared in an easily visible, intelligible and legible manner. It has to include all necessary information, such as for purposes of the processing, the legal basis for the processing or the legitimate interests pursued by the controller, the period for which the personal data will be stored and clear indication and description of rights to which each data subject is entitled.

Moreover, a statement or a banner on the use of cookies with all necessary information will be required. In general, the use of certain types of cookies, as well as the processing of data for each purpose requires informed and separate consent. General Data Protection Regulation (GDPR) sets strict rules with regard to data processing which has to be followed in order to avoid potential dizzyingly high fines.

For e-commerce it is crucial to have a wide database of contacts but, unfortunately, there are limitations imposed on direct marketing, so every e-commerce entity must be aware of its limits. Generally, consent from an individual will be required for direct marketing. Internal processes should include separate consent for advertising, tracking and marketing purposes. Individuals must be given the opportunity to actively opt-in for uses of their data for those purposes.

Legal entity for e-commerce

From a statutory point of view, there is not much difference between a regular business or an e-commerce business. Behind every e-commerce business is generally a legal entity, most commonly a limited liability company. Business can be conducted via other forms as well, including sole proprietorship. It is, however, important to understand that the latter form does not provide for limitation of liability in relation to one’s personal assets and is, therefore, (at least in this aspect) riskier.

For existing companies that will expand their business activity to e-commerce it is advisable to amend the articles of association in order to list G47.910 retail sales via mail order houses or via Internet as an additional business activity.

Legal e-commerce considerations

Requirements under Consumer Protection Act, Trade Act, Electronic Commerce Market Act, and Electronic Communications Act need to be taken into consideration with regard to business premises requirements, mandatory information included on the web-site, language of the website, obligations with regard to commercial messages and many others.

An important aspect includes drafting of the terms of use, which provides for the manner in which potential disagreements with the customers will be resolved, information on customer’s rights in relation to legal and material defects, the return of goods, out-of-court settlement of consumer disputes, etc.

Payment methods

A proper payment system is one of the essential elements of each e-commerce and requires careful consideration. When choosing payment methods practicality, price, tax aspects and safety must be taken into consideration. Fortunately, there are many providers of payment systems that can be easily integrated into an online shop. In general, one may choose between the following payment options:

  • bank payments (through online banking);
  • payments with credit/debit cards (through virtual POS terminals);
  • mobile smart wallets (i.e. VALÚ);
  • payment with cryptocurrencies;
  • payment through online payment platforms;
  • payment upon delivery.

Fiscal validation of receipts may be required, meaning that businesses will have to provide pre-numbered receipt book (“vezana knjiga računov”) or fiscal cash register (“davčna blagajna”). The decision on the type of fiscal validation depends upon preferences and planned scope of business and a number of issued receipts. Electronic devices and software for fiscal validation may be bought on the market, however in the case of both, fiscal cash register and pre-numbered receipt book, an online application “MINI BLAGAJNA” is available for free and can be downloaded on the following link: https://miniblagajna.fu.gov.si/. In each such case the taxpayer must determine the manner of fiscal validation in its internal acts and inform Financial Administration on data regarding the business premises in which receipts will be issued in advance.

Payment methods which require fiscal validation of receipts are generally all payments upon delivery, payments with credit and debit cards (excluding situations where the payment is made directly to payment service providers) and with cryptocurrencies. In these cases, the issued receipts should be fiscally validated.

With regard to mobile smart wallets and online payment platforms, the obligation to fiscally validate the receipts depends on the status of the online payment provider. If it is considered as a payment service provider, then the validation is not necessary, but if it acts merely as an intermediary, the fiscal validation is mandatory. Between different online payment platforms, PayMill and Braintree are considered as monetary payments (i.e. fiscal validation is required), whereby PayPal is not and therefore does not require fiscal validation of receipts. Payments through mobile wallets usually must be validated, however, VALÚ is an exception in this regard, since no fiscal validation is required.

Risks accompanying online business and e-commerce

Despite the positive aspects of e-commerce, there are several risks connected with online shopping, whereby security is being the most relevant factor. According to Europol, the number of cybercrimes during the times of COVID-19 is significant and is expected to increase. Even though the negative consequences on the customers’ end (such as abuse of credit card and personal data, fake websites following the absence of delivery and counterfeits) are commonly known, businesses and individuals may suffer significant damage.

In order to mitigate risks, the regular updating of website and software, regular passwords changes and generation of backup copies (saved on external mediums) are recommended. For operators of e-commerce it is important to install SSL (secure sockets layer) encryption, at the very least. The indicator that a website has SSL is the URL for the site starts with https, instead of just http.

Focusing on the positive side of the COVID-19 situation, switching to e-commerce may enable businesses not only to generate profit but also to expand the customer base and maybe even boost the reputation despite difficult times. Therefore, setting up your own e-shop may be an option worth the try. But as always, such a decision must be considered with due care and preferably with the help of experts.

 

The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.