Operational Restrictions in the Retail Sector

Operational restrictions in the retail sector

Written by LE Europe, Spark Legal Network and Consultancy and VVA Consulting

November – 2017

EUROPEAN COMMISSION Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs Directorate E — Modernisation of the Single Market Unit Directorate E.4 — Business to Business Services Contact: Maciej GORKA E-mail: [email protected] [email protected]

European Commission B-1049 Brussels

EUROPEAN COMMISSION

Operational restrictions in the retail sector

Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs

2017

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Luxembourg: Publications Office of the European Union, 2017

ISBN number 978-92-79-73246-1 doi:number 10.2873/6677

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Contents

EXECUTIVE SUMMARY ...... IV 1 INTRODUCTION ...... 1 2 IDENTIFICATION, MAPPING, AND DESCRIBING OPERATIONAL RESTRICTIONS IN THE RETAIL SECTOR - OBJECTIVES, SCOPE AND METHODOLOGY ...... 3 3 IDENTIFICATION AND MAPPING OF OPERATIONAL RESTRICTIONS IN THE 28 MEMBER STATES AND NORWAY ...... 9 3.1 Introduction ...... 9 3.2 Overview of operational restrictions identified across the EU...... 10 3.3 Restrictions on sales activities ...... 11 3.3.1 Introduction ...... 11 3.3.2 Restrictions on shop opening hours ...... 12 3.3.3 Restrictions on distribution channels (Alcohol) ...... 22 3.3.4 Restrictions on distribution channels (Medicines) ...... 27 3.3.5 Restrictions on distribution channels (Tobacco) ...... 38 3.3.6 Other restrictions on sales activities ...... 42 3.4 Restrictions on promotional activities ...... 48 3.4.1 Restrictions for end-of-season sales ...... 49 3.4.2 Restrictions on end-of-business sales ...... 55 3.4.3 Restrictions on discounted sales ...... 62 3.4.4 Restrictions on sales below cost ...... 66 3.4.5 Promotional activities (other) ...... 70 3.5 Restrictions on sourcing ...... 74 3.5.1 Direct sourcing restrictions ...... 75 3.5.2 Indirect sourcing restrictions: origin labelling ...... 77 3.6 Financial restrictions ...... 78 3.7 Key findings and conclusions ...... 83 4 IDENTIFICATION BY THE RETAIL SECTOR OF THE MOST BURDENSOME RESTRICTIONS ...... 87 4.1 Introduction ...... 87 4.2 Ranking of the 10 most problematic operational restrictions faced by retailers ...... 87 4.2.1 Operational restrictions in the EU-28 and Norway ...... 89 4.2.2 Operational restrictions by retailers’ size ...... 92 4.2.3 Operational restrictions by retailing sector (food/non-food) ...... 93 4.2.4 Operational restrictions by retail channel (brick and mortar/online) ...... 95 4.3 Key findings and conclusions ...... 97 5 METHODOLOGY FOR MEASURING THE BURDEN OF COMPLYING WITH OPERATIONAL RESTRICTIONS ...... 98 5.1 Introduction ...... 98 5.2 Main findings from the literature ...... 98 5.3 Conceptual framework for the analysis of the impacts of operational restrictions ...... 101 5.3.1 Cost categories in the analytical framework ...... 103 5.4 Survey methodology ...... 106 5.4.1 Questionnaire structure ...... 106 5.4.2 Questions to online retailers ...... 107 5.4.3 Sampling methodology ...... 107

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6 SURVEY RESULTS AND QUANTIFICATION OF THE BURDEN OF OPERATIONAL RESTRICTIONS IN THE RETAIL SECTOR IN THE EU28 AND NORWAY ...... 110 6.1 Retailers’ views and opinions on general statements about legislation in the EU ...... 110 6.2 Views on the burdens imposed by different compliance tasks ...... 119 6.3 Impact of retail restrictions on operational aspects of businesses ...... 120 6.3.1 Impact on businesses of sales and promotions restrictions ...... 120 6.3.2 Impact on businesses of opening hours restrictions ...... 124 6.3.3 Impact on businesses of restrictions on selling ...... 127 6.3.4 Impact on businesses of restrictions on sourcing ...... 129 6.3.5 Rating of burdens from additional restrictions ...... 131 6.4 Assessment of regulatory burdens by online retailers ...... 138 6.5 Enforcement ...... 148 6.6 Estimate of the monetary value of the burdens ...... 155 ANNEX 1 REVIEW OF THE LITERATURE ON MEASURING BURDEN OF RESTRICTIONS ...... 169 A1.1 Frameworks for analysing the burden of regulation ...... 169 A1.2 Methods for quantifying regulation costs faced by businesses ...... 175 A1.3 Public sector studies of the overall burden of regulation ...... 182 A1.4 Cost of regulation: implementation through business surveys ...... 188 A1.5 Examples of studies using the above methods ...... 189 A1.6 Competition impacts of regulation ...... 192 A1.7 Cost of regulation: methods for quantifying wider economic impacts ...... 193 A1.8 Literature on retail sector impacts of regulation ...... 196 A1.9 Broad measure of regulation impacting the retail sector ...... 201 A1.9.1 The OECD’s index of retail sector regulation ...... 201 A1.9.2 World Economic Forum cost of business indicators ...... 203 A1.10 Conclusions from the literature review ...... 204 A1.11 Review of literature references ...... 205 ANNEX 2 ADDITIONAL INFORMATION ON SURVEY RESPONSE SAMPLE ...... 211

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Executive Summary

The Single Market Strategy (SMS) adopted in October 20151 proposes actions addressing remaining obstacles to a better functioning internal market in services, including retail services. In particular, for the retail sector, it proposes that “the Commission will set out best practices for facilitating retail establishment and reducing operational restrictions in the Single Market. These will provide guidance for Member State reforms and priority-setting for enforcement policy in the retail sector”.

The present study focuses on operational restrictions which, according to the terms of reference of the study, are defined as regulations impacting on the daily operations of companies. "Such regulations sometimes become a significant burden for businesses, affecting their efficiency, productivity and the quality and price of goods/services offered. Excessive restrictive and complex regulations can also make market entry more burdensome or induce exit.”

The focus of this study is on:  national/regional regulations in EU Member States and Norway. It does not include assessing rules harmonised at EU level such as harmonised consumer protection rules;  operational restrictions specifically affecting retail companies. It does not look at regulatory framework conditions of horizontal nature, which apply to all sectors. The retail sector is the economic sector covered by NACE Rev. 2 Division 47.

The study does not examine private barriers and operational costs resulting from particular behaviours of economic operators in their business relationships with retailers.

The four tasks of the study are to:

1. identify, map and describe operational restrictions in the retail sector in the countries covered in an organised and systematic way (Task 1); 2. identify and rank the 10 most problematic operational restrictions faced by retailers in the countries covered. These are the operational restrictions that have the most negative impact on the day to day operation of retailers from an economic point of view (Task 2); 3. undertake a literature review on the impact of operational restrictions and identify a methodology to measure the burden on retailers of procedures in the countries covered to ensure compliance with regulations in retailers’ day-to-day operations. In contrast to the previous two tasks, this third task considers the combined burden of both national / regional operational restrictions and of national rules based on harmonised EU legislation (Task 3); and, 4. apply the methodology developed under Task 3 to quantify the burden of operational restrictions using information gathered through a survey of retailers (Task 4).

It should be noted that the retailers and retail trade associations surveyed as part of Task 2 identified occasionally as most problematic those restrictions which arise from

1 COM (2015) 550 final, Upgrading the single market: more opportunities for people and business.

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EUROPEAN COMMISSION horizontal laws such as, for example, competition law or from the business practices of suppliers. While such restrictions are clearly outside the scope of the study, they are nevertheless reported as part of the results of Task 2, as such information provides valuable insights into some of the issues faced by retailers in the EU-28 and Norway. At the same time, the results of Task 1 on the regulatory framework are clearly delineated by the rather confined scope of this study, which may therefore not capture all existing restrictions in a given country that may have an impact on the retail sector (for example restrictions that apply to any traders and not to retailers only).

Task 1: Identification, mapping, and describing operational restrictions in the retail sector Context, objectives and scope EU law does not provide for a fully harmonised legal framework in relation to the retail sector, nor in the more specific area of retail operational activities. The relevant legislative framework across the Member States currently remains diverse and fragmented. With this in mind, the objectives of task 1 are to identify, map and describe the relevant legal framework in the EU28 and Norway, with regard to operational restrictions in the retail sector, including those relevant to e-commerce. These restrictions pertain to sales activities, promotional activities, sourcing, financial restrictions and other specific burdens. The scope of research is determined by the concepts of retail and operational restrictions. For the purposes of this study, retail operational restrictions to be researched are those having the following characteristics: a) They are retail-specific and affect retailers specifically and not restrictions affecting all kinds of businesses irrespective of their area of activity; b) they are regulatory and as such stem from laws and regulations. Barriers created by the behaviour of business operators are excluded; c) they are regulations that are adopted at national/regional level; d) they go beyond regulations derived from harmonised EU legislation.

Methodology Task 1 was conducted through desk research, by a team of national legal experts across the EU. This work was done on the basis of a detailed research protocol, including a research questionnaire. Research was carried out in two stages in order to reach maximum data coverage. Stage one consisted of a first data collection exercise in order to verify and complete data already gathered by the Commission. In the second phase, legal experts were asked to collect additional information on the basis of the outcomes of task 2 and feedback received from the Commission after the submission of preliminary results.

Results The results of task 1 include a complete overview of the relevant national legal frameworks in the EU28 and Norway regarding operational restrictions in the retail sector. The study maps and describes the following categories and subcategories of restrictions:

1. Restrictions on sales activities, including a) regulations on shop opening and b) distribution channels and c) any other restrictions on sales activities. 2. Restrictions on promotional activities, including a) restrictions for end-of- season sales; b) restrictions for end-of-business sales; c) restrictions for discounted sales; d) restrictions for sales below cost; e) any other restrictions related to promotional activities. 3. Sourcing restrictions, including a) direct sourcing restrictions and b) indirect sourcing restrictions (such as origin labelling).

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4. Financial restrictions.

Restrictions identified by the study include limitations, obligations or bans that retailers are subject to on the basis of national law. The restrictions apply at different levels (e.g. national or regional level). In some cases, exceptions to the rules apply, and rules are often accompanied by the policy objectives which purport to justify them. Some restrictions are applicable to e-commerce, while sanctions are often in place to enforce the rules. In many cases, recent and future plans for legal reforms to the restrictions have been identified.

Our analysis shows a relatively fragmented landscape among the twenty-eight EU Member States and Norway with regard to the legal frameworks concerning operational restrictions in the retail sector.

Restrictions on shop opening hours With regard to shop opening hours, this study found that fifteen countries2 restrict the retailers’ freedom to organise their sales activities during weekdays, Saturdays, Sundays and public holidays. Furthermore, labour laws that may indirectly affect opening times, apply in all countries. The policy objectives that are provided by Member States to justify the restrictions are related to the protection of employees’ rights and conditions, as well as consumers’ interests, (Sunday) rest, ensuring fair competition and economic growth. A majority of countries have recently reformed their regulations, liberalising or introducing more flexible measures. At the same time, some future plans for reforms, which have been noted in three countries3, propose more restrictive changes.

Restrictions on distribution channels Restrictions on distribution channels were mainly found in relation to non-prescription medicines, alcohol and tobacco. Firstly, with regard to non-prescription medicines, all 29 countries apply specific rules to the sales of non-prescription medicines (mainly referred to as ‘over-the-counter medicines’ or OTCs). Nonetheless, eighteen Member States4 allow the sale of (certain) OTCs / non-prescription medicines outside of pharmacies, while varying rules on which outlets and types of OTCs apply. The policy objectives put forward by national authorities to justify the restrictions are related to the protection of public health and safety, as well as ensuring the safe and proper use and high quality of medicines. Restrictions on selling medicines online have been identified in all countries.

Legislation that restricts the distribution of alcohol exists in sixteen Member States.5 In a majority of these countries, only shops which hold a licence or comply with other specific requirements, can sell alcohol. These barriers are justified by national authorities on the basis of protection of public health, young people and consumers in general. In about half of the countries the restrictions also apply to e-commerce. Recent and future plans for reforms, even when they aim to deregulate the sale of alcohol, aim to strike a balance between lowering the legal age limits and reducing the negative impact of alcohol consumption. With regard to restrictions on distribution channels for tobacco (products), in fourteen countries6 the legal framework provides that shops should either have a licence/authorisation or meet specific criteria to sell tobacco products. Protecting health and safety and young people were found as the main justifications provided for these restrictions. Specific restrictions for e-commerce apply in several countries.

2 AT, BE, CZ, DE, DK, EL, ES, FR, LU, MT, NL, NO, PL, SK, UK. 3 IT, PL, SK. 4 AT, BG, CY, CZ, DK, EL, FI, HU, IE, IT, NL, NO, PL, PT, RO, SI, SE, UK. 5 AT, CY, CZ, DK, FI, FR, IE, LV, LT, LU, NL, NO, PL, SE, SK, UK. 6 AT, BG, CY, CZ, DK, ES, FI, FR, HU, IE, IT, SI, SK, UK.

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Other restrictions on sales activities A majority of countries also have other sales restrictions in place, which relate to a wide range of products such as alcohol, tobacco, books and fireworks, pertaining to age limits and fixed hours of sales.

Restrictions on promotional activities A majority of countries include restrictions on promotional activities in their legal systems.7 Within each type of promotional activity, requirements range from limitations in terms of time periods in which the sales can take place, the products to which the sale would apply, the place where the sale would take place, to notification obligations before the start of sales. The main policy objectives provided by the national authorities to justify the restrictions in place are: the protection of consumers’ interests and the prevention of unfair commercial practices. Furthermore, almost all the restrictions apply equally to e-commerce with only a limited number of exceptions. Quite often the laws do not explicitly apply to e-commerce either because they were drafted before the existence of e-commerce or because it is considered self-evident that e-commerce fits into the category of so-called ‘distant sales’. In eight countries8 restrictions on promotional activities were observed which concern issues such as the advertisement of specific products or the manner in which the discounts and sales activities are communicated to consumers.

End-of-season sales As regards restrictions on end-of-season sales, it was found that thirteen countries9 include such restrictions in their legal frameworks, where requirements and / or conditions vary significantly from country to country. Fixed time periods are commonly observed restrictions concerning end-of-season sales, while some countries prohibit the application of discounts during the period preceding the end-of-season sales. In some countries, retailers are obliged to notify the competent authorities regarding their intention to conduct such kind of sales, whereas in other countries the retailers need to indicate clearly both the original price and the sales price. Furthermore, in some countries sales must take place exclusively in the usual premises where the commercial activity takes place.

End of business sales Restrictions for end-of-business sales have been identified in thirteen countries.10 The majority of the legal frameworks only allow these types of sales for specific reasons, such as total or partial termination of the commercial activities of the undertaking, renovation or relocation of the business premises, the retailer’s death or retirement or bankruptcy and/or in cases of force majeure. In many of these countries the law mentions the maximum amount of time during which end-of-business sales may take place. Furthermore, in several countries the law requires ex ante authorisation or notification to the competent authority. Other restrictions identified include a prohibition on selling newly purchased products or an obligation to conduct these sales at the usual business premises as well as an obligation to accompany the sales by relevant advertising which announces the latter. Discounted sales

7 7 countries (CZ, IE, MT, PL, SK, SE, UK) do not include any kind of restrictions on promotional activities in their national laws. 8 DK, EE, FI, FR, EL, LV, LT, NL. 9 BE, BG, EL, ES, FR, HR, IT, LV, LU, NO, PT, RO, SI. 10 AT, BE, BG, EL, ES, FR, HR, IT, LV, NO, PT, RO, SI.

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Restrictions on discounted sales were found in the legal systems of nine countries.11 In the majority of these countries the obligation exists to clearly display both the old and the new price as well as the percentage of the reduction. Additionally, in some countries discounted sales can only take place for a limited period which must be clearly indicated by the retailer.

Sales below cost Seven countries12 have restrictions on sales below cost in their legal systems. These restrictions are rules that may limit retailers’ freedom to sell products at a price which is lower than the one paid by the former to purchase these products. In five of these countries13 it is generally prohibited to sell products below cost. In the remainder of the countries14 the legislation sets specific requirements that need to be fulfilled in order to carry out such sales, such as rules that only allow retailers to carry out sales below cost for a limited number of times a year and the obligation to notify national authorities in advance (IT). Furthermore, it is important to note that, in line with the scope of this project as described under Chapter 2, this study does not include restrictions on sales below cost that stem from EU competition law15 and are generally not only applicable to retailers but apply to a broader group of stakeholders.

Direct sourcing restrictions Within the above-described scope of this study, only one direct sourcing restriction was found, in RO. RO law provides that retailers with a turnover of more than 2 million Euros per year should acquire and sell at least 51% of the products offered for sale from Romanian sources. Furthermore, it is noteworthy that in BG, a draft law is likely to introduce a requirement on the retailers to source certain quantities of domestically produced traditional products in BG.

Indirect sourcing restrictions: Origin Labelling16 Desk research has found a recently enacted17 restriction in RO on origin labelling, which applies exclusively to retailers and imposes the obligation to indicate the Romanian origin of milk and meat products. According to the legislator the ultimate purpose is to serve consumers’ interests by giving them the necessary information concerning the origin of the products. It provides as a justification the promotion of Romanian milk and dairy products as well as Romanian meat products.

Financial restrictions Desk research shows that a large majority of countries do not provide for retail-specific taxes and fees. Nonetheless, financial restrictions have been found in a handful of

11 BG, CY, ES, FR, HR, LV, PT, RO, SI 12 BE, ES, FR, HR, IT, PT, RO. 13 BE, ES, HR, PT, RO. 14 FR, IT. 15 According to Art. 102 TFEU “Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States. Such abuse, in particular, consist in: (a) Directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; (b) […]”. Furthermore, according to the general principles of European Competition law, Art. 102 TFEU prohibits the abuse of a dominant position which may take various forms (such as the imposition of unfair purchase or selling prices/sales below cost). See also C-62/86 AKZO v EC. 16 The current study does not describe restrictions on origin labelling that impose a burden beyond or other than the retail sector, such as producers. Such restrictions can be found in FI, FR, IT, LT and PT, where recently incorporated or draft laws concern origin labelling restrictions with regard to certain foods such as meat and/or milk and dairy products. They mostly apply to producers but in some cases they also apply to retailers. 17 i) Law no. 150/2016 modified and completed the general framework concerning food products commercialisation introduced by Law no. 321/2009, ii) Law 88/2016 which was adopted to amend Law no. 321/2009 regarding commercialisation of food products. Law 88/2016 introduced new compulsory provisions for labelling applied to milk and dairy products.

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Member States.18 Such financial restrictions concern taxes applicable to large retail stores, on the basis of factors such as the size of the retail sales area or the turnover of the store. Justifications provided for such restrictions include the need to support the State budget, the reduction on the impact of large retailers on traditional stores, or curbing the impact of large commercial establishments on the environment and urban trade of the area.

Task 2: Identification of the most problematic operational restrictions from the retailers’ perspective The objective of task 2 is to identify the 10 most problematic operational restrictions faced by retailers in the countries covered. To collect the information, 162 interviews were carried out with different kinds of retailers and relevant national retail associations and national business associations.

Some of the restrictions mentioned by retailers are outside the scope of the present study because they either apply more broadly and are not specific to the retail sector, or arise from business practices. They are nevertheless reported in the present study as such information highlights more generally the key challenges faced nowadays by retailers in the EU-28 and Norway.

The key findings from the 162 interviews are that retailers are mainly concerned about:  financial restrictions;  restrictions on shop opening hours; and,  restrictions regarding sales below cost.

Financial restrictions include both regulations imposing taxes and fees specifically on the retail sector and property taxes that greatly affect retailers using a physical distribution channel. For example, in Belgium there are specific local taxes on parking space, surface of the shop, size of the signs etc. In the UK and Ireland business rates are the main concern of the retail sector.

Shop opening hours are not liberalised in all the countries analysed, and remain a main concern for the retailers in those countries. In some countries (i.e. Poland), retailers are concerned about the potential reintroduction of regulation. In others, shop opening hours are not regulated, but limited by labour market regulation.

In some of the countries, sales below costs are heavily regulated (e.g. Italy) or forbidden (e.g. Portugal). This reduces the possible business solutions available to retailers.

More generally, however, since regulation varies among countries, retailers concern tends to be very country-specific.

Task 3: Literature review and methodology for assessing the burden of restrictions The first part of the literature review considered definitions and taxonomies of the various types of regulatory burdens. These cover a wide range, from the very narrow which consider only the costs related to ‘information obligations’, to sector-wide or

18 ES, FR, PL, PT.

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Executive Summary even economy-wide impacts of regulation. From this wide range, we draw most heavily on those which consider the wide range of procedures put in place by businesses to comply and to demonstrate compliance with regulations.

The only literature that was identified which focuses specifically on the impacts of regulation in the retail sector had a focus on economic impacts rather than compliance burdens on businesses. In addition, some of these articles are based on theoretical models and do not seek to quantify but rather to analyse particular effects. Most studies that seek to quantify effects on, e.g., prices, investment, and R&D, do so through econometric modelling

Taking the most relevant elements of the reviewed literature as a starting point, this chapter puts forward a framework for analysis of direct regulatory costs to businesses. The proposed framework takes the existing approaches in the literature as a starting point and applies them to the restrictions and structure of the retail sector.

The main four categories of costs that form this framework are: 1. Information and administrative burdens – including primarily costs incurred by regulated entities to demonstrate compliance with regulations. 2. Substantive compliance costs – costs that are more than purely administrative, such as equipment, software, materials, and labour training. 3. Substantive compliance impact on operations – this category includes the impacts that regulation and restrictions have on the actual operations and possibly strategic decisions of the retail businesses. 4. Indirect / market effects – this category of effects considers, at a more macro level, the extent to which regulation may have market-wide or economy-wide impact on prices, product range, innovation, investment and employment; the analysis of effects of retail restrictions at this level is largely outside the scope of the present study.

And an additional category, also outside the scope of the study and of a somewhat different nature, considers the perspective of the regulatory and enforcing entities, namely the costs of administration and enforcement – such as monitoring, enforcement and adjudication costs

Task 4: Quantification of the burden of the operational restrictions in the retail sector The final task of this study was a survey of retailers which included questions on the following three main areas:

1) regulatory burdens, and administrative, informational and implementation costs

2) impacts of regulations and restrictions on firm-level operations and strategy

3) perceptions and costs associated with the intensity of enforcement

The target was to achieve about 50 respondents from each of the 28 EU Member States and to have a good representation of firms of different sizes, across a wide range of retail sub-sectors and, importantly, to achieve a good sub-sample of online retailers. Albeit with some limitations, most of these objectives were generally achieved.

The first set of results was about general perceptions of the merits of legislation in the EU. It is interesting to note significantly positive views about its role ensuring quality and safety of products and services and in giving firms access to suppliers and

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EUROPEAN COMMISSION customers across the internal market. In contrast, there is strong agreement that such legislation increases administrative and procedural costs for businesses.

Respondents were asked to quantify certain aspects of compliance with regulations. This included administrative tasks, purchases such as software or equipment and possibly externally sourced support services. In relation to each category of expense the survey was careful to ask respondents to distinguish between the full amount of costs incurred and the costs that would have been incurred in the absence of the regulations.

The most striking result in this area of the survey is the high level of costs, relative to turnover, incurred by the smallest firms in the sample. Indeed, these costs are over thirty times more than those incurred by the medium-sized firms. Monetary estimates of burdens also vary greatly across countries.

The survey also asked a series of questions to assess the extent to which regulations and restrictions had an impact on the running of the businesses. Although the majority of respondents consider such impacts to be low or non-existent, there is a significant number who see an impact on turnover and profits. Impacts are considered lower by online businesses.

At the country level, and taking all the restrictions and types of impact together, respondents in Croatia, Cyprus, Lithuania, Romania and Slovenia feel most affected. At the other end of the spectrum are Bulgaria, Denmark, Estonia, Sweden and the UK, in which there are only small variations across different firm sizes and, somewhat surprisingly, the smaller firms perceive lower impacts on business operations than the larger firms.

A series of questions about enforcement focused on perceptions, links to particular classes of regulations, number of inspections and fines incurred. Overall, this sample of respondents has a mostly negative view of the proportionality of fines, the way inspections are carried out and the ability of firms to seek redress. These views, however, vary widely across countries.

The average number of inspections per firm is generally high and particularly so in several central European countries. The likelihood of receiving fines is closely associated with this. In relation to turnover, fines are heavier for the smaller firms.

The administrative burdens to comply with relevant regulations and restrictions, including information obligations (i.e. provision of information to respective competent administration) as a percentage of turnover are estimated to be highest in Portugal, Poland, Latvia, Romania, France and Austria - at or above 3.5% of turnover. These overall burdens are lowest in Luxembourg, Ireland, Malta, Denmark and Belgium, all of which are below 1% of turnover. The total estimated monetary burden of compliance tasks across all EU retail firms is estimated at €26.7 billion, with a 95% confidence interval ranging between €22.6 and €30.9 billion. This amount falls disproportionately on micro firms who shoulder an estimated total burden of between €21.0 and €27.4 billion.

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1 INTRODUCTION

The Single Market Strategy (SMS) adopted in October 201519 proposes actions addressing remaining obstacles to a better functioning internal market in services, including retail services. In particular, for the retail sector, it proposes that “the Commission will set out best practices for facilitating retail establishment and reducing operational restrictions in the Single Market. These will provide guidance for Member State reforms and priority-setting for enforcement policy in the retail sector”.

The present study focuses on operational restrictions which, according to the terms of reference of the study, are defined as “regulations that may have a negative impact on the daily operations of companies. Such regulations sometimes become a significant burden for businesses, affecting their efficiency, productivity and the quality and price of goods/services offered. Excessive restrictive and complex regulations can also make market entry more burdensome or induce exit.”

The focus of this study is on:

 national/regional regulations in EU Member States and Norway. It does not include assessing rules harmonised at EU level such as harmonised consumer protection rules;  operational restrictions affecting specifically retail companies. It does not look at regulatory framework conditions of horizontal nature, which apply to all sectors. The retail sector is the economic sector covered by NACE Rev. 2 Division 47.

The study does not examine barriers and operational costs resulting from particular behaviours of economic operators in their business relationships with retailers.

The four tasks of the study are to:

19 COM (2015) 550 final, Upgrading the single market: more opportunities for people and business.

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1 | Introduction

The study does not examine barriers and operational costs resulting from particular behaviours of economic operators in their business relationships with retailers.

However, it should be noted that the retailers and retail trade associations surveyed as part of Task 2 identified occasionally as most problematic those restrictions which arise from horizontal laws such as, for example, competition law or from the business practices of suppliers. While such restrictions are clearly outside the scope of the study, they are nevertheless reported as part of the results of Task 2, as such information provides valuable insights into some of the issues faced by retailers in the EU-28 and Norway. At the same time the results of Task 1 on the regulatory framework are clearly delineated by the rather confined scope of this study, which may therefore not capture all existing restrictions in a given country that may have an impact on the retail sector (for example restrictions that apply to any traders and not to retailers only).

This report is structured as follows:

 Chapter 2 presents the objectives and the scope of the identification, mapping, and description of operational restrictions in the retail sector and the methodology.  Chapter 3 describes the operational restrictions identified in the 28 Member States and Norway.  Chapter 4 lists the operational restrictions identified as the most burdensome by retailers.  Chapter 5 reviews the literature on measuring restrictions and develops a methodology for measuring the burden of operational restrictions in the retail sector.  Chapter 6 provides a quantitative estimation of the burden of operational restrictions in the retail sector in the EU28 and Norway based on the methodology developed in Chapter 5.  A number of annexes provide additional information on different aspects of the study.

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2 IDENTIFICATION, MAPPING, AND DESCRIBING OPERATIONAL RESTRICTIONS IN THE RETAIL SECTOR - OBJECTIVES, SCOPE AND METHODOLOGY

Introduction Before presenting the outcomes of our data collection exercise, which has identified and mapped operational restrictions in the retail sector (task 1), this chapter describes the background and objectives of task 1 (section 2.2), as well as the scope of the data collection task (2.3 and 2.4). The final section of chapter 2 provides a description of the methodological approach (2.4). The results of task 1 are brought together in chapter 3, where all the identified restrictions and their main characteristics are described following a clear categorisation of restriction types. The 29 completed country fiches and a comparative table (which comprises a summarised overview of the data in a structured manner) are provided as stand-alone annexes.

Context and objectives EU law does not provide for a fully harmonised legal framework in relation to the retail sector. Regardless, it has sought to harmonise and create a common legal framework with regard to certain areas of law, which indirectly have an impact on retail. This includes areas and issues such as consumer protection, e-commerce, health and safety, and data protection. Establishment and operation of the retail sector has not been subjected directly to harmonisation at EU level. Hence, the competence to regulate these areas lies primarily with the Member States. Member States have a margin of discretion in regulating the retail sector, but must fully comply with the four Single Market freedoms. Hence, national, regional or local restrictions must be justified by policy objectives such as health, safety, environment protection or country planning, and they must be appropriate and proportionate to the objectives pursued. Although the CJEU has developed a solid body of case law in this area, the legislative framework across the Member States remains diverse and fragmented. According to the Commission’s Expert Group on Retail Sector Innovation, “if the European retail market remains fragmented, retailers will not be able to be successful”20.

With this in mind, the objectives of task 1 are to:

a) Describe operational restrictions based on information gathered by the Commission (restrictions on sales activities, on promotional activities, on sourcing, financial and other specific burdens); and b) Identify, map and describe any further restrictions that affect retail operations not included in the point above. Particular attention will be given to operational restrictions affecting e-commerce.

Scope of research The scope of our research in terms of geographical coverage is: all 28 EU Member States and Norway. Additionally, the scope of research subject is focused on operational restrictions in the retail sector. These concepts are further elaborated below.

20 European Commission, Final Report from the Expert Group on Retail Sector Innovation, 2013.

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2 | Identification, mapping, and describing operational restrictions in the retail sector - objectives, scope and methodology

Retail sector

According to the European Commission’s Retail Market Monitoring Report (2010), retail services embrace a variety of:

 Forms (shops, electronic commerce, open markets, etc.)  Formats (from small shops to hypermarkets);  Products (food, non-food, prescription and over-the-counter drugs);  Legal structures (independent stores, franchises, integrated groups);  Locations (urban/rural, city centre/suburbs, etc.).

For the purpose of this study, the retail sector is defined by NACE Rev. 2 Division 47, which states that: “this division includes the resale (sale without transformation) of new and used goods mainly to the general public for personal or household consumption or utilisation by shops, department stores, stalls, mail order houses, door-to-door sales persons, hawkers, consumer cooperatives etc.”

The division proposed by NACE Rev. 2 excludes the following:

. sale of farmers’ products by farmers . manufacture and sale of goods . sale of motor vehicles, motorcycles and their parts . trade in cereal grains, ores, crude petroleum, industrial chemicals, iron and steel, industrial machinery and equipment . sale of food and drinks for consumption on the premises and sale of takeaway food, and . renting of personal and household goods to the general public.

Operational restrictions

It should further be emphasized that this study is focused on operational restrictions. Retail operational restrictions are regulations that frame the daily operations of retailers. More particularly, following the terms of reference, operational restrictions are:

‘regulations that may have a negative impact on the daily operations of companies. Such regulations sometimes become a significant burden for businesses, affecting their efficiency, productivity and the quality and price of goods/services offered. Excessive restrictive and complex regulations can also make market entry more burdensome or induce exit’.

As such, restrictions that concern the establishment of retail businesses are out of scope of this study.

In short, the retail operational restrictions to be considered thus have the following characteristics:

a) They are retail-specific and affect retailers specifically and not those affecting all kinds of businesses irrespective of their area of activity. b) They are regulatory and as such stem from laws and regulations. Barriers created by the behaviour of business operators are excluded. c) They are regulations that are adopted at national/regional level. d) They go beyond regulations derived from harmonised EU legislation.

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Categories of restrictions to be covered

The following categories of operational restrictions were researched by the study team:

1) Restrictions on sales activities. These refer to regulations which limit, directly or indirectly, retailers’ freedom to organise their sales activities. This includes: . regulations on shop opening hours (i.e. maximum number of hours a shop can be open on weekdays/Saturdays/Sundays/public holidays) and . product-specific sales restrictions (i.e. requirements for certain products to be sold only in certain shops).

2) Restrictions on promotional activities. These refer to regulations which limit retailers' freedom to decide on, to advertise or to announce, and to conduct promotional activities for their shops. For the purpose of this study these restrictions shall include:  Restrictions for end-of-season sales (e.g. fixing specific sales periods, imposing specific conditions);  Restrictions for end-of-business sales (e.g. mandatory prior authorisations, imposing specific conditions, limiting duration);  Restrictions for discounted sales (outside specific sales periods - if fixed) (e.g. restrictions on the characteristics and quantities of products permissible for discounting, restrictions on duration);  Restrictions for sales below cost (e.g. complete ban, restrictions on duration and occurrences).

3) Restrictions on sourcing. These include regulations which limit, directly or indirectly, retailers' possibilities for sourcing products.

4) Financial restrictions. These refer to regulations imposing taxes and fees specifically on the retail sector excluding any product-based taxes and fees.

5) Additional operational restrictions including but not limited to regulations on retail sale of regulated products, for example, pharmaceutical products, alcohol, and tobacco.

6) Retail operational restrictions with regards to E-commerce, for example:  restrictions related to the execution of, as well as the duration or periods in which promotional and discounted online sales can be held;  restrictions imposing specific conditions for the pricing or the price displaying during such online sales;  a prohibition to deliver goods purchased online on certain days of the week.

7) Regulation on lease contracts relevant to retail and pop-up stores (i.e. temporary stores that operate for a short period of time, usually no longer than a couple of months).

8) Any other operational restrictions, such as origin labelling, delivery and collection, etc.

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2 | Identification, mapping, and describing operational restrictions in the retail sector - objectives, scope and methodology

A number of operational restrictions falling under the categories listed under 1) up to and including 4) were already identified by the European Commission through questionnaires completed by governmental authorities.

It should be further noted that the following categories of restrictions are excluded for the purposes of this study:

 Restrictions with regard to the operation of street markets;  Restrictions with regard to mail order houses, door-to-door sales persons, hawkers, consumer cooperatives, stalls;  Regulations on retail sale of fuels;  Licensing requirements for the use of the public (floor) space by stores.

Methodology As agreed with the Commission at the kick-off meeting of this project, Task 1 was conducted in 2 stages. During the first stage, our team of national legal experts verified and completed data already gathered by the Commission and collected further data on any additional restrictions they were able to identify. In the second phase, on the basis of feedback received from the Commission after the submission of preliminary results (included in the Interim Report and presented at the Stakeholder and Member State Workshop on addressing retail restrictions in the single market held on 3rd May 2017) as well as the results from Task 2, the legal experts were asked to collect additional information. During this second round of data collection, additional restrictions and details on already identified restrictions were identified and described. The results are included in Chapter 3.

Task 1 was managed and run by Spark Legal Network and comprised of three main activities:

 Activity 1: Preparation for data collection  Activity 2: Data Collection in EU28 + Norway and completion of country fiches (2 phases)  Activity 3: Reporting

Activity 1: Preparation for Data Collection

Activity 1 was the preparatory stage for the rest of Task 1. It covered an inventory and mapping of data on operational restrictions already held by the EC and the preparation of the Research Protocol. Activity 1 started with an inventory of the data collected by the Commission (hereinafter to be referred to as “EC Questionnaires”). As listed above, these include data in four main categories: a) restrictions on sales activities, b) restrictions on promotional activities, c) restrictions on sourcing, and d) financial restrictions. The study team received from the Commission a dataset gathered on the above-mentioned restrictions, consisting of 27 completed EC Questionnaires and a EuroCommerce summary table with data on opening hours across the EU.21 These data were screened, and a completeness check was conducted with the help of a comparative table for each category of restrictions. The outcomes were used to inform the network of experts on the level of completeness of the existing data, in order to guide them in their work.

21 No completed EC Questionnaires were available for the Netherlands and Malta. For the Netherlands a Position paper on Operational Restrictions in the retail sector by the Dutch Retail Association Detailhandel of October 2016 was provided.

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With an inventory of the existing data set at hand, the team at Spark developed the Research Protocol, to be used to instruct and guide the network of legal experts. It includes detailed instructions on the work to be conducted in each of the 29 countries as well as a Research Questionnaire. The questionnaire is structured in such a way that it can be used as country fiches once completed by the national correspondents. The Research Protocol also includes guidance in terms of which categories and types of operational restrictions experts were expected to look for. A list of categories is described under section 2.3.1. As mentioned above, the edited and finalised standardised country questionnaires double up as country fiches.

The completed Research questionnaires are structured in a manner that elicits the following information:

 The Member State in which the restriction was identified;  The type of restriction identified;  The source of the restriction (national/regional legislation/regulation, etc.)  The level of the restriction (regional or national)  Description of the restriction (details on what the regulation provides, specifying in particular what bans, limitations or obligations the retailers are subject to on the basis of the regulation.)  The scope of the restriction, i.e. to what format (e.g. small shops, hypermarkets, etc.), products (e.g. food, non-food, prescription and over-the counter-drugs), time coverage (if it applies for a limited time, e.g. seasonal) and location: (urban/rural, city centre/suburbs, etc.), to which it applies.  Information on the policy objective/rationale of the restriction (e.g. health, safety, environmental protection, country planning, etc.).  Any exceptions to the restriction  If the restriction is applicable to e-commerce  The entity, body or authority in charge of supervising compliance with the restriction  Any sanctions (if provided for by law), in case of breach of the regulation (e.g. fine, amount, etc.);  Any information or data available on the impact (in particular, the economic impact) of the rules, for example an impact assessment carried out before adopting or after implementing the rules, or any other relevant studies  Any information on recent reforms or plans for reforms with regards to the regulation/restriction.

Activity 2: Data Collection in EU28 + Norway and completion of country fiches

The national experts carried out desk research at national level and completed the Research Questionnaires (country fiches), verifying, completing, identifying, listing and describing relevant operational restrictions according to the provided guidelines. As mentioned above, the data collection was done in two phases, in order to produce a more complete and robust set of data across the EU. After the desk research and completion of the Research Questionnaires, the national experts submitted their reports to Spark’s core team. Spark network coordinators carried out careful quality control measures in the first draft of the reports. The country questionnaires were then sent back to the national experts in order to address the comments and finalise the questionnaires.

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2 | Identification, mapping, and describing operational restrictions in the retail sector - objectives, scope and methodology

Activity 3 Reporting

While reviewing the national reports, Spark’s core team drafted a standard comparative table, which was completed with the results of the 29 completed country fiches. The use of such a table facilitated a structured categorisation, mapping and comparison and was used for internal analysis purposes, alongside the full country fiches. The results of our data collection and comparative analysis will be presented in the following chapter.

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3 IDENTIFICATION AND MAPPING OF OPERATIONAL RESTRICTIONS IN THE 28 MEMBER STATES AND NORWAY

3.1 Introduction

This chapter presents the results of task 1, which focuses on the identification, description and mapping of operational restrictions in the retail sector across the EU 28 and Norway, including those relevant to e-commerce. It provides a complete overview and a comparative analysis of the relevant legal frameworks in the above-mentioned countries, with regard to the following categories and subcategories of restrictions:

Table 1 Categories and subcategories of operational restrictions in the retail sector

Category Subcategory

Restrictions on sales activities Shop opening hours

Distribution channels Sales activities (other) Restrictions on promotional activities End-of-season sales

End-of business sales Sales below cost Promotional activities (other) Sourcing restrictions Financial restrictions

Other restrictions

The operational restrictions that were identified across the EU and Norway will be described in detail in Chapter 3, with a focus on the common characteristics of the rules. This includes a definition for each restriction as well as a detailed narrative on the limitations, obligations or bans that retailers are subject to on the basis of national law. Information is also provided on the level of restrictions (whether they apply at national or regional level), the applicable exceptions to the rules (if any), the policy objectives that aim to justify the restrictions, their applicability to e-commerce, the sanctions that are in place to enforce the rules and information on recent and future plans for legal reforms.

More specifically, Section 3.2 includes a table that provides a complete overview of the various categories and subcategories of restrictions that were identified during our desk research at national level across the EU28 and Norway. What follows are sections providing details on each restriction type, as explained above.

Accordingly, Section 3.3 includes detailed information on identified operational restrictions with regard to sales activities in the retail sector. This category of restriction can be further classified into three subcategories of restrictions: a) shop

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3 | Identification and mapping of operational restrictions in the 28 Member States and Norway opening hours; b) distribution channels; and c) sales activities (other). What follows under section 3.4 is an overview and description of operational restrictions on promotional activities, which contains the following subcategories: a) end-of-season sales; b) end-of-business sales; c) discounted sales; d) sales below cost and e) other promotional activities. Section 3.5 contains restrictions on sourcing. Specifically, Section 3.5.1 includes information on direct sourcing restrictions and Section 3.5.2. includes details on indirect sourcing restrictions: origin labelling. What follows under section 3.6 is a detailed overview of the financial restrictions which were discovered during our desk research. Lastly, section 3.7 provides the conclusions and key findings on the basis of our comparative analysis.

3.2 Overview of operational restrictions identified across the EU

Table 2 below provides an overview of the restrictions which have been identified in the 28 MSs and Norway. Each of these restrictions is discussed in detail after the table.

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Table 2 Overview of the operational restrictions identified in the 28 MSs and Norway

Source: Spark Legal Network

3.3 Restrictions on sales activities

3.3.1 Introduction

This section provides an overview and a comparative analysis of restrictions on sales activities in the EU Member States and Norway. Restrictions on sales activities can be described as: regulations which limit, directly or indirectly, retailers’ freedom to organise their sales activities. This type of restriction can be further classified into three subcategories of restrictions:

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a. shop opening hours: maximum number of hours a shop can be open on weekdays/Saturdays/Sundays/public holidays; b. distribution channels: requirements for certain products to be sold in certain shops, and c. sales activities (other): any other regulations which limit retailers’ freedom to organise their sales activities.

The analysis covers the eight main questions included in the desk research in relation to each of the three subcategories of restrictions, namely, description of the actual restriction(s), level of restrictions, policy objectives / rationale of the restrictions, applicability to e-commerce, exceptions to the restrictions, sanctions provided for by law, recent reforms and future plans for reforming the regulations).

3.3.2 Restrictions on shop opening hours

Introduction

For the purposes of this study, shop opening hours restrictions are defined as maximum number of hours a shop can be open on weekdays/Saturdays/Sundays/public holidays. Table 3 below presents an overview of such restrictions that were identified across the countries researched.

Table 3 Shop opening hours

Category of data Observed in which countries? Restriction(s) on shop opening hours AT, BE, CZ, DE, DK, EL, ES, FR, LU, MT, NL, NO, PL, SK, UK Level of the National AT, BE, CZ, DE, DK, EL, ES, FR, LU, MT, NL, restriction(s) NO, PL, SK Regional AT, ES, UK Exceptions AT, BE, CZ, DE, DK, EL, ES, FR, LU, MT, NL, NO, PL, SK, UK Applicability to e-commerce - Sanctions AT, BE, CZ, DE, DK, EL, ES, FR, LU, NL, NO, PL, SK, UK Recent reforms BE, CZ, DK, ES, EL, FI, FR, HU, MT, NL, PT, RO Future plans for reform of the CY, DE, IT, PL, SK regulation(s) Source: Spark Legal Network

Description of the restrictions The majority of countries have regulations on shop opening hours, which restrict the retailers’ freedom to organise their sales activities during weekdays, Saturdays, Sundays, public holidays (AT, BE, CZ, DE, DK, EL, ES, FR, LU, MT, NL, NO, PL, SK, UK). However, restrictions vary among the countries (see Table 4). In twelve Member States, opening hours are unrestricted (BG, EE, FI, HR, HU, IE, IT, LT, LV, PT, RO22, SE, SI). In CY, no valid legislation currently exists concerning shop opening hours, due to an ongoing legislative reform, resulting in the situation that no such restrictions apply at this moment.

22 Ordinance no 99/2000 does not establish opening hours restrictions. Retailers may set their opening hours freely, provided that they respect labour law and subject to the regulations regarding peace and public order (Art. 8 of OUG no. 99/2000). Although local level restrictions are outside of scope of this study, it should be noted that local authorities can restrict opening hours within their areas of competence.

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Furthermore, it should be noted that labour law may affect retailers’ opening times in practice, as employees may not be allowed to work during certain hours, etc. For example, in SE there are no restrictions on opening hours, but pursuant to labour law23, night work is restricted between 24.00 and 05.00 hours.

The table below describes the opening time restrictions in place in the above- mentioned Member States.

Table 4 Restrictions on shop opening hours

Shop opening hours across the EU

Country Monday-Friday Saturday Sunday / Public Holidays 06.00 to 18.00 On Sundays and Public

Holidays, shops must be Total opening hours closed. 06.00 to 21.00 may not exceed 72

hours in a calendar Special rules for 24th and week. 31st December.

In the case of particular regional Austria In Lower Austria, needs (e.g. tourism, opening hours may shopping events), the start at 05.00. Governor of the Exceptions allowed in the Some shops may open Province may allow case of particular regional at 05.00 during shops to be open needs (e.g. tourism, weekdays and may stay beyond 18.00. shopping events). open beyond 21.00 in Additionally, some tourist places. shops (e.g. bakeries) may be kept open on Saturday after 18.00.

Closed on Sundays but not on Public Holidays, unless the trader has chosen another weekly closing day.

Exceptions are linked to 1) tourist zones and seaside resorts (opening 24/7) and, 2) type of shop (e.g. night Belgium 05.00 to 20.00 05.00 to 20.00 shops: opening between 18.00 and 07.00 unless a specific municipal regulation provides for different opening hours; telephone shops: opening between 20.00 and 05.00 unless a municipal exception exists; etc.).

23 Act (1982:673) on working time.

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Shops have to be closed on 1st January, Easter Monday, 8th May, 28th September 28th October, 24th December (prohibition only 12.00 to 24.00), 25th December and 26th December. Czech Unrestricted Unrestricted Republic It does not apply to shops with areas up to 200 m2, fuel stations, pharmacies, and shops in airports, railway stations and bus stations, shops in medical facilities. Shops have to stay closed on Public Holidays/Constitution Day. On Christmas Eve and New Year’s Eve they have to close at 15.00. Public Holidays include: New Year’s Day, Maundy Thursday, Good Friday, Easter Sunday, Easter Monday, General Prayer Day, Ascension Day, Whit Sunday, Whit Monday, Denmark Unrestricted Unrestricted Christmas Day and Boxing Day.

Exceptions include certain types of products (e.g. bread) and shops (e.g. furniture shops, DIY centres, airport shops), shops with a turnover of less than 33.7 million DKK, retail shops in the countryside and retail shops granted dispensation to stay open. Principle of Sunday rest for 24 Unrestricted Unrestricted employees and general restriction on Public Holidays for all employees.

Shops staffed by shop owners can be opened. France Food retail shops can stay open until 13:00 on

Sundays.

Non-food shops can be opened on Sunday by mayor’s decision within the limit of 12 Sundays/year

24 Pursuant to Article L. 3132-2 of the Labour Code, every employee is entitled to a weekly rest period of at least 24 consecutive hours. In the employees’ interests, this is set on Sunday. Additionally, the same article sets out a general restriction on working on Public Holidays.

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(‘Mayor’s Sundays’).

Other possible exemptions for retail trade in tourist or commercial tourist areas and some stations, several sectoral exemptions (e.g. florists). Shops must remain closed on Sundays and Public Holidays. Regions usually allow shops to be open on four Sundays/ Public Holidays per year.

Several exceptions to In most regions In most regions unrestricted shop opening (Laender), shop (Laender), shop hours in federal states. Germany opening hours are opening hours are Certain products (e.g. unrestricted unrestricted newspapers) may be sold and some sales outlets (e.g. at railway stations and airports) are permitted to be open on Sundays. Opening is permitted on four Sundays and public holidays, and under certain special circumstances. All stores are closed on 05.00 to 21.00 05.00 to 20.00 Sundays and Public Holidays. Certain shops (e.g. florists, kiosks), shops (in tourist areas) upon decision of the regional Governor. All shops are open the two Sundays before Christmas Greece Local authorities may Local authorities may and the last Sunday of each extend the opening extend the opening year, and shops may open hours. hours. the first Sunday of each regular sales period. Shops that fulfil certain conditions (e.g. total surface area up to 250m2) are allowed to stay open on Sundays. Retail stores must be closed: 06.00 to 20.00 - before 06.00 and after 06.00 to 19.00 on 13.00 on Sundays and Saturdays and on the Luxembourg Once a week, shops Public Holidays; day before a public may close at 21:00. - before 06.00 and after holiday. 18.00 on New Year’s Eve, Christmas Eve and on the day before the National Day.

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Certain shops may be open between 06:00 and 18:00 (e.g. bakeries, kiosks).

The Ministry of Economy can decide derogations for specific local areas. 8th January – 31st 8th January – 31st October: October: 04.00 to 04.00 to 19.00, 19.00 On Saturdays 1st November – 7th January (including public from 04.00 am to 22.00 1st November – 7th holidays): 8th January January: 04.00 to – 31st October from On Carnival and Easter 22.00 04.00 to 20.00 Sunday 07:00 to 17.00

Petrol Stations: 06.00 1st November – 7th Manually operated petrol to 18.00 January: 04.00 to stations: are closed all day 22.00 on Sundays and Public Shops that rent Holidays. Carnival Costumes until Petrol stations: 06.00 22.00 from Thursday to 15.00 Flowers, plants, seeds and before Carnival to fertiliser shops: may open Carnival Tuesday. Shops, selling from 06.00 to 19.00 beverages, sweets, Shops, selling tobacco products, Retail sale of food, beverages, sweets, fish, crustaceans, beverages and tobacco in tobacco products, fish, molluscs, watches, specialised stores selling crustaceans, molluscs, clocks, jewellery, predominantly bread, cakes, watches, clocks, souvenirs, craft-work, flour confectionery and jewellery, souvenirs, religious articles, sugar confectionery: craft-work, religious books, newspapers, opening hours are articles, books, stationery, office unrestricted. newspapers, stationery, items, perfumery Malta office items, perfumery items, swimming and Shops, selling beverages, items, swimming and diving equipment, sweets, tobacco products, diving equipment, photographic fish, crustaceans, molluscs, photographic equipment, optical watches, clocks, jewellery, equipment, optical and and related precision souvenirs, craft-work, related precision equipment: 06.00 to religious articles, books, equipment: 6.00 to 23. 23.00. This applies newspapers, stationery, This applies only in the only in the Tourist office items, perfumery Tourist Localities and Localities and Gozo. items, swimming and diving Gozo. equipment, photographic Passenger liner when equipment, optical and Passenger liner when cruise liners call at related precision equipment: cruise liners call at Harbour: the general 06.00 to 23.00. This applies Harbour: the general rule on closing hours only in the Tourist Localities rule on closing hours of of shops in the and Gozo. shops in the harbour harbour area in such area in such cases is cases is 22.00. Passenger liner when cruise 22.00 pm. liners call at Harbour: the Late night shops may general rule on closing Late night shops on close at 22.00. This hours of shops in the Thursdays and Fridays: exception applies harbour area in such cases may close at 10pm. regardless to whether is no later than 13.00. This exception applies or not the area is a regardless to whether tourist area. Certain designated shops or not the area is a situated in the harbour area tourist area. close at 18.00. Stores must be closed on Netherlands 06:00 to 22:00 Sundays and the public holidays of New Year's Day,

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Easter (2nd day), Ascension, Pentecost (1st and 2nd day) and Christmas (1st and 2nd Christmas 06.00 to 22.00 day). On Good Friday, 4 May (Memorial Day) and 24 December, stores must be closed after 19:00. 25Possible exceptions for e.g. pharmacies, shops that exclusively or mainly sell newspapers and magazines; and shops located in

hospitals and nursing homes, railway stations, airports and petrol stations. Exceptions on religious grounds. During Sundays and Public Holidays stores must be closed. Stores must also be closed after 16.00 on Easter Eve, Whit Saturday and Christmas Eve. Holidays are the following days: New Year's Day (1 January), Maundy Thursday, Good Friday, Easter Sunday, Easter Monday, Ascension Norway Unrestricted Unrestricted Day, Whit Sunday, Whit Monday, Christmas Day, Boxing Day, 1st and 17th of May. Exception for all shops for the last three Sundays before Christmas Eve 14:00-20:00. Exceptions for grocers smaller than 100m², petrol stations smaller than 150m², tourist areas. Sundays: Unrestricted There are 13 Public Holidays Poland Unrestricted Unrestricted with mandatory closure. Restrictions do not apply to pharmacies. Shops are closed 24 December after 12:00, 25 December, 1 January, Easter Sunday Slovakia Unrestricted Unrestricted Exceptions: sales at petrol stations, ports, airports, stations and other public transport facilities and

25 Municipalities have the competence to allow retailers to open their stores on these days (rules are not included as local level restrictions are outside of the scope of this study).

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hospitals and sale of souvenirs, pharmaceuticals and transport tickets still allowed. Restricted for all shops not subject to the Special Regime (mainly ANGED´s General regime: General regime: members). There are a Restrictions Restrictions minimum number of All shops not subject to All shops not subject Sundays and Public Holidays 26 the Special Regime to the Special Regime on which retailers have to (mainly members of (mainly members of be open (Central ANGED27) have to ANGED), have to Government Law); comply with the weekly comply with the Autonomous Regions can working hours weekly working hours modify this number established by the established by the according to their needs. Autonomous Regions, Autonomous Regions, However, the number of but which may not be but which may not be days retailers have to be less than 90 hours. less than 90 hours. open on Sundays and Public Holidays cannot be less than Some Autonomous Some Autonomous 10 days. Regions forbid stores Regions forbid stores from opening before to open before 7:00 Some Autonomous Regions am and to close after forbid stores to open before Spain 07:00 and closing after 22:00 (e.g. Catalonia). 22:00 pm (e.g. 07:00 and to close after Catalonia). 22:00 (e.g. Catalonia).

Some Autonomous Regions forbid opening on 1st and 6th January and 25th December. Special Regime or Special Regime or unrestricted for: shops unrestricted for: Special Regime or smaller than 300 m², shops smaller than unrestricted for: shops convenience shops, 300 m², convenience smaller than 300 m², shops in tourist areas, shops, shops in tourist convenience shops, shops in shops in railway areas, shops in tourist areas, shops in stations, transport railway stations, railway stations, transport terminals, and border transport terminals, terminals, and border points, shops selling and border points, points, shops selling bakery bakery goods, shops selling bakery goods, confectionery, bread, confectionery, bread, goods, confectionery, ready meals, newspapers, ready meals, bread, ready meals, fuel, flowers and plants. newspapers, fuel, newspapers, fuel, flowers and plants. flowers and plants.

Sunday opening is restricted in England, Wales and Northern Ireland: large shops can open for a United Unrestricted Unrestricted maximum of 6 hours Kingdom between 10.00 and 18.00 (England and Wales) and 13.00 to 18.00 (Northern Ireland).

26 The Special Regime applies to those who are benefitting from non-resident income tax in Spain: http://www.agenciatributaria.es/AEAT.internet/Inicio/_Segmentos_/Ciudadanos/No_Residentes__viajer os_y_trabajadores_desplazados/Trabajadores_extranjeros_desplazados_en_Espana/Regimen_especial/I nformacion_sobre_el_regimen_especial.shtml. 27 La Asociación Nacional de Grandes Empresas de Distribución (National Association of Mass Distribution Companies).

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Sunday opening is unrestricted in Scotland but shop workers can refuse to work on Sundays.28

In England and Wales, large shops and supermarkets cannot be open on Christmas Day.29 No Sunday restrictions for shops smaller than 280m². Shops exempt from the Sunday trading restrictions include airport and railway station outlets, pharmacies and farms selling mainly their own produce. Source: Spark Legal Network

Level of the restriction As noted in Table 3, the majority of restrictions with regard to shop opening hours are set out at national level (AT, BE, CZ, DE, DK, EL, ES, FR, LU, MT, NL, NO, PL, SK). However, in three Member States, regions have the competence to set their own specific rules (AT, ES, UK). Additionally, in some Member States legislative competence is also allocated to municipalities (e.g. in NL, PL30). 31

Policy objective/Rationale for the restrictions All countries that have shop opening hours restrictions in force, provided for a rationale or policy objective (AT, BE, CZ, DE, DK, EL, ES, FR, LU, MT, NL, NO, PL, SK, UK). In the majority of the countries, policy objectives are provided by law, while in CZ it is stated in the government’s explanatory memorandum to the draft Act32, and in EL33 and MT34 in policy documents. Policy objectives and rationales for the regulations vary among these countries, however, six main categories have been identified, such as: protection of employees’ rights, conditions and interests (AT, BE, CZ, DE, FR, LU, PL, SK, UK), protection of consumers’ interests (BE, EL, LU, NO, SK), rest on Sunday and holidays (CZ, DK, FR, MT, NO, SK), ensuring fair competition (DE, EL, LU), economic growth and jobs (AT, EL, ES, FR, NL) and ensuring proper and safe delivery of medicines from pharmacies (CY, NO). It should be noted that two Member States provided a rationale for their decision to deregulate opening hours mainly in terms of economic objectives, such as facilitating competition between retailers (IT), as well as entrepreneurship and market freedom (HR).

28 Sunday Working (Scotland) Act 2003. 29 Christmas Day Trading Act 2004. 30In Poland, rules in this regard may be introduced at local level, by the Local Community Council. 31 As described above under our section on the scope of research, municipal level rules are not included in the scope of this project. 32 Act No. 223/2016 Coll., on Opening hours in retail and wholesale sector. 33 In EL the policy objective was provided by the national authority in the completed EC Questionnaire. 34 Consultation document published by the Ministry for Social Dialogue and Civil Freedoms.

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The remainder of the Member States either do not have specific national or regional regulations for opening hours (BG, EE, FI, HU, IE, LV, LT, PT) or do not make the information publicly available (MT, SE). Within this latter group, MT did not provide any information only with regard to pharmacies’ opening hours, while the policy objectives of the shop opening hours’ regulation were identified as mentioned above.

Exceptions to the restrictions Table 3 shows that the rules in each of the countries which set out opening times for retail shops (AT, BE, CZ, DE, DK, EL, ES, FR, LU, MT, NL, NO, PL, SK, UK) provided also for exceptions to the restrictions identified. Exceptions to the set opening hours vary from country to country but common features are identified as follows: shops located in specific areas such as tourist zones, airports, rail stations, bus stations etc.; certain type of shops which sell specific products such as pharmacies, shops selling food, flowers, souvenirs, fuel, and small shops.

Among the countries where opening times are unrestricted, IT sets out some exceptions to the liberalisation of shop opening hours35, meaning that opening hours may be restricted on the basis of protection of health, health of workers, environment and cultural heritage. Additionally, the Italian Constitutional Court36 affirms that exceptions may be applied to the liberalisation of shop opening hours related to public interest values protected by the Italian Constitution such as: public order, internal security.

Applicability to e-commerce Shop opening hours’ regulations, due to their nature, do not apply to e-commerce. Nonetheless, regulations can have an impact on pickup of goods that are bought or ordered online, such as in CZ37 and DK38.

Sanctions provided for by law As Table 3 above shows, in fourteen countries the law provides for sanctions in case of breach of their respective regulations (AT, BE, CZ, DE, DK, EL, ES, FR, LU, NL, NO, PL, SK, UK). Within this group, in nine countries (AT, CZ, DE, DK, NL, NO, PL, SK, UK) the sanction applied is a monetary fine, the amount of which varies from country to country and in DE from region to region. For instance, in CZ, if a shop opens during the specific public holidays in breach of the law39, the entity running the shop may be fined up to CZK 1,000,000 (approx. EUR 37,000). For repeated violation, the fine may be increased up to CZK 5,000,000 (approx. EUR 185,000). In the UK, shop owners are liable for a maximum fine of up to £50,000 (approx. EUR 54,325) in the case of Sunday trading in breach of the provisions of the law.

In ES, Autonomous Communities establish their own penalty regimes in their regions, applicable to breaches of the shop opening hours regulations.

In four countries (BE, EL, FR, LU) the sanctions imposed differ widely and can be both monetary and non-monetary penalties. For example, in BE, sanctions range from

35 Law of 22nd December 2011, No. 214, Article 31. 36 Ruling of 19th December 2012 No. 299. 37 Act No. 223/2016 Coll., on Opening hours in the retail and wholesale sector. In CZ, there has been uncertainty as to whether and when opening hours restrictions apply to e-shops pickup outlets. There is an ongoing debate on the matter between the Czech Trade Inspection Authority (CTIA) and an operator of a large e-shop in the Czech Republic, which kept its pickup outlets open during a public holiday. 38 “Strid om Lukketid på Nettet” published on Finans.dk, 13th September 2001. The restriction does not apply when consumers place their order but it applies to when the consumer can take possession of the product. 39 Act No. 223/2016 Coll., on Opening hours in the retail and wholesale sector, Section 3.

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EUROPEAN COMMISSION warnings to criminal penalties. Furthermore, in LU, retailers who breach the regulations have to pay a fine that may range between 10,001 to 100,000 francs (approx. EUR 247,9 to 2478,9).40 In the event of a repeated offence (recidivism) within five years, the closure of the establishment (undertaking) may be ordered for a period from one month to two years.

Lastly, in MT, the law does not provide for sanctions.41

Recent reforms Twelve Member States have recently reformed their shop opening hours regulations (BE, CZ, DK, ES, EL, FI, FR, HU, MT, NL, PT, RO). Within this group, reforms that appear to liberalise or introduce more flexible measures were registered in eight Member States (DK, FI, FR, ES, EL, HU, MT, NL). Within this group, three Member States fully liberalised shop opening hours (FI, HU, PT), while in the other countries (EL, ES, FR, MT, NL) a partial deregulation of opening times took effect. EL further liberalised the regime on shop opening hours on Sundays42. In FR, regulations on shop opening hours on Sundays43 were amended in 2015 and 2016, while no reforms on opening times during public holidays have been carried out. In MT, a new regulation on business hours entered into force at the beginning of 201744, whilst regulations on pharmacies’ opening hours have not been subjected to recent reforms. In NL, the law45 allocated broader powers to municipalities to authorise exemptions from the prohibitions with regard to Sundays and several public holidays.

Differently, in CZ, the new regulation introduced restrictions on opening hours during specific public holidays.

Additionally, in three Member States (BE, FR, RO) the reforms were aimed at clarifying existing rules and procedures, while not amending the material effect of the rules.

In the UK, in February 2016 the Government intended to introduce amendments to the Enterprise Bill46 to allow local authorities to decide whether to extend Sunday shopping hours in their areas, along with measures to strengthen protection for shop workers wishing to opt out of working on Sundays. However, the amendments were defeated in the House of Commons in March 2016.

Future plans for reform

40 Article 9 of the Law of 19 June 1995, provides for the fines in francs (10,001 – 100,000). However, given that Luxembourg has had the euro as its official and national currency since 2002, the amount of the fines has been converted into euros. However, the amount in euros depends on the conversion rate at the time of conversion. 41 Business Hours Regulations, Legal Notice 6 of 2017 (S.L. 441.08). 42 Article 114 of Law 4446/2016, which amended Law 4277/2013. 43 Law 2015-990 6th August 2015 on growth, economic activity and equal opportunities clarified the rules on Sunday rest and in the evening and Law No 2016-1088 8th August on work, modernisation of social dialogue and career security provided a procedure for amending the list setting out the Sundays granted by the mayor. 44 Business Hours Regulations, Legal Notice 6 of 2017 (S.L. 441.08), Article 2, 3, 4, 6, 7, 11. 45 Act of 11 June 2013 amending the Shop Opening Hours Act in connection to the widening of the municipalities’ powers: https://zoek.officielebekendmakingen.nl/dossier/32412/stb-2013- 217?resultIndex=7&sorttype=1&sortorder=4 . 46Enterprise Bill 2016: https://www.publications.parliament.uk/pa/cm201516/cmpublic/enterprise/160225/am/160225s01.htm

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3 | Identification and mapping of operational restrictions in the 28 Member States and Norway

In the vast majority of the countries, there are no future plans for reforming their current regulations on shop opening hours (AT, BE, BG, CZ, DK, EE, EL, ES, FI, FR, HR, HU, IE, LT, LU, LV, MT, NL, NO, PT, RO, SI, UK), while in a handful of Member States, plans or discussions for future reforms have been identified (CY, DE, IT, PL, SK). Within this group, plans or discussions to reintroduce limits to opening times have been found in IT, PL and SK, whilst in DE the reforms are intended to partly liberalise opening hours. In CY, the regulation on opening times is under discussion.

In IT, shop opening hours were liberalised in 2011, but a draft bill on reintroducing some limits on opening times is under discussion in Parliament.47

In PL, the government is currently working on a new regulation on shop opening hours, which would introduce Sunday opening restrictions.48 In SK, there is a political discussion around a proposal made by one of the governing parties with regard to the extension of the restrictions on retail shops opening to all public holidays for family protection reasons. In DE49, there are plans to extend the shop opening hours in the Land of Saarland and discussions are ongoing to increase opening hours on Sundays in the Land of Brandenburg. In CY, there have been recent discussions between the government and the legislature about restoring some regulations on shop opening times. For instance, discussions were held on 14 March 2017 in the House of Representatives Committee on Labour, Welfare and Social Security.

3.3.3 Restrictions on distribution channels (Alcohol)

Introduction For the purposes of this study, distribution channels restrictions are defined as requirements for certain products to be sold in certain shops or in shops that have been licensed to sell alcohol. The table below presents an overview of such restrictions pertaining to alcohol, which were identified across the countries researched.

Table 5 Distribution channels (Alcohol)

Category of data Observed in which countries? Restriction(s) on distribution channels AT, CY, CZ, DK, FI, FR, IE, LV, LT, LU, NL, NO, for alcohol PL, SE, SK, UK Level of the National AT, CY, CZ, DK, FI, FR, IE, LV, LT, LU, NL, NO, restriction(s) PL, SE, SK Regional UK Exceptions CZ, DK, IE, LT, LU Applicability to e-commerce CZ, DK, FR, IE, NL, NO, SE, UK Sanctions CY, CZ, DK, FI, FR, IE, LV, LT, LU, NL, NO, PL, SE, SK, UK Recent reforms CZ, FI, LT, NL Future plans for reform of the CZ, FI, LT, LV, NL, SE regulation(s) Source: Spark Legal Network

47 Draft Bill (AS1629). 48 Draft Bill available at: http://www.sejm.gov.pl/Sejm8.nsf/PrzebiegProc.xsp?id=BD896877D7858089C12580360058EDB4 . 49 Regarding the future plans for reform in Saarland and Brandenburg, further details can be found here: https://www.nichtgeschlossen.info/zug/; http://www.maz-online.de/Brandenburg/Lockerung-der- Sonntagsoeffnung-bleibt-umstritten.

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Sixteen Member States have regulations which restrict the distribution of alcohol to certain types of shops, i.e. those operating under a state monopoly, that hold a licence, or that do not sell other types of products (AT, CY, CZ, DK, FI, FR, IE, LV, LT, LU, NL, NO, PL, SE, SK, UK). In the majority of these countries shops need to hold a licence to sell alcohol (AT, CY, FR, IE, LV, LU, NL, NO, SK, UK), while in eight countries national regulations provide also for further requirements (CZ, DK, FI, LT, NL, NO, PL, SE) as described below.

Two Member States have state monopolies in place for the sale of alcohol (FI, SE). In FI, the State Alcohol Monopoly (“Alko”) has the sole right to carry out retail trade of alcoholic beverages. Retail trade of alcoholic beverages may only be carried out via specific retail shops for alcoholic beverages approved by the supervisory authority (National Supervisory Authority for Welfare and Health, Valvira).50 Alko may also retail trade alcoholic beverages by dispatching them to traders or buyers as provided by Decree.51 In SE, the Swedish Alcohol Retailing Monopoly (Systembolaget AB) holds the exclusive right to retail sales of all alcoholic beverages containing more than 2.25 percent alcohol by volume, with the exception of beer with an alcohol content of up to 3.5 percent by volume.52

In CZ, alcohol can be sold only in specialised shops for alcoholic beverages, specialised store departments for alcoholic beverages, grocery stores, dining, cultural or accommodation facilities, with the exception of those for minors53. In DK, alcoholic beverages with 2.8 percent alcohol and over, have to be sold in shops which must be open at least once per week for a continuous period of at least 4 months.54

In LT, alcoholic beverages may only be sold in specific shops and places55: 1) alcohol beverages – at permanent shops selling alcoholic beverages, departments of permanent stores selling alcoholic beverages, permanent catering establishments, in general sections of permanent shops located in rural settlements, international trains, narrow-gauge railway trains and ships which have set up separate catering places, aircrafts carrying passengers on international routes, at exhibitions and fairs which are held in permanent buildings, as well as in special sales outlets; 2) naturally fermented cider, beer and beer blends with non-alcoholic beverages, bottled by the plant, the ethyl alcohol strength of which by volume does not exceed 7.5 % – in pavilions, automobile-shops (which serve the rural population according to the procedure established by a municipal council); 3) alcoholic beverages, the ethyl alcohol by volume of which does not exceed 22 % – in temporary catering establishments during a resort, recreational and tourist season period set by a municipal council; 4) naturally

50 Alcohol Act (1143/1994) section 13 and http://www.valvira.fi/web/en/alcohol. 51 According to section 14 of the Alcohol Act (1143/1994), retail trade of alcoholic beverages containing a maximum of 4.7% by volume ethyl alcohol, which are prepared through fermentation, may be carried out, besides by Alko, by whoever has been granted a retail licence by the licensing authority. Retail trade of alcoholic beverages containing a maximum of 13% by volume ethyl alcohol, which are prepared through fermentation, may be carried out, besides by Alko, on conditions determined by the Ministry of Social Affairs and Health and with the permission of the licensing authority, by the person who has been licensed to produce the said product. 52 This restriction is provided by the Alcohol Act (2010:1622) and an agreement between Systembolaget AB and the state, giving Systembolaget AB control of establishment of points of sale and opening hours (Chapter 5, Section 1-3). 53 Act No. 379/2005 Coll., on Measures for protection from harm caused by tobacco products, alcohol and other addictive substances. 54 Trade Act, 14th June 2011, no. 595, section 3, sub-section 1. 55 Law on Alcohol Control of the Republic of Lithuania, 2004, No. 47-1548, Article 18.

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3 | Identification and mapping of operational restrictions in the 28 Member States and Norway fermented alcoholic beverages of which ethyl alcohol by volume does not exceed 13 % – at exhibitions; 5) naturally fermented alcoholic beverages of which the ethyl alcohol by volume does not exceed 7.5 % – at mass events and fairs.

In NL, low-alcohol beverages for consumption off premises may not be sold by retailers other than: liquor stores; shops which predominantly sell food- or tobacco- related products, or exclusively sell low-alcohol beverages; department stores with a food hall of at least 15 m² of floor space where a wide range of packaged and non- packaged food products is sold; publicly accessible enclosed spaces where mainly ready-for-use foodstuffs for consumption are being sold (not being a hospitality facility).56

In NO, the law provides that a) alcoholic beverages may only be sold, served or produced on the basis of a licence57; b) the retailing of alcoholic beverages containing more than 4.75 per cent alcohol by volume may only be carried out by AS Vinmonopolet58; d) other alcoholic beverages may only be retailed on the basis of a municipal licence or on the basis of authorisation59; e) that a licence to retail or serve alcoholic beverages may not be issued to gas stations or kiosks.60

In PL, retail sales of alcoholic beverages with over 4.5% alcohol content (except for beer), intended for consumption off premises, can be conducted only in dedicated points of sale61, namely: trade shops that sell only alcoholic beverages; dedicated sections in commercial outlets with a sales area greater than 200 m2; other self- service facilities and other commercial outlets in which the retailer conducts direct sales of alcoholic beverages.

Level of the restriction As one can see in Table 5, all countries regulate the sale of alcohol at national level except for the UK where different regulations apply in England and Wales, Scotland and Northern Ireland.

Policy objective/Rationale of the restrictions All countries which have distribution channel restrictions for alcohol in place, provide for a rationale or a policy objective, except for CY. Policy objectives are mainly provided by law, excepting in CZ, FR and SK. In CZ, the policy objective of the restrictions can be found in the government’s explanatory memorandum to the draft Act62, while in FR and SK policy objectives were provided by national authorities63.

These restrictions mainly aim at protecting public health (AT, CZ, DK, FI, FR, IE, LU, NL, SE, UK), protecting young people (AT, LU, SE, UK) and consumers (SK), reducing alcohol consumption (FI, LT, NO, PL, UK).

Exceptions to the restrictions

56 Alcohol Licensing and Catering Act 2004, Article 18. 57 Norwegian act of 2 June 1989, No. 27 Relating to the Sale of Alcoholic Beverages, § 1-4. 58Norwegian act of 2 June 1989, No. 27 Relating to the Sale of Alcoholic Beverages, § 3-1(1). 59 Norwegian act of 2 June 1989, No. 27 Relating to the Sale of Alcoholic Beverages, § 3-1 (2). 60 Norwegian regulation of 8 June 2005, No. 538 Relating to the Sale of Alcoholic Beverages, § 3-4. 61 Act on Upbringing in Sobriety and Counteracting Alcoholism of 26 October 1982 (Official Journal 2016, item 487), Article 18. 62 Act No. 379/2005 Coll., on Measures for protection from harm caused by tobacco products, alcohol and other addictive substances. 63 In FR and SK, the policy objectives were provided by the national authorities in the completed EC Questionnaires.

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A large majority of countries where distribution channel restrictions for alcohol were found, either do not provide for any exceptions (AT, CY, FI, NO, PL, SK, SE, UK) or provide general exceptions which do not specifically refer to the identified restrictions (FR, LT, LV)64. In the other five Member States, specific exceptions to the above- mentioned restrictions exist (CZ, DK, IE, LU, NL). Exceptions concern the possibility to sell certain types of alcoholic beverages without a licence (LU) or under slightly less burdensome requirements for licences for wine (IE), as well as during short-term events (DK) and by the glass (CZ).

In NL, the above-mentioned restrictions do not apply to military sites and premises under military authority, during the time these are exclusively used for military purposes, or to shops located at airfields opened to traffic to and from countries outside of the European Union, in the areas only accessible to people who are in possession of a valid ticket.

Applicability to e-commerce In eight countries, the identified restrictions apply to e-commerce (CZ, DK, FR, IE, NL, NO, SE, UK). In FR, e-shops which sell alcoholic beverages must comply with two requirements: specific training65 and a licence, which vary according to the category of beverages that can be sold, while in IE, licensees can take orders online but the transaction needs to be completed at the premises for which the licence is held. Illustratively, in NL the law does not specifically mention online sales. However, the law provides that it is prohibited, except in the legitimate exercise of a liquor store, to offer the delivery of liquor to private homes, while the same restriction applies to the delivery of low-alcohol beverages by retailers who, under the Act, are not permitted to sell these beverages. This means that only the retailers authorised to sell certain alcoholic beverages under the Alcohol Licensing and Catering Act 66may also sell these beverages online.

In PL, according to a recent judgment67, the online sale of alcoholic beverages is not allowed because the law, which lists the sales points of alcoholic beverages exhaustively, does not mention the internet as a point of sale.

In seven Member States the identified restrictions either do not apply to e-commerce (CY, FI, LT, LU, LV) or are not explicitly stated in the law (AT, SK).

Sanctions provided for by law Almost all countries - which have distribution channel restrictions for alcohol - specific sanctions are foreseen by the law in the case of breach of their regulations (CY, CZ, DK, FI, FR, IE, LT, LU, LT, NO, NL, PL, SE, SK, UK). The only exception is AT where the country correspondent reported that the information is not publicly available. Sanctions differ from country to country; however, the majority of countries have rules imposing monetary fines (CY, CZ, DK, FR, IE, LT, LU, LV, NL, NO, PL, SE, SK, UK). Additionally, within this group, seven countries may punish the violations by also imposing imprisonment (CY, DK, IE, LU, NO, SE, UK), while four Member States also

64 The reason behind it is because the same national law provides for different restrictions on alcohol and not only for distribution channel restrictions. 65 Articles L.3331-4 paragraph 2, L.3332-1-1 and 3332-4 and subsequent and Decree No. 2011-869 of 22 July 2011. 66 Article 19 Alcohol Licensing and Catering Act. 67 Judgment of the Supreme Administrative Court, 21st April 2016 (II GSK 2566/14).

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3 | Identification and mapping of operational restrictions in the 28 Member States and Norway impose sanctions that affect the selling activity itself (CY, CZ, LT, PL). In CY, in addition to criminal sanctions (imprisonment, fine), the court may order the revocation of the licence, while in LT, in addition to a fine, the licence may also be revoked. In CZ, depending on the infringement, a ban on the activity may also be imposed. In PL, forfeiture of alcoholic beverages may be ordered, even if such beverages are not the property of the perpetrator. Furthermore, a prohibition on conducting business activities consisting of selling and serving alcoholic beverages may be imposed. Finally, FI provides for several sanctions which mainly affect retail sale activity and the licence.

Recent reforms A handful of Member States recently reformed their regulations on distribution channels for alcohol (CZ, FI, LT, NL), while in the other twelve countries no recent reforms or amendments occurred (AT, CY, DK, FR, IE, LV, LU, NO, PL, SE, UK).

In CZ, the national regulation was recently reformed, tightening the conditions of sale and distribution of alcohol products.

In FI, in the first half of 2016, the Government held preliminary discussions and presented guidelines and proposals for a more comprehensive reform of the national legislation on alcohol. The reform is part of the deregulation project, with the aim to reduce the negative effects of alcohol on public health and safety and respond to competition concerns.68 The principles of the reform include maintaining Alko’s current retail monopoly and the current licensing system, and dismantling all unnecessary, outdated or cumbersome norms included in current legislation69.

Lithuania introduced changes to the national law70 in 2015 and 2016. The latest amendments have been in force since beginning of 2017.

Furthermore, in the Netherlands, the national regulation71 was amended in 2013 with the aim of reducing alcohol consumption among young people, reducing alcohol- related disturbances of public order, and curbing administrative burdens.

Future plans for reform As Table 5 shows, in six Member States, plans or discussions for future reforms have been identified (CZ, FI, LT, LV, NL, SE), whilst in the other nine countries there are no future plans for reform of the restrictions (AT, CY, DK, FR, IE, LU, NO, PL, UK).

In CZ, the new law72 will enter into force at the end of May 2017, replacing the pre- existing Act73. In Finland, the Government intends to reform the national regulations.74 This reform is part of the deregulation project, which is one of the Government’s key projects. The reform will aim to reduce the negative effects of alcohol on public health and safety

68 http://valtioneuvosto.fi/en/artikkeli/-/asset_publisher/1271139/lausuntoyhteenveto-alkoholilain- kokonaisuudistuksesta-valmis; http://stm.fi/en/comprehensive-reform-of-alcohol-act . 69 In spring 2017, the draft bill was submitted for evaluation to the Finnish Council of Regulatory Impact Analysis (FCRIA). After the evaluation of its impact, the Government’s draft bill was submitted to Parliament during the spring session of 2017. The entry into force of the Act will be decided during parliamentary discussions. However, the Ministry of Social Affairs and Health estimates that the Act would enter into force on 1 January 2018 at the earliest. 70 Law on Alcohol Control of the Republic of Lithuania, Official Journal of Lithuania, 2004, No. 47-1548, Article 18. 71 The Alcohol Licensing and Catering Act. 72 Act No. 65/2017 Coll., on Protection of health from harmful effects of addictive substances. 73 Act No. 379/2005 Coll., on Measures for protection from harm caused by tobacco products, alcohol and other addictive substances. 74 The Alcohol Act, No. 1143/1994.

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EUROPEAN COMMISSION and respond to competition concerns. The principles of the reform include maintaining the current State retail monopoly and the current licensing system, and dismantling all unnecessary, outdated or cumbersome norms included in current legislation.

In Lithuania, the Law on Alcohol Control is under constant review in Parliament. The majority party in Parliament aims to restrict the sale of alcohol and its accessibility, including the sale of alcohol only in specialised stores.

In the Netherlands, in December 2016, the State Secretary for Health presented the findings of the 2016 evaluation of the Alcohol Licensing and Catering Act. The evaluation found that both young people and adults drink less than before, but when they do drink, they drink a lot. In order to reduce the consumption of alcohol, all future cabinets have been advised to consider implementing one (or more) of the three “best buys” measures that are internationally recognised as being effective ways of making people consume less alcohol: a tax increase, limiting the number of points of sale, and a complete ban on alcohol advertising and sponsorship.

Finally, in Sweden, the State retail monopoly of alcohol is subject to constant debate within the trade sector and between the different political parties.

3.3.4 Restrictions on distribution channels (Medicines)

Introduction For the purposes of this study, distribution channel restrictions are defined as requirements for non-prescription medicines to be sold only in certain types of shops (i.e. whether solely in a pharmacy or elsewhere, such as in supermarkets). The table below presents an overview of such restrictions pertaining to non-prescription medicines that were identified across the countries researched.

Table 6 Distribution channels (Non-prescription Medicines)

Category of data Observed in which countries? Restriction(s) on distribution channels AT, BE, BG, CY, CZ, DK, DE, EE, EL, ES, FI, FR, for non-prescription medicines HR, HU, IE, IT, LU, LT, LV, MT, NL, NO, PL, PT, RO, SE, SI, SK, UK Level of the National AT, BE, BG, CY, CZ, DK, DE, EE, EL, ES, FI, FR, restriction(s) HU, IE, IT, LU, LT, LV, MT, NL, NO, PL, PT, RO, SE, SI, SK, UK Regional Exceptions DE, EE Applicability to e-commerce AT, BE, BG, CY, CZ, DK, EE, EL, ES, FI, FR, DE, HR, HU, IE, LT, LU, LV, MT, NL, NO, PL, PT, RO, SE, SI, SK, UK Sanctions AT, BE, BG, CY, CZ, DK, EE, EL, ES, FI, FR, DE, HR, HU, IE, IT, LT, LU, LV, MT, NL, NO, PL, PT, RO, SE, SK, SI, UK Recent reforms CY, DK, FI, EL, LU, NL, PL, SI, UK Future plans for reform of the FI, IT, LV, PL, SE regulation(s) Source: Spark Legal Network

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3 | Identification and mapping of operational restrictions in the 28 Member States and Norway

All Member States impose restrictions on the sale of non-prescription medicines. Non- prescription medicinal products75 are covered by Directive 2001/83/EC. They are also referred to as OTCs (over-the-counter medicines) as they can be purchased without a medical prescription.76

Directive 2001/83/EC provides a degree of harmonisation in respect of the prescription / non-prescription dichotomy. Article 71(1) provides that medicinal products shall be subject to a requirement for a prescription where they:

- are likely to present a danger either directly or indirectly, even when used correctly, if utilised without medical supervision, or - are frequently and to a very wide extent used incorrectly, and as a result are likely to present a direct or indirect danger to human health, or - contain substances or preparations thereof, the activity and/or adverse reactions of which require further investigation, or - are normally prescribed by a doctor to be administered parenterally.

Article 72 defines non-prescription products as those which are not described in Article 71. National authorities are responsible for deciding which types of medicines are subject to prescription. The types of medicines designated as prescription or non- prescription therefore varies from one Member State to another.

In addition, Article 71(4) specifies that a competent authority may nonetheless decide that, in respect of medicinal products with characteristics described in Article 71(1), sale without a prescription can be effected, having regard to:

- the maximum single dose, the maximum daily dose, the strength, the pharmaceutical form, certain types of packaging; and/or - other circumstances of use which it has specified.

Thus, in addition to the discretion that competent authorities exercise in classifying medicines as meeting the requirements of prescription or non-prescription medicines, there is a degree of discretion afforded to competent authorities at national level in exempting certain products from the need for a prescription. However, the Directive does not prescribe the distribution channels for such non-prescription medicines (i.e. whether solely in a pharmacy or elsewhere, such as in supermarkets). Yet, it is common for competent authorities, when exercising their discretion pursuant to Article 71(4), to consider that while a drug may not require sale by prescription, supervision by a pharmacist is nonetheless required. Thus, it is common for sale of such medicinal products to be allowed only in pharmacies. On the other hand, in some Member States, the competent authority may consider that the level of dosage, strength, type of packaging or other circumstances of use make the product appropriate for general sale without the supervision of a pharmacist (i.e. in supermarkets).

In ten Member States the sale of all non-prescription medicines is reserved for pharmacies (BE, DE, EE, ES, FR, LT, LU, LV, MT, SK), whilst the other countries also allow the sale of (certain) OTCs / non-prescription medicines outside of pharmacies

75 Definition of “medicinal product” as provided in the Directive 2001/83/EC, Article 1: Any substance or combination of substances presented for treating or preventing disease in human beings. Any substance or combination of substances which may be administered to human beings with a view to making a medical diagnosis or to restoring, correcting or modifying physiological functions in human beings is likewise considered a medicinal product. 76 Directive 2001/83/EC of the European Parliament and of the Council of 6 November 2001, on the Community Code relating to medicinal products for human use.

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(AT, BG, CY, CZ, DK, EL, FI, HR, HU, IE, IT, NL, NO, PL, PT, RO, SI, SE, UK). Varying rules on outlets and types of medicines sold as OTCs apply across Member States.

Table 7 Overview table OCTs/non-prescription medicines

Products defined as OTCs / Non- Shops authorised to sell OTCs / Country prescription medicines Non-prescription medicines According to the law77, all medicines are subject to the prescription obligation unless they are excluded from the obligation by Annex I or Annex II of the regulation (in the latter case, such medicines need to be accompanied by a warning). The excluded medicines are accompanied by the letter “R” or “W”. The full list of substances is in the regulation. Drugstores, namely shops that sell (https://www.ris.bka.gv.at/GeltendeF mainly cosmetics (so-called Austria assung.wxe?Abfrage=Bundesnormen “Drogerien”, as mentioned in the &Gesetzesnummer=10010358 ). law). 78

The Federal Ministry of Health and Women has competence to decide in agreement with the Federal Ministry of Economy and Labour which medicines can be sold in drugstores or by traders who are entitled to produce medicinal products in accordance with the 1994 Trade Regulations, according to Paragraph 59 (3) AMG. Under Belgian law, the Minister or his/her delegate publishes a list of OTCs/Non-prescription medicines Belgium medicines which are subject to the can only be sold in pharmacies. requirement of a prescription.79 Drugstores (places where medicinal Food additives; foods for special products are dispensed without purposes; cosmetic products and medical prescription, products and biocides from the group I commodities of significance to Bulgaria "Disinfectants and general biocides" human health, specified in a special and group III "Biocides for pest ordinance, and medical articles can control". be sold or by which these can be sold over the internet).

77 Federal Law of 25 October 1972 on the supply of medicinal products on the basis of a medical prescription (prescription law, last amended in 2013, Para 1. https://www.ris.bka.gv.at/GeltendeFassung.wxe?Abfrage=Bundesnormen&Gesetzesnummer=10010351 , and Ordinance of the Federal Minister for Health and Environmental Protection of 30 August 1973 on prescription medicines. Verordnung des Bundesministers für Gesundheit und Umweltschutz vom 30. August 1973 über rezeptpflichtige Arzneimittel last amended in 2017, https://www.ris.bka.gv.at/GeltendeFassung.wxe?Abfrage=Bundesnormen&Gesetzesnummer=10010358 ). 78 Art. 59(3) Bundesgesetz vom 2. März 1983 über die Herstellung und das Inverkehrbringen von Arzneimitteln (Arzneimittelgesetz) (Federal Law of 2 March 1983 on the production and placing on the market of medicinal products). 79 Loi sur les médicaments, 25 Mars 1964, Art.6.

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Effervescent or solvent tablets of acetylsalicylic acid not containing other active ingredient of the above acid (other than those required to make effervescent tablets or soluble); Solution of acriflavine; Castor oil; Epsom salt; Solution of hydrogen peroxide; Weak Iodine Solution; Porous plasters; Sodium bicarbonate; Liquid antiseptic or disinfectant in Establishments other than which the only active ingredient is a Cyprus pharmacies chlorinated phenol; Liquid antiseptic

or disinfectant in which the only active ingredient is cetrimide or any other cationic surface active agent; Paraffinum Molle; Effervescent formulations of sodium bicarbonate in which the active ingredients are sodium bicarbonate, citric or tartaric acid and / or salts of the above acids; Pastilles or lozenges not containing any amount of poison or antibiotics. The Agency for Medicinal Products and Medical Devices (HALMED) classifies the prescription status of medicine as either prescription-only HALMED determines the medication medicines or OTC medicines. The dispensing status, which means status of an OTC medicine may be that an OTC medicine may be granted only to those medicines for dispensed either only in which no previous doctor's Croatia pharmacies, or both in pharmacies prescription is needed. OTC medicines and specialised stores for retail sale may contain one or more active of medicinal products. substances (or a combination thereof)

and those active substances may be

of chemical or herbal origin.

Types of medicines that can be distributed over the counter must be sold by sellers complying with the following obligations:

A list of all medicines is kept by the - each natural person in State Institute for Drug Control possession of a certificate of Czech (“SIDC”). SIDC also specifies which of professional competence, Republic these are prescription and which are - can sell only non- non-prescription medicines.80 prescription medicines, - non-prescription medicines may only be bought from official manufacturers or distributors of those products. The Danish Medicines Agency OTC may only be sold by shops established a list of OTCs, which is authorised by the Danish Medicines updated daily. This includes: mild Agency, including shops which are Denmark pain-relieving medicines, smoking not pharmacies. Varying dispensing cessation medicines, throat, cough categories exist based on age and nasal medicines. groups.

80 Act No. 378/2007 Coll., on Medicines, Section 2, defines the prescription and non-prescription medicines.

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Further info and the current list of OTCs can be found here: https://laegemiddelstyrelsen.dk/en/p harmacies/over-the-counter- medicines/

Information on the sales of medicines can be found on the website on the Republic of Estonia Agency of Medicines: OTCs can only be sold in Estonia http://ravimiregister.ravimiamet.ee/e pharmacies. n/default.aspx?pv=HumRavimid.Otsin g

Most OTCs need to be sold in pharmacies. However, traditional herbal medicinal products and homeopathic products, and nicotine products may be sold elsewhere – No information identified during this Finland such as in tobacco-selling retail research. stores, kiosks and service stations as well as bars and restaurants on the basis of the authorisation granted by the municipality where the sales outlet is located. OTCs are those set out in one of 3 OTCs can only be provided by a France lists published by the competent pharmacy. authority81. The Federal Joint Committee provides information on OTCs on its website: https://www.g- ba.de/institution/themenschwerpunkt e/arzneimittel/otc-uebersicht/ OTCs can only be sold in Germany Furthermore, information and pharmacies. examples of OTCs can be found here: https://www.g- ba.de/downloads/83-691-323/AM-RL- I-OTC-2013-06-05.pdf OTC Medicines are those which satisfy Most OTCs can only be provided by the following requirements: medicines a pharmacy, apart from certain which fulfil the following “medicines of general use”, requirements: 1) they are used to including: sodium fluoride, tackle simple diseases with obvious hexetidine, benzoxonium chloride, symptoms, 2) they shall not put in ranitidine hydrochloride, glycerol, danger patients’ health directly or white soft paraffin, salicylic acid etc. indirectly due to adverse side effects, In practice, they concern pain Greece 3) they shall protect the patients from relieving drugs, antipyretics, bad use and they shall not cause aspirin, medicines against muscle addiction, 4) they shall not include ache, antihistamines etc. "Medicines active substances only recently of general use” can be sold not only authorised by the National from pharmacies but also from Organization for Medicines, 5) they shops which have the licence to shall be sold in at least another three operate as i) supermarkets and ii) European countries without medical grocery shops.82 prescription, 6) on their packaging it

81 http://ansm.sante.fr/Dossiers/Medicaments-en-acces-direct/Medicaments-en-acces-direct/(offset)/0 82 Ministerial Decision N. ΥΑ Γ5(α) 51194/2016 issued by the Minister of Health.

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should be indicated that they can be provided without a medical prescription Hungary No information available. Supermarkets. Legislation allows medicines (not There is a distinction between non- being those for which a prescription is prescription products which can required) to be sold over-the-counter only be sold by pharmacies and by pharmacies. In addition, some those which can be sold in non- medicines can be classified for general pharmacy outlets (such as sale (in non-pharmacy outlets), where supermarkets). The latter concerns they are non-prescription drugs and products containing: they contain certain substances. The Aspirin; Colecalciferol; Ireland HPRA is responsible for classifying Cyanocobalamin; Ergocalciferol; medicines.83 It will assess whether Folic Acid; Hypericum perforatum re-classification it is reasonably safe L.; Nicotinic acid; Pyridoxine having regard to the nature and Hydrochloride; Retinol; Retinol purpose of the product. Acetate; Retinol Palmitate; Sodium Fluoride; Sodium Monofluorophosphate; Stannous Fluoride. Parapharmacies and ‘health corners’ Several OTCs and non-prescription located in commercial medicines (SOP) are allowed to be establishments (e.g. supermarkets, sold also outside of pharmacies, such hypermarkets, etc.). Health corners as aspirin, paracetamol, cold and Italy are areas dedicated to the sale and cough remedies, etc. The latest list of storage of over-the-counter the most common sold OCTs and medicines and non-prescription SOPs was published in 2016: list in medicinal products in supermarkets Italian. and hypermarkets. There is a searchable database of medicines. A search can be performed OTCs can only be sold in Latvia by name of medicine or by active substance, and the result shows pharmacies. whether it is available OTC.84 No information identified during this OTCs can only be sold in Lithuania research. pharmacies. No information identified during this OTCs/non-prescription medicines Luxembourg research. can only be sold in pharmacies. There is a searchable database of medicines where one can see if each OTCs can only be sold in Malta medicine is available OTC or by pharmacies. prescription only. The Medicines Evaluation Board is UA medicines: pharmacies Netherlands responsible for classifying medicines UAD medicines: pharmacies and as either ‘UA’85, ‘UAD’86 or ‘over- chemists

83 The HPRA website contains a searchable database: http://www.hpra.ie/homepage/medicines/medicines- information/find-a- medicine/results?ls=Product%20not%20subject%20to%20medical%20prescription&iw=false&exhom=f alse&exher=false&onlyedu=false. A search for non-prescription medicine shows 963 matches, 640 of which can only be sold in pharmacies, while 323 can also be sold in non-pharmacy outlets. 84https://www.zva.gov.lv/zalu- registrs/?iss=1&lang=en&q=&ON=Paracetamol&SN=&NAC=on&RN=&ESC=on&AK=&SAT=on&RA=&DE C=on&LB=&PIM=on&MFR=&MDO=&IK= . 85 “Uitsluitend in de Apotheek”: Exclusively in Pharmacies. These are medicines that can be made available without a prescription, but only in pharmacies by pharmacists practicing their profession in a pharmacy (Article 61.1 Medicines Act). 86 “Uitsluitend in de Apotheek en Drogisterij”: Exclusively in Pharmacies and Chemists).” These are medicines without a prescription, not being a UA-medicine. In order for a chemist to be allowed to sell ‘UAD’-medicines, this must be done in a “responsible manner”. This means that the sale must occur under the responsibility and supervision of a chemist and the consumer must be clearly informed about the medicine by a chemist or an assistant chemist (Medicines Act, Article 62.2).

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the-counter’87. The Board will classify ‘over the counter medicines’: a medicine in the latter category Pharmacies, drug stores and other when it considers doing so to be registered retailers “who engage in responsible from a safety perspective, the pursuit of business selling taking into account the active activities”. Over-the-counter substance, the dose and the medicines may also be sold in, for packaging size. example, supermarkets and gas Depending on the ingredient, certain stations. terms and conditions apply (e.g.: a certain substance can only be used as a lozenge; up to 42 tablets; Up to 20 mg / tablet.) The latest list of active ingredients that are eligible for over- the-counter sale was published in 2016 and includes those used in cough syrups, nasal sprays, muscle balms and paracetamol: list in Dutch. Businesses subject to No information identified during Norway supervision by the Food Safety this research Authority. According to the website of the Ministry of Health the products sold in retail shops (see right column) are only allowed to contain active substances which were sold without prescription in pharmacies for at least five years: Website in Polish. The list of active substances which can be contained in the medicines sold in the shops open to the public and the specialist medical supply Herbal medicine shops; shops is much shorter (at present, specialist medical supply shops; Poland 52 substances). As a result, a lot shops open to the public, i.e. of medicines can be sold in such grocery shops, newspaper shops – they include, amongst stands, petrol stations etc. others: painkillers, non-steroid anti-inflammatory medications, medicines used to treat nicotine addiction, sore throat medicines, antiseptic products and disinfectants, antihistamine products, proton pump inhibitors and medicinal products used in oral and pharyngeal inflammations containing only vegetable products. A list of medicines (and other Shops that sell over-the-counter Portugal substances) which can be sold medicines have to comply with

87 Pharmacists and chemists are also allowed to sell over-the-counter medicines (without the “responsibility” requirement). However, so are any other registered retailers “who engage in the pursuit of business selling activities” (Medicines Act, Article 62.3). This means over-the-counter medicines may also be sold in, for example, supermarkets and gas stations. See also Article 56 of the Medicines Act.

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without prescription is provided by a number of conditions (related the INFARMED (national authority to hygiene, staff qualifications, for medicines and public health) safety, etc.), have to be and updated on a daily basis.88 registered with the INFARMED (national authority for medicines and public health), and to follow any requirements imposed by this authority, according to Decree law 134/2005 of 16 August as amended by Decree Law 238/2007 of 19 July. Drugstores: a drugstore provides pharmaceutical assistance to consumers p No information identified during through the activities mentioned Romania this research. in Pharmacy Law no. 266/2008 art. 2 (1) lit. b), e) and g), with the exception of selling homeopath products/drugs.

No information identified during OTCs can only be sold in Slovakia this research. pharmacies.

Non-prescription medicinal Specialised stores authorised by products include medicinal the Public Agency of the products of herbal and synthetic Republic of Slovenia for origin that have a favourable risk- Medicines and Medical Devices benefit balance and are used for Slovenia and covered by the marketing treatment of mild symptoms and authorisation for medicinal mild health issues and their products. pharmacovigilance data show a small risk.

Non-prescription medical products include medical devices, equipment, and OTCs.89 The Spanish Agency for Medicines and Health Products90 defines non- prescription medicines as medicines that are used in a manner for which no precise OTCs/non-prescription Spain diagnosis is needed and whose medicines can be sold only in data on toxicological, clinical authorised pharmacies. evaluation or its use and administration do not require a prescription. These medicines can be used for self-care, by dispensing them in the pharmacy office by a pharmacist, who will inform, advise and instruct on

88 http://www.infarmed.pt/web/infarmed/entidades/licenciamentos/locais-de-venda-mnsrm/lista_de_mnsrm 89 Law 29/2006, Article 2. 90 https://www.aemps.gob.es/en/home.htm.

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their correct use.

A list of OTC substances – which are continuously updated - is provided by the Medical Products Retail stores such as grocery Sweden Agency (e.g. paracetamol, stores, convenience stores, gas esomeprazole, pantoprazole, stations. etc.): Information on OTCs in EN and SE. Over-the-counter medicines can be bought only from a pharmacy and in the presence of a pharmacist

General sale medicines are taken General sales list medicines for common, easily recognised (GSL) can be sold at a wide ailments which usually last around range of shops including 2–3 days. These medicines cause convenience stores, newsagents few troublesome side effects in and petrol stations as long as United normal use. To reduce the they are pre-packaged. They Kingdom chances of harm from can only be sold from premises inappropriate use, many general which can be closed off to the sale medicines packs contain only public and not from market a few doses. stalls etc. Attached to this report a list of pharmaceuticals which have been reclassified from prescription- only to over-the-counter, and from over-the-counter to general sale.

Source: Spark Legal Network

Level of the restriction Restrictions on distribution channels for non-prescription medicines are set out at national level.

Policy objective/Rationale of the restrictions A policy objective / rationale of the restrictions on the sale of non-prescription medicines has been identified in all Member States, except for HR. The main reason behind restricting the sale of OTCs is to protect public health and safety (AT, BE, BG, CY, DK, EE, EL, ES, HU, IE, IT, LT, LU, PL, PT, RO, SI, SE, SK, UK). Moreover, in some countries, ensuring safe and proper use of medicines (CZ, FI, NO, SE) as well as secure and high quality of medicines (DE, DK, LV, NL) were found as policy objectives / rationales of the restrictions.

Exceptions to the restrictions The majority of Member States do not provide for exceptions to the above-mentioned restrictions. Nonetheless, two Member States provide for exceptions (EE, DE), which differ.

Regarding DE, the exceptions mainly concern a limited range of highly specialised products that can be sold outside of pharmacies. Specifically, in DE, certain medicinal

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3 | Identification and mapping of operational restrictions in the 28 Member States and Norway products 91 are exempted from the applicability of the law92 and others can be sold outside of pharmacies93. Furthermore, under certain circumstances, the Bundesministerium may permit the sale of other substances in pharmacies.94 In EE, it is not required to hold a marketing authorisation to sell certain medicinal products.95

Applicability to e-commerce Restrictions on selling medicines online have been identified in all countries, mostly reflecting the requirements of EU legislation96 (e.g. prohibition to sell prescription medicinal products via the internet; online retailers that sell medicines must be registered with the national competent authorities in the EU Member States, etc.; only non-prescription medicines can be sold online).

Sanctions provided for by law All countries provide for sanctions in case of breach of their regulations (AT, BE, BG, CY, CZ, DE, DK, EE, EL, ES, FI, FR, HR, HU, IE, IT, LT, LU, LV, MT, NL, NO, PL, PT, RO, SE, SK, SI, UK). In the majority of countries, the applied sanctions consist of a pecuniary fine (AT, BG, CY, CZ, DE, EE, EL, ES, HR, HU, IE, LU, LT, LV, MT, NL, NO, PL, PT, RO, SE, SI, SK, UK), whereas in some of them also non-pecuniary penalties (such as imprisonment, and other bans) are found (CY, CZ, DE, EL, HU, IE, NL, NO, PL, SE, UK). In BE, criminal sanctions apply, as well as in FI and IT where administrative sanctions are also imposed. In FR, several disciplinary sanctions are imposed for offline sales, while for online sales administrative penalties apply. Lastly, in the UK penalties vary and range from imprisonment to seizure of drugs.

91 The medicinal products Act does not apply to: 1) medicines which are produced through the use of pathogens, or through biotechnical means, and which are used for the prevention, identification or curing of animal diseases; 2) the production and placing onto the market of germ cells for the artificial insemination of animals; 3) tissue, which is extracted from a person as part of a special treatment programme, in order to retransfer it to said person without having changed its material composition; 4) medicines which are exclusively aimed at serving a different purpose than to cure or soothe illnesses, suffering, or physical complaints due to illness can be sold outside of pharmacies. 92 Medicinal Products Act 2005, amended in 2016. 93 The following medicinal products can also be sold outside of pharmacies: 1. a) natural ‘healing waters’ (Heilwasser) as well as their salts (also as tablets or pills), b) artificial healing waters as well as their salts (also as tablets or pills), but only if they correspond to natural healing waters in their composition. 2. Medicinal clay, and similar peloids. 3. Labelled with their common German names, a) plants and plants parts, also crushed, b) mixes from whole or cut up plants or plant parts as ready-medicines, c) distillates from plants or plant parts, d) pressed juices from fresh plants and plant parts, as long as they are not produced with any solvents other than water. 4. Plasters. 5. Disinfectants as well as mouth and throat disinfectants, which are meant only or mainly for external use. 94Medicinal Products Act, Paragraph 45: Substances, preparations of substances or objects intended to be used partly or exclusively to cure / remedy diseases, suffering, body injuries or illness-related complaints may be released for sale outside pharmacies, (1) in so far as they are not restricted to medical, dental or veterinary prescriptions, (2) in so far as they do not require examination, storage and delivery by a pharmacy in order to ensure the right storage, composition or effect, (3) if there is no direct or indirect risk to the health of people or animals as a result of selling the medicine outside pharmacies, (4) provided that selling medicines outside pharmacies does not jeopardise the proper supply of medicines. Desk research has not identified whether this provision has ever actually been applied in practice. 95The list of products that can be sold without marketing authorisation: 1) medicinal products prepared as magistral and officinal formulae and medicinal products divided up into retail packaging by pharmacies; 2) medicinal products imported based on a single import authorisation and a single distribution permit granted by the State Agency of Medicines; 3) whole blood and blood components; 4) herbal substances; 5) medicinal products prescribed for use on aquarium fish, cage birds, terrarium animals, small rodents as well as ferrets and rabbits kept as pets (hereinafter veterinary medicinal products not subject to the marketing authorisation requirement) provided that the use of such medicinal products on any other animal species is precluded; 6) advanced therapy medicinal products that have been, by way of exception, made on the basis of a doctor’s prescription and subject to doctor’s professional liability for being used by a specific patient upon provision of in-patient health services in Estonia. 96 Directive 2011/62/EU of the European Parliament and of the Council of 8 June 2011 amending Directive 2001/83/EC on the Community code relating to medicinal products for human use, as regards the prevention of the entry into the legal supply chain of falsified medicinal products.

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Recent reforms Recent reforms have been found in seven Member States (CY, DK, EL, NL, PL, SI, UK), while in the remainder of countries no recent reforms or amendments have occurred (AT, BE, BG, CZ, DE, EE, ES, FR, HU, IE, IT, LT, LU, LV, MT, NO, PT, RO, SE, SK, UK). In three Member States (CY, LU, NL) recent reforms concern online selling. In CY and LU, the regulations allow the online sale of OCTs under certain conditions, whereas, in NL, the rules introduced in 2015 concern the obligation of online providers of medicines to be registered with the CIBG – an executive agency of the Dutch Ministry of Health, Welfare and Sport. It appears that in these Member States, such reforms stem from EU law.97

In DK, a regulation98 entered into force in 2016 that allows the sale of mild pain- relieving medicines, smoking cessation medicines, throat, cough and nasal medicines, in the general area of stores allowing consumers to choose medication without information or guidance over the counter. Prior to this reform, such OTCs had to be kept behind the counter or in a locked cabinet.

In EL, a recent reform99 introduced a new regime on the marketing of OTC medicines. In particular, it introduced a new category of medicines: Medicines of General Use which can be sold also outside of pharmacies, in certain points of sale, without the presence of a pharmacist.

In PL, at the beginning of 2017100 a new restriction on the retail sale of OTC medicinal products came into force. It limits the sale of OTCs containing psychoactive ingredients to pharmacies and dispensary pharmacies.

In SI, the reformed regulation101 introduced a provision, which states that the Public Agency for Medicines and Medical Devices of the Republic of Slovenia publishes on its website a list of medicinal products that may be dispensed in specialised shops, and prohibits any commercial incentives to the retail sale of medicinal products that would lead the final customer to unnecessary or excessive purchase or use of medicinal products. Furthermore, it explicitly regulates the online sale of non-prescription medicine, specifying that the online supply of medicinal products shall be performed by pharmacies and specialised stores for medicinal products.

Lastly, in the UK, the Regulations are constantly updated to take into account new drugs.

Future plans for reform Future plans for reform have been found in five countries (FI, IT, LV, PL, SE). In three Member States there are ongoing discussions at governmental level that concern deregulating the sale of OTCs (LV) and class C medicines102 103 (IT), as well as

97 Commission Implementing Regulation (EU) No 699/2014 of 24 June 2014 on the design of the common logo to identify persons offering medicinal products for sale at a distance to the public and the technical, electronic and cryptographic requirements for verification of its authenticity. 98 Draft Legislation Amending the Act on Pharmacies and the Medicines Act, 6th October 2016, no. 38 99 Law 4389/2016, Article 68 paragraph 2. 100 Ordinance of the Ministry of Health of 16th December 2016, Article 71a. 101 Medicinal Products Act, Article 126. 102 Class C medicines are prescription medicines that are entirely paid for by patients and not reimbursed by the National Health Service. Furthermore, Class C includes other products which do not have the

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3 | Identification and mapping of operational restrictions in the 28 Member States and Norway liberalising (further) the sale of OTCs in FI.104 In PL, plans for reform appear to go in the direction of reducing the number of medicines that can be sold in shops other than pharmacies.105 Furthermore, In SE, proposals have been presented on the role of pharmacies and pharmacists in ensuring better use of medicines and on the supervision and control of the sale of over-the-counter medicines. In this regard, future plans propose that municipalities should be able to commission another municipality to carry out checks on the sale of non-prescription medicines under an agreement. Furthermore, the plans propose that the Medical Products Agency take the initiative to increase knowledge concerning what rules are applicable to the sale of non-prescription medicines outside pharmacies. 106

3.3.5 Restrictions on distribution channels (Tobacco)

Introduction For the purpose of this study, distribution channel restrictions for tobacco encompass: obligations to sell tobacco only in certain types of shops, shops holding a licence/authorisation or registration or that meet specific criteria, in order to sell tobacco. The table below provides an overview of such restrictions, identified in the countries researched.

Table 8 Distribution channels (Tobacco)

Category of data Observed in which countries? Restriction(s) on distribution channel for AT, BG, CY, CZ, DK, ES, FI, FR, HU, IE, IT, SI, tobacco SK, UK Level of the National AT, BG, CY, CZ, DK, ES, FR, HU, IE, IT, SI, SK restriction(s) Regional UK Exceptions AT, CY, DK, FR, HU Applicability to e-commerce CZ, DK, ES, IE, IT Sanctions AT, BG, CY, CZ, DK, ES, FI, FR, HU, IE, IT, SI, SK Recent reforms BG, CY, CZ, FI, HU, SI, SK Future plans for reform of the HU regulation(s) Source: Spark Legal Network

Such restrictions can be found in fourteen Member States (AT, BG, CY, CZ, DK, ES, FI, FR, HU, IE, IT, SI, SK, UK). These countries require tobacco products to be sold in specific shops holding a licence, an authorisation, a registration or meeting specific criteria.

characteristics of Class A (essential products and those intended for chronic diseases, and are fully reimbursed by the NHS). www.aifa.gov.it/en. 103 Hearing of the President of the Antitrust Authority 28 October 2015, page 17. 104 Reports and Memorandums of the Ministry of Social Affairs and Health 2012:33. 105 On 2nd of January 2017, the Ministry of Health published a draft of a law amending the Regulation on the Index of Medicinal Products Which Can be Sold in Non-Pharmacies and Pharmacy Dispensaries. 106Report on “Quality and security on the pharmaceutical market – an interim report from the New Pharmaceutical Market Investigation: http://www.regeringen.se/494699/contentassets/898886b519fa4630b9b576de75d5cbf9/english_summary- nya_apoteksmarknadsutredningen.pdf .

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In four Member States (AT107, CY108, FI109, HU110) the retail sale of tobacco products is restricted to licensed tobacco shops, while in three countries (ES111, IT112, SI113) selling tobacco products may only be carried out by authorised sellers.

In IE, in the UK (Scotland)114 and in SK115, retailers selling tobacco must be registered in a dedicated register (Register of Tobacco Retailers).

In three Member States (BG, CZ, DK) tobacco products may be sold only in specific shops, namely, commercial stores and sites, speciality stores for trade with tobacco products, stores for food and non-food goods, stores for selling wines and spirits, petrol stations, kiosks, which meet the criteria indicated in the law (BG)116; specific stores, in designated areas of shops, as well as in shops selling daily and periodical press, and in dining and accommodation facilities with the exception of those for minors (CZ)117 and shops open at least once per week for a continuous period of at least 4 months (DK)118.

Finally, in FR, the retail sale of tobacco products is entrusted to the State. Retailers selling tobacco products are described as employees of the administration and bound by a management contract.119

Level of the restriction Restrictions on distribution channels for tobacco are set out at national level, except for the UK, where different regulations apply at regional level and restrictions on distribution channels apply only in Scotland.

Policy objective/Rationale of the restrictions All Member States, except for CY, provide for policy objectives of their restrictions. Policy objectives can be found in the law in six countries (AT, BG, DK, FI, HU, SI, SK), while in five countries they were provided by national authorities (ES, FR, IT, SK, UK). In CZ, the policy objective of the restrictions can be found in the government’s

107 Tobacco Monopoly Act 1996. 108 Excise Duties Law 2004 (L. 91(I)/2004); L. 75(I)/2002, mentioned in Existing Information, has been replaced by the Protection of Health (Control of Smoking) Law 2017 (L.24(I)/2017). 109 Tobacco Act 549/2016. 110 Tobacco Act CXXXIV of 2012. 111 Law 28/2005, 26 December, about health measures against smoking and regulating the sale, supply, consumption and advertising of tobacco. Article 3: Sale and supply of tobacco products. 112Ministerial Decree 21st February 2013, No. 38, Regulation governing the distribution and sale of smoking products; Law 22nd December 1957, No. 1293, provides for the organisation of the services for the distribution and sale of articles subject to monopoly; Law 1951 No. 27 on the monopoly of salts and tobacco. 113 The Restriction of the Use of Tobacco Products Act, adopted on 15 February 2017 and entered into force on 11 March 2017. 114 The Tobacco and Primary Medical Services (Scotland) Act 2010. 115 Article 10 (1) of Act No. 106/2004 Coll. on the Excise Duty on tobacco products. 116 Excise Duties and Tax Warehouses Act from 01.01.2016, Art. 90b; Tobacco, Tobacco Products and Related Products Act from 08.04.2016, Art. 31a. 117 Act No. 379/2005 Coll., on Measures for protection from harm caused by tobacco products, alcohol and other addictive substances, Section 3. 118 Trade Act, 14th June 2011, no. 595, section 3, sub-section 1. 119 Information provided by the French national authority in the completed EC Questionnaire.

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3 | Identification and mapping of operational restrictions in the 28 Member States and Norway explanatory memorandum to the draft Act120 and in IE it is based on general policies.121 Similar policy justifications have been identified, for the types of restrictions identified within this category. It appears that these countries regulate distribution channels of tobacco for public health and safety reasons (AT, BG, CZ, DK, ES, FI, FR, IT, SI, SK), to protect young people as well reducing smoking uptake (HU, IE, UK) and reducing the unauthorised sale of tobacco products (BG).

Exceptions to the restrictions Relevant exceptions to the restrictions have been found in four Member States (AT, CY, DK, FR). In AT, tobacco products may be sold by holders of a trade licence (e.g. the owner of a restaurant) to their guests, if they have been purchased in tobacco shops or in vending machines, whilst in CY the restrictions do not apply to passengers of aircrafts or boats. In DK, tobacco may also be sold in short term events such as market places, exhibitions, trade and cattle shows, open-air markets, as well as at fête grounds, travelling funfairs etc. Furthermore, in FR the sale of tobacco is permitted as a complementary service of specific businesses (e.g. drinking places having a certain licence, restaurants holding a restaurant licence, etc.) which have to comply with a number of obligations.122

Applicability to e-commerce Restrictions on distribution channels for tobacco apply to e-commerce in five Member States (CZ, DK, ES, IE, IT) and in five countries regulations set out additional limits with regard to distance selling of tobacco products (BG, FI, FR, HU, IE, SI, SK). In six Member States selling tobacco products online is prohibited (BG, FI, FR, HU, SI, SK) and in IE online sales of cigarettes is not allowed. Finally, in the remaining countries, it is not stated in the law (CY, UK).

Sanctions provided for by law With regard to this subcategory of restrictions, sanctions are imposed in all countries except the UK. Sanctions differ among the Member States, but commonalities can be identified. In five countries (AT, BG, ES, HU, SI) the sanction applied is a monetary fine, the amount of which varies depending on the country and violation. For instance, in SI a fine of 50,000 Euro will be imposed on a legal person and on a sole trader who sells tobacco products and related products without an authorisation, while a fine of 5,000 Euro will be imposed on the responsible person of a legal person and the responsible person of a sole trader who sells tobacco products and related products without an authorisation.

In three Member States, (IE) or alternatively (DK, IT), in addition to fines, offences can be punished with imprisonment, whilst in CZ, depending on the infringement, fine and /or a ban on the activity apply. Furthermore, in SK, a fine and administrative penalty are provided for by the law and in FR, disciplinary sanctions, which take the form of warning and fines are applied.

In CY, various sanctions are applied in cases of violation of the regulations. Breach of the Excise Duties Law123 are punished with: imprisonment, fine, confiscation of the goods in question and criminal and civil liability, both of the legal person involved and

120 Act No. 379/2005 Coll., on Measures for protection from harm caused by tobacco products, alcohol and other addictive substances. 121 Irish legislation does not have recitals such as Directives, etc. The purpose of a provision should be identified by the Court, in line with judicial interpretation techniques or on the basis of general policy. 122 Decree no 2010-720 of 28th June 2010 on the retail of manufactured tobacco products, articles 45-50; Order of 24th February 2012 concerning the retail of manufactured tobacco products. 123 Excise Duties Law 2004 (L. 91(I)/2004).

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EUROPEAN COMMISSION its managers, whilst breach of the Violation of Protection of Health Law 124are punished with: imprisonment of up to six months and/or a fine of up to 2000 Euro, issuance of a fine payable out-of-court, an administrative fine by the Supervisor of Health Services, Ministry of Health and issuance of an injunction suspending the business operation of the offending business.

Lastly, in FI, the retail licence may be cancelled for a period between one week and six months if the holder of the retail licence, despite a written warning or a criminal sanction issued by the municipality or other supervisory authority, does not comply with the provisions of the Act125. Further sanctions in cases of non-compliance with the prohibitions are provided for in section 99 and 100, 101 and Chapter 14 of the Tobacco Act.

Recent reforms Recent reforms of the regulations have been registered in seven Member States (BG, CY, CZ, FI, HU, SI, SK). Within this group, in four countries (BG, FI, HU, SK) reforms entered into force in 2016, whilst in the rest of the Member States (CY, CZ, SI), new regulations came into force in 2017. It appears that all these countries introduced stricter rules on selling tobacco products.

Future plans for reform Plans for future reforms have been identified in one country (HU)126. From 1st July 2017, cigarette sleeves, cigarette papers and tobacco fillers can only be sold in so called ‘tobacco shops’.

Restrictions on distribution channels (Other)

In addition to the restrictions described above on alcohol, non-prescription medicines and tobacco, other restrictions on distribution channels have been reported in three countries (DE, DK, LT). In DE, only commercial establishments with a permit can sell explosive substances and fireworks.127 In DK, the law128 which provides for restrictions on distribution channels for tobacco and alcohol (see above) also sets out a limit for other products such as mineral water, chocolate and sugar confectionary. The mentioned products can only be sold in shops open for sale at least once per week over a continuous period of at least four months.

Instead in LT129, additional distribution channel restrictions have been identified with regard to sex items and second-hand goods. Selling sex items is restricted to specialised shops (shops trading only in sex items), and second-hand goods are only allowed to be sold in marketplaces and in specialised shops (shops trading only in second hand goods).

124 Protection of Health (Control of Smoking) Law 2017 (L.24(I)/2017). 125 The Tobacco Act 549/2016, section 97. 126 Tobacco Act 2012, Article 11 (1), reformed in 2016. 127 Explosives Act, as amended in 2016. 128 The Trade Act, 14th June 2011, no. 595, section 3, sub-section 1. 129 Decree of the Government of the Republic of Lithuania No. 697 as of 11 June 2001 “On Approval of the Rules on Retail Trade”.

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3.3.6 Other restrictions on sales activities

This subcategory of sales restrictions includes a wide range of product-specific restrictions. In particular, this section focuses on age restrictions on alcohol, tobacco and other products, restrictions on hours and days of alcohol sale and any other restrictions identified (rest-category).

Age restrictions

Table 9 Restrictions on age and conditions of buyers (Alcohol)

Category of data Observed in which countries? Restriction(s) on age and conditions of AT, BE, BG, CY, CZ, EL, ES, FI, FR, HR, IT, LT, buyers (Alcohol) LU, NL, PT, PL, SE, SK, SI, UK Source: Spark Legal Network

In all countries, except for DK and HU, additional restrictions on sales activities have been found, as described below. Twenty Member States reported age restrictions on alcohol (AT, BE, BG, CY, CZ, EL, ES, FI, FR, HR, IT, LT, LU, NL, PT, PL, SE, SK, SI, UK). Within this group, seven Member States also impose restrictions on conditions of buyers of alcohol (BG, CZ, FI, LT, PL, PT, SK).

In two countries, it is prohibited to sell alcohol to people under 16 (AT, BE) while in CY, it is prohibited to sell alcohol to someone under 17. In the remainder of Member States, the limit for selling alcohol is set at a higher age, namely at the age of 18 in 15 countries (CZ, EL, ES, FI, FR, HR, IT, LT, LU, NL, PL, PT, SI, SK, UK) and at 20 years of age in two countries (FI, SE). Furthermore, alcohol sellers must usually verify the age of the buyers if they are unsure of the age.

Other restrictions pertain to the condition of buyers, which can be defined as ‘drunken state’ / ‘intoxication’ (BG, FI, LT, PL, PT, SK), ‘under the influence of alcohol or other substances’ (CZ), ‘psychical anomaly’ (PT), ‘disturbing behaviour’ (FI), drivers (SK), ‘on credit’ (PL). Retailers are not allowed to sell alcohol to people under the above- mentioned conditions.

Table 10 Age restrictions (tobacco)

Category of data Observed in which countries? Restriction(s) on age (Tobacco) BE, BG, CY, CZ, EL, ES, FR, HR, IT, LT, LU, MT, NL, NO, PL, PT, RO, SE, SK, SI, UK Source: Spark Legal Network

Twenty-one countries include regulations in their legal frameworks which restrict the sale of tobacco to people under certain ages (BE, BG, CY, CZ, EL, ES, FR, IT, LT, LU, MT, NL, NO, PT, RO, SE, SK, SI, UK). In a large majority of these countries it is prohibited to sell tobacco to people under 18 (BG, CY, CZ, EL, FR, HR, IT, LT, MT, NL, PL, PT, RO, SE, SI, SK, UK), while in three countries the age limit is set at 16 (BE, LU, NO). Tobacco sellers generally must verify the age of the buyers when the age of the purchaser is not obvious.

Table 11 Age restrictions (other products)

Category of data Observed in which countries? Restriction(s) on age (Other products) DE, HR, LT, LV, NL, PT, UK Source: Spark Legal Network

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In addition to the above-mentioned restrictions on age for alcohol and tobacco, in six Member States, restrictions on age with regard to other products have been found.

In DE, the law sets age limits for the sale and purchase of fireworks. As a general rule, retailers and consumers need to be at least 21 years old in order to be able to sell and / or buy fireworks. However, with regard to age-limits of customers, depending on the category of the fireworks, different age limits apply. So-called category F1 fireworks are subject to a lower age limit of 12 years. Category F2 fireworks and category P1 and T1 pyrotechnic articles can only be sold to customers of 18 years or over.130

In LT and LV legal restrictions on energy drinks have been identified, that prohibit the sales of energy drinks to people under the age of 18. Desk research also found examples of restrictions where pornographic content cannot be sold to people under the age of 18 (HR and PT). In particular, in PT, staff under 18 cannot sell pornographic or obscene content products to minors under 18. So, the restriction applies to both the seller and the buyer.

In NL, the law sets age limits for the sale of fireworks and forbids the sale: 1) of “very low risk” consumer fireworks - which can also be used indoors - to individuals under the age of 12; 2) “low risk” consumer fireworks – suitable for private use – to individuals under the age of 16; 3) of “medium risk” consumer fireworks – usually only meant for professional use – to individuals under the age of 18.

Finally, in the UK, age restrictions apply to a number of products. The following products cannot be sold to people under 18: fireworks, knives, solvents, sunbeds, cross bows, while lottery tickets and spray paints cannot be supplied to under 16s.

Restrictions on hours and days of alcohol sale

Table 12 Restrictions on hours and days of alcohol sale

Category of data Observed in which countries? Restriction(s) on hours and days of EE, FI, FR, IE, IT, LV, LT, NO, PT, SE, SI, UK alcohol sale Source: Spark Legal Network

Restrictions on hours of alcohol sale were observed in thirteen countries (EE, FI, FR, IE, IT, LV, LT, NO, PT, SE, SI, UK). Within this group, four countries provide for limits with regard to days on which the sale of alcohol is restricted (FI, IE, LT, NO). Such restrictions vary from country to country as shown below.

In EE, the sale of alcohol is permitted between the hours of 10.00 and 22.00. In FR, selling alcohol between 22.00 and 08.00 is regulated and requires an operating permit, while in LV it is prohibited to sell alcoholic beverages between 22.00 and 08.00.

130 Explosives Act, as amended in 2016.

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In FI, the State Alcohol Monopoly (“Alko”) can carry out retail trade of alcoholic beverages during weekdays between 09:00 and 20:00, except on Saturdays and some Public Holidays such as Independence Day Eve, New Year’s Eve and May Day Eve when retail trade is allowed between 09:00 and 18:00. Retail trade of alcohol is forbidden on Sundays, Religious Holidays, Independence Day, May Day, Christmas Eve and Easter Day Eve. On Midsummer Eve retail is forbidden after 13:00. Moreover, the sale of alcohol is restricted in regular shops with a licence for retail trade of alcoholic beverages between 21:00 and 09:00.

In IE, restrictions on sale of alcohol apply to Monday - Saturday: 10.30 - 22.00; Sunday and St Patrick’s Day: 12.30 - 22.00. On Christmas Day and Good Friday trading is prohibited.

In IT, limits depend on the premises that sell alcoholic beverages, liquors or spirits. It is forbidden to sell such alcoholic beverages as follows: in service stations from 22.00 to 06.00; in corner shops from 24.00 to 06.00; in public areas / spaces from 03.00 to 06.00 and in vending machines located in commercial establishments and other places from 24.00 to 07.00.

In LT, the sale of alcoholic beverages is restricted on the following days and hours: on 1st September, each year; from 22:00 to 08:00 in retail stores and from 22:00 to 08:00 in catering establishments holding licences to engage in retail trade in alcoholic beverages.

In NO, sale of alcohol is allowed between 08:30 to 18:00. On the day preceding Sundays and public holidays, retailing must cease at 15:00. Selling alcohol is prohibited on Sundays and public holidays, 1 and 17 May, Christmas Eve, New Year's Eve, Easter Eve, the day before Whit Sunday and on voting day for parliamentary elections, county council elections, municipal elections and referendums prescribed by law. Retailing and supply of alcoholic beverages containing a maximum of 4.7 per cent alcohol by volume may take place between 08:00 and 18:00. Retailing must cease at 15:00 on days preceding Sundays and public holidays. Retailing and delivery of these beverages must not take place on Sundays and public holidays, 1 and 17 May and on voting day for parliamentary elections, county council elections, municipal council elections and referendums prescribed by law.

In PT, it is prohibited to sell alcohol between 24:00 and 08:00 in any commercial establishment, with the exception of: commercial establishments for catering or drinks; establishments located at ports and airports in an accessible place reserved for passengers and nightlife and similar establishments.

In SI, the sale of alcoholic drinks is prohibited between 21.00 and 07.00, while in Scotland - which is the only region of the UK where this sort of limit is registered - stores and supermarkets cannot sell alcohol between 10.00 and 22.00.

Other restrictions

This other category of restrictions includes three main sub-types of restrictions: 1) other restrictions on the retail sale of alcohol, such as prohibitions to sell alcohol in certain areas / places and during specific events; 2) other restrictions on the retail sale of tobacco products, such as prohibitions on selling tobacco products in certain areas / places, during specific events and through vending machines; and 3) other restrictions which apply to products different from alcohol and tobacco, for instance, books.

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Table 13 Other category of restrictions

Category of data Observed in which countries? Other restriction(s) on the retail sale of BG, CZ, EE, ES, LT, PT, SK, SI, UK alcohol Other restriction(s) on the retail sale of BG, CY, EE, EL, ES, HR, IE, LT, LU, MT, NO, PT, tobacco products RO, SK, SI, UK Any other restriction(s) BG, EL, FR, NL Source: Spark Legal Network

With regard to the first subtype of restrictions, as the table above shows, nine Member States have regulations which provide for additional restrictions on the sale of alcohol (BG, CZ, EE, ES, LT, PT, SK, SI, UK). These restrictions pertain mainly to the prohibition on selling alcohol in certain places / areas, or during certain events (BG, CZ, EE, ES, PT, SI, SK).

In SI, in addition to the prohibition on selling alcoholic beverages in certain places, the sale of alcoholic beverages and beverages with added alcohol from vending machines is forbidden at any time.

Finally, in the UK, retailers are obliged to buy alcohol from wholesalers approved by HMRC (HM Revenue and Customs).

Regarding the second subtype of restrictions, in seventeen countries, other restrictions on selling tobacco products have been discovered (BG, CY, EE, EL, ES, HR, IE, LT, LU, MT, NO, PT, RO, SI, SK, UK). As mentioned above, it appears that these restrictions mainly concern the prohibition on selling tobacco products in certain places / areas (BG, EE, EL, ES, SI, SK), during specific events (BG, EL), as well as the prohibition on selling tobacco products in vending machines (BG, CY, EE, ES, HR, MT, NO, PT, RO, SI, SK, UK) and via the internet (HR).

Furthermore, in BG, there are further restrictions with regard to tobacco products: it is prohibited to trade in tobacco products by the piece or out of open sales packaging or by weight as well as selling tobacco products and other products which are in the same packaging. Additionally, it is prohibited to apply measures of which the purpose or possible result is to exceed the maximum retail price of the cigarettes. Moreover, handling of smokeless tobacco products is prohibited. In IE, the sale of boxes of cigarettes of fewer than 20 cigarettes is an offence.

In LU, there are prohibitions on selling toys intended for children and manufactured with the clear intention of giving the product or its packaging the appearance of a type of tobacco product. Furthermore, sellers of tobacco products must ensure that the products are kept in such a way that customers cannot access them without assistance of a retailer.

In the third subtype of restrictions, seven Member States reported additional restrictions on the sale of products such as genetically modified food (BG), books (EL, FR, NL) and fireworks (NL). In BG, the sale of genetically modified foods in pre- kindergartens, children's cuisine, kindergartens and schools is prohibited. In three Member States, the sale price of books is fixed (EL, FR, NL). In addition, in EL it is prohibited to sell books during book exhibitions in the exhibition hall. Furthermore, in NL, there are restrictions on selling fireworks to consumers.

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Level of the restrictions

Table 14 Level of the restrictions

Category of data Observed in which countries? Level of the National AT, BE, BG, CY, CZ, EE, EL, ES, FI, FR, HR, IE, restriction(s) IT, LU, LT, LV, MT, NL, NO, PL, PT, RO, SE, SI, SK Regional AT, UK Source: Spark Legal Network

Regarding the level of the above-mentioned restrictions it appears that all of them are set out at national level, except for the restrictions identified in AT, where age restrictions concerning alcohol are set out both at national and regional level and in the UK, where varying restrictions on alcohol, tobacco and other products apply at regional level.

Policy objective/Rationale of the restrictions Our research brought to light policy objectives / rationales for the majority of the above-mentioned restrictions, except in the UK (prohibition to sell tobacco in vending machines). Despite the variety of restrictions identified, these policy objectives / rationales can be grouped per type of product which they apply to. The main policy objectives, identified with regard to alcohol restrictions, are to protect and promote public health and order, protect minors and reduce consumption of alcohol. Similarly, with regard to tobacco restrictions, the justifications behind the restrictions are to protect public health, reduce tobacco use and protect minors.

With regard to other products, justifications vary, depending on the product to which the restriction applies. For instance, in EL and NL restrictions on sales and pricing of books aim at protecting culture and preventing supermarkets from selling successful books at cut prices (NL). In the UK, age restriction on retail sale of sunbeds, fireworks, knives etc., are aimed at protecting public health, and in LT and LV, restrictions on the sale of energy drinks are aimed at promoting health and regulating the distribution of these products.

Exceptions to the restrictions Exceptions to the above-mentioned restrictions are fairly rare. Exceptions to the restrictions on the time of alcohol sale have been found in seven countries (EE, IE, IT, LT, LT, NO, PT). In general, these exceptions concern specific places and periods of the year in which restrictions do not apply. For instance, in EE the restriction on hours of alcohol sale does not apply in customs control areas of airports open for international traffic and onboard watercraft or aircraft used for international carriage of passengers; In NO, the regulation does not apply on the day before Ascension Day, meaning that the outlet may sell liquor from 08.30 until 18.00. Furthermore, a notable exception has been discovered in the UK with regard to the sales of knives: these cannot be sold to people under 18 excepting folding knives under 3 inches (7.62 cm) long.

Applicability to e-commerce

In order to provide clear information, due to the amount of restrictions identified under this subcategory of sales restrictions, the information on applicability to e-commerce is included in the below table.

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Table 15 Applicability to e-commerce

Category of Observed in which Applicable to e-commerce data countries?

No information Legislation Yes No available does not specify Restriction(s) AT, BE, BG, CY, CZ, EL, BE, BG, FI, EL AT, LU, LT, IT, on age and ES, FI, FR, HR, IT, LT, CZ, HR, SK CY conditions of LU, NL, PT, PL, SE, SK, FR, NL, buyers SI, UK PL, PT, SI, (Alcohol) ES, SE, UK Restriction(s) BE, BG, CY, CZ, EL, ES, BE, CZ, BG, EL, IT, RO, SK, MT, on age FR, HR, IT, LT, LU, MT, ES, FR, PL, SI, HR UK NO, CY (Tobacco) NL, NO, PL, PT, RO, SE, LT, LU, SK, SI, UK NL, PT, SE Restriction(s) DE,HR, LT, LV, NL, PT, DE,HR, NL LT on age (Other UK LV, PT, UK products) Restriction(s) EE, FI, FR, IE, IT, LV, LT, FR, PT, SE EE, FI, IE, IT, NO LT on hours and NO, PT, SE, SI, UK LV, SI, UK days of alcohol sale Other BG, CZ, EE, ES, LT, PT, BG, CZ, EE, ES LT, SK restriction(s) SK, SI, UK PT, SI, UK on the retail sale of alcohol Other BG, CY, EE, EL, ES, HR, NO, PT BG, CY, EE, LT, LU MT restriction(s) IE, LT, LU, MT, NO, PT, EL, ES, HR, on the retail RO, SK, SI, UK IE, RO, SK, sale of tobacco SI, UK products Any other BG, EL, FR, NL EL, FR, BG, restriction(s) NL(books), NL(fireworks),

Source: Spark Legal Network

Sanctions provided for by law However, it should be noted that in cases of breach of the regulations, sanctions are provided for by law in all countries, except for three Member States where the information is not publicly available: LU (restrictions on setting prices for medicines), SE (restrictions on hours of alcohol sale) and UK (age restrictions for the sale of tobacco; restrictions on selling tobacco in vending machines). Sanctions vary from country to country and from one type of restriction to another, but it appears that most violations are punished with pecuniary sanctions such as fines.

Recent reforms In the vast majority of countries no recent reforms have taken place. However, notable reforms have been identified in a handful of Member States, with regard to alcoholic beverages (IT, NL, PT). For instance, in IT, the ban on selling alcohol to

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3.4 | Restrictions on promotional activities people under 18 was introduced in 2012131, whilst in NL and PT the minimum age for purchasing alcoholic beverages was raised from 16 to 18 years respectively in 2014132 and 2015133. It seems that these amendments introduced further restrictions on the sale of alcohol.

Future plans for reform With regard to the restrictions included in this remaining category, a majority of countries do not have any future plans for reforming their regulations. Nonetheless, notable examples of future reform with regard to alcohol have been identified in EE, FI and LT. In LT, the national regulation134 on alcohol is constantly under review. In relation to this section, one of the future amendments concerns raising the age for purchasing alcoholic beverages.

3.4 Restrictions on promotional activities

Introduction This section provides an overview of the national legal frameworks across the EU28 and Norway with respect to operational restrictions on promotional activities in the retail sector. For the purposes of this study, such restrictions are defined as rules that limit retailers' freedom to decide upon, to advertise or to announce and to conduct promotional activities for their shops. This category of restrictions contains the following subcategories:

a) Restrictions on end-of-season sales; b) Restrictions on end-of-business sales; c) Restrictions on discounted sales; d) Restrictions on sales below cost, and e) Restrictions on other promotional activities. An overview of the existence of each of these restrictions across the 29 countries that were researched can be found in the table below.

Table 16 Overview table: restrictions on promotional activities

Country End-of- End-of- Discounted Sales Other season business sales below promotiona sales sales cost l activities Austria √ Belgium √ √ √ Bulgaria √ √ √ Croatia √ √ √ √ Cyprus √ Czech

Republic Denmark √ Estonia √ Finland √ France √ √ √ √ √ Germany Greece √ √ √ Hungary

131 Decree Law 13th September 2012 No.158. 132 The Alcohol Licensing and Catering Act as amended in 2014. 133 Decree law 50/2013, 16th April, amended by Decree law 106/2015, 16th June. 134 Law on Alcohol Control of the Republic of Lithuania, Article 18.

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Ireland Italy √ √ √ Latvia √ √ √ √ Lithuania √ Luxembou √ rg Malta Netherlan √ ds Norway √ √ Poland Portugal √ √ √ √ Romania √ √ √ √ Slovakia Slovenia √ √ √ Spain √ √ √ √ Sweden United Kingdom Source: Spark Legal Network

What follows is a detailed description of each restriction, specifying what limitations, obligations or bans retailers are subject to on the basis of their national laws, while focusing on the common features of the restrictions. Information is also provided on the level of restrictions (whether they apply at national or regional level), the exceptions, the policy objectives that justify the restrictions, whether they are applicable to e-commerce, what sanctions are in place to enforce the rules and information on recent and future plans for legal reforms.

3.4.1 Restrictions for end-of-season sales

Restrictions for end-of-season sales are rules that may limit retailer’s freedom to sell (unsold) stock from spring, summer, autumn, or winter at the end of each particular season at a reduced price. Table 17 gives an overview of the restrictions identified in this category across the 29 countries that we researched.

Table 17 Overview of restrictions of end-of-season sales

Category of data Observed in which countries? Restriction(s) for end-of-season sales BE, BG, EL, ES, FR, HR, IT, LV, LU, NO, PT, RO, SI Level of the National BE, BG, EL, FR, HR, LV, LU, NO, PT, RO, SI restriction(s) Regional ES, IT Exceptions BE, BG, EL, FR, HR, LV Applicability to e-commerce BE, EL, ES, FR, HR, IT, LV, LU, NO, PT, RO, SI Sanctions BE, BG, EL, ES, FR, HR, IT, LV, LU, NO, PT, RO, SI Recent reforms BE, CY, EL, ES, FR, HR, LU, PT, RO, SI Future plans for reform of the None regulation(s) Source: Spark Legal Network

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3.4 | Restrictions on promotional activities

Through desk research, our study team identified restrictions for end-of-season sales in thirteen countries: BE, BG135, EL, ES, FR, HR, IT, LV, LU, NO, PT, RO and SI136 all include such restrictions in their legal frameworks. These restrictions refer to regulations which limit retailers’ freedom to decide on the conditions under which end- of-season sales can take place. We have found, amongst other things, fixed periods of sales, notification obligations to the competent authority, the obligation to indicate clearly both the original and sales price of the product, the prohibition on applying discounts during the period prior to end-of-season sales, the prohibition on selling products at a discount if the retailer purchased the goods during the month prior to the sales period.

In the majority of these countries (BE, EL, ES, FR, HR, IT, LU, LV, PT, RO), end-of- season sales can only take place during fixed periods. For instance, in BE the winter sales last from the 3rd of January until the 31st of January, whereas the summer sales last from the 1st of July until the 31st of July.137 In ES, despite the liberalisation of the regime at national level138, several autonomous communities continue to apply regional restrictions regarding fixed periods of end-of-season sales.139 In FR, there are winter sales that start the 2nd Wednesday of January at 08.00 or the 1st Wednesday if the 2nd Wednesday falls on or after the 12th. The summer sales start the last Wednesday of June at 08.00. The sales period cannot exceed six weeks for each period.140 Furthermore, in IT, the beginning of the sales has been set for the winter sales on the first working day prior to the Epiphany and for the summer sales on the first Saturday of July.141 In PT, end-of-season sales can be carried out any time of the year but they must not exceed, in total, the duration of four months per year. Usually the retailers choose two months in the winter and two months in the summer but this is not mandatory as long as end-of-season sales do not exceed four months in total per year. Likewise, in LV142, end-of-season sales cannot exceed a total duration of three months per year.

The table below gives a complete overview of how this is regulated across these Member States.

135 In BG, the identified restrictions apply uniformly to end-of-season, end-of-business, and discounted sales; see the Bulgarian Consumer Protection Act from 10.06.2006, Art. 6, 63, 64, 65, 66 (Закон за защита на потребителите от 10.06.2006 г. Чл. 6, 63, 64, 65, 66)). This restriction will therefore be mentioned under each relevant category of promotional activity. 136 In SI, the identified restrictions apply uniformly to end-of-season, end-of-business and discounted sales; see Article 28 Consumer Protection Act (Zakon o varstvu potrošnikov, Official Gazette of RS, Nos. 98/04, 114/06, 126/07, 86/09, 78/11, 38/14, and 19/15), adopted on 26 February 1998; came into force on 28 March 1998). This restriction will therefore be mentioned under each relevant category of promotional activity. 137 Art. VI. 25 to VI. 30, Code of Economic law (Code de droit économique). 138 Law 7/1996, 15 January, through the Royal Decree 20/2012 about measures to ensure fiscal stability and promote competitiveness. 139 In País Vasco, Cataluña, Galicia, Cantabria, Comunidad Valenciana, Extremadura, the respective regulations limit the end-of-season sales periods to two per year, one at the beginning of the year and the second in the summer. 140 Article L310-3 of the Commercial Code (Code de commerce). 141 Legislative Decree N. 114/1998. 142 Section 3 of the Consumer Rights Protections Law.

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Table 18 End-of-season sales: fixed time periods End-of-season sales: fixed time periods Winter Summer Belgium Sales may last from the 3rd of Sales can only take place between January until the 31st of January. the 1st of July and the 31st of 143 July. th Croatia Start on the 27 December. Start on the 1st July. Can last a Can last a maximum of 60 maximum of 60 days. days.144 France The sales period cannot exceed The sales period cannot exceed six weeks.145 It can start the 2nd six weeks. It can start the last Wednesday of January at Wednesday of June at 08.00. 08.00(or the 1st Wednesday if the 2nd Wednesday falls on or after the 12th). Greece Regular sales period: from the Regular sales period: from the second Monday of January until second Monday of July until the 146 the end of February. end of August. Intermediate sales period: first Intermediate sales period: first two weeks of November. two weeks of May. Italy Start on the first working day Start on the first Saturday of July. 147 prior to the Epiphany. Luxembourg The dates for summer and winter sales are set each year by Grand- 148 Ducal regulation and cannot exceed one month. 149 Latvia Sales cannot exceed, in total, a duration of three months per year. Portugal Sales can be carried out any time of the year but they cannot exceed, 150 in total, the duration of four months per year. Romania From the 15th of January until the From the 1st of August until the 151 th 15th of April. 8 of October. 152 Spain Despite the liberalisation of the regime at national level, several autonomous communities continue to apply regional restrictions 153 regarding fixed periods of end-of-season sales. Source: Spark Legal Network

143 Book VI Market Practices and Consumer Protection. 144 Article 2 of the Regulation on conditions and procedure of seasonal sales (Official Gazette no. 135/2015). 145 Article L310-3 of the Commercial Code (Code de commerce). 146 Article 15 Law 4177/2013 Rules on handling & product marketing & provision of services. 147 Legislative decree 31st March 1998, No. 114. 148 Article 1(4) of the Law of 23 December 2016. 149 Section 13 of the Competition Law, adopted on 4 October 2001, (Konkurences likuma 13. pants), Sections 2, 4, 9 of the Unfair Commercial Practice Prohibition Law, adopted on 22 November 2007, (Negodīgas komercprakses aizlieguma likuma 2. 4., 9. pants). Section 3 of the Consumer Rights Protection Law (Patērētāju tiesību aizsardzības likuma 3. pants) 150 Article 10 of Decree Law 70/2007. 151 Government Ordinance no. 99/2000 regarding the products and services trade on the market. 152 The Royal Decree 20/2012 amended the Law 7/1996 by giving the retailers full freedom to determine when or for how long they will conduct end-of-season sales. 153In País Vasco, Cataluña, Galicia, Cantabria, Comunidad Valenciana, Extremadura, the respective regulations limit the end-of-season sales periods to two per year, one at the beginning of the year and the second in the summer.

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3.4 | Restrictions on promotional activities

In some countries it is prohibited to apply a sales discount in the period preceding the end-of-season sales (BE, FR and IT), whereas in the month before sales there must be no announcement of price reductions in BE, EL and IT. In BG, an announcement of price reduction may not be applied for a period longer than one month and shorter than one working day.

In RO, retailers have to notify the city hall 15 days before the start of the sales, specifying the place of the sales.154 A similar restriction is identified in the Basque Country155 (ES) and in PT156 where retailers need to notify the competent authority regarding their intention to conduct end-of-season sales.

In BE, PT and RO it is prohibited to sell products at discount during the end-of-season sales if the retailer purchased these goods during the month prior to the sales period.

In BG, EL, HR, NO and SI157, retailers are obliged to indicate unambiguously both the original price and the sales price of the product.

In ES, LU and RO, a restriction exists that sales can only take place in the usual premises of the commercial activity.

An additional restriction for BE and LU consists of the prohibition to use the word “sales” or any other wording or presentation suggesting discount sales, outside of the official sales period.

Another restriction found in LV is that when the retailer indicates the maximum amount of the discount or the lower price, at least 10% of the products must be offered with that discount or for that price. Likewise, in NO it must be proven that a certain number of the items have been sold at the previous price, in the period preceding the sale.

Level of the restriction As shown in the table above, all identified restrictions regarding end-of-season sales apply at national level (BE, BG, EL, ES, FR, HR, IT, LV, LU, NO, PT, RO, SI).

Additionally, in ES and IT the regions are competent to set their own rules. In ES Law 7/1996 applies at national level but at regional level six Autonomous Communities158 have their own regulations which deviate from national law. In particular, these regulations continue to limit the sales periods to two per year despite the liberalisation on this issue at national level. In IT, national law159 has delegated legislative powers to the regions and the autonomous provinces of Trento and Bolzano with regard to end-of-season sales. Hence, there is an overarching national regulatory framework in place, while regional regulations define the end-of-season sale periods and duration.

154 Government Ordinance no. 99/2000. 155 Law 7/1994, May 27 (de la Actividad Comercial del País Vasco). 156 Art. 10, no. 5 of Decree-Law no. 70/2007 as amended by Decree-Law no. 10/2015. 157 In SI, the existing restrictions are applicable to end-of-season sales, end-of-business sales, and discounted sales. 158 País Vasco, Cataluña, Galicia, Andalucía, Principado de Asturias, Cantabria, La Rioja, Región de Murcia, Comunidad Valenciana, Aragón, Castilla la Mancha, Canarias, Comunidad Foral de Navarra, Extremadura, Islas Baleares, Comunidad de Madrid, Castilla y León. 159 Legislative decree 114/1998, article 1.

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Policy objective/Rationale of the restrictions All thirteen countries provided a rationale for their restrictions regarding end-of-season sales. Consumer protection is explicitly mentioned as a policy objective in BG160, EL161, ES162, FR163, HR164, IT165, LV166, PT167, SI168. Furthermore, the promotion of healthy and fair competition in the market is mentioned as a rationale in BE169, EL, ES, FR, IT, LU170, NO171, PT, RO. In BE and RO172 the protection of SMEs’ interests is also identified as a rationale. It is noteworthy that in NO, the law173 clarifies that the rationale for the imposed restriction is “to control the marketing, commercial practices and contract terms and conditions in consumer relations”.

Exceptions to the restrictions Exceptions to the restrictions were identified in six countries (BE, BG, EL, FR, HR, LV). In the majority of these countries (EL, FR, HR, LV) the exceptions allow for selling products at reduced prices also outside the fixed periods of sales, under certain circumstances. This may relate to the quantity of products, the geographic area where the sales take place or to certain products. For instance, in EL products can be sold at a discount outside the sales period and for up to 10 days only if the quantity of these products is not more than 50% of the total amount of products sold in the same shop.174 In FR, derogations from the restrictions on fixed sales periods apply in certain tourist and cross-border areas such as Alpes-Maritimes, Corsica, Meurthe-et- Moselle, Meuse, Moselle, Vosges, Pyrénées Orientales.175 In addition, also in FR, derogations apply to retailers who organise private sales events (Ventes privées) for customers who own loyalty cards.176 In HR, retailers may prolong the period of sale if not all products on sale are sold by the end of the initial sales period. In LV, the restrictions do not apply to food and seasonal products.177 In BG, price reductions can take place for a period longer than one month but not exceeding six months under

160 The policy objective was provided by the national authorities in their responses to the European Commission’s questionnaire. 161 Explanatory Memorandum of Law 4177/2013. 162 The policy objective was provided by the national authorities in their responses to the European Commission’s questionnaire. 163 The policy objective was provided by the national authorities in their responses to the European Commission’s questionnaire. 164 Proposal of the Act on amendments and supplements of the Consumer Protection Act dated 23 July 2015. 165 Article 1 of the Law 114/1998. 166 Section 2 of the Unfair Commercial Practice Prohibition Law. 167 Preamble of Decree-Law no. 70/2007, of 26 March. 168 Article 28 Consumer Protection Act (Zakon o varstvu potrošnikov, Official Gazette of RS, Nos. 98/04, 114/06, 126/07, 86/09, 78/11, 38/14, and 19/15). 169 Article 25 of the Code of Economic Law (CEL). 170 Statement of the Ministry of Economy in the press. 171 § 1 of the Norwegian act of 9 January 2009, No. 2 Relating to the Control of Marketing and Contract Terms. 172 Article 2 of the Government Ordinance no. 99/2000. 173 § 1 of the Norwegian act of 9 January 2009, relating to the Control of Marketing and Contract Terms. 174 Article 15 par. 2 Law 4177/2013. 175 Article L310-3 of the Commercial Code. 176 Law No. 2008-776 of 4 August 2008. 177 Guidelines of the Consumer Protection Centre on the displaying prices for products and services, including implementation of fair commercial practice.

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3.4 | Restrictions on promotional activities certain exceptional circumstances such as in the case of building works on the business premises or partial suspension of the business activity.178 Lastly, in BE, exceptions to the pre-seasonal black-out period may be introduced by Royal Decree.

Applicability to e-commerce In twelve out of thirteen countries (BE, EL, ES, FR, HR, IT, LV, LU, NO, PT, RO, SI) the restrictions concerning end-of-season sales are applicable to e-commerce. In relation to HR, when retailers sell online, they are not obliged to mention both the original and the reduced price. However, the restriction on fixed sales periods applies to e- commerce.179 In BG, it can be inferred from the Consumer Protection Act180 that the end-of-sales restriction does not apply to e-commerce as the requirements do not apply to distance and to off-premises contracts.

Sanctions provided for by law

All thirteen countries (BE, BG, EL, ES, FR, HR, IT, LV, LU, NO, PT, RO, SI) provide for sanctions in cases of breach of the respective regulations. In seven countries (BE, BG, EL, FR, HR, IT, PT) the sanctions are monetary fines, while the amount varies from country to country. For instance, in EL the imposed fine is equal to 0.5% of the annual turnover and no less than EUR 5,000.181 In HR the fines range between HRK 10,000 and HRK 100,000 (approx. EUR 1,300 – EUR 13,100).182 In PT, when the infringement is committed by an individual, the fine is between EUR 250 to EUR 3,700, whereas when committed by a legal person, it is between EUR 2,500 to EUR 30,000.183

In five countries (ES, LV, NO, RO, SI) the sanctions imposed can be both monetary and non -monetary penalties. For example, in ES, very serious infringements184 are punished with a fine of EUR 30,000 to EUR 900,000 and in the event of a third recurrence, the autonomous communities may additionally decree temporary closure of the offending enterprise for up to one year. Furthermore, in NO, infringements of the respective regulations are subject to monetary fine, imprisonment of up to six months, or both.

In LU in cases of non-compliance with the regulations and prohibitions, the infringer risks prosecution in the form of criminal proceedings, civil action and damages, prohibitory injunction and administrative withdrawal of the business licence. Furthermore, if the infringer fails to comply with the prohibitory injunctions imposed by a final decision, they will be punished by a fine of EUR 251 to EUR 120,000. 185

Recent reforms In 10 countries (BE, CY, EL, ES, FR, HR, LU, PT, RO, SI) there have been recent reforms which affected the above-mentioned restrictions. Within this group, 7

178 Consumer Protection Act from 10.06.2006. 179 Regulation on conditions and procedure of seasonal sales. 180 Art. 61a, Para. 2 of the Consumer Protection Act. 181 Art.21 par.1 Law 4177/2013. 182 Art. 138, Consumer Protection Act. 183 Decree-Law no. 70/2007, of 26 March, as amended by Decree-Law no. 10/2015, of January 16. 184 The Spanish law (Law 7/1996) distinguishes between minor infringements, serious infringements and very serious infringements. The law provides exhaustive lists with the specific events that constitute these infringements. 185 Article 8, 9 of the Law of 23 December 2016 on sales within seasonal sales and street trading, and misleading and comparative advertising.

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EUROPEAN COMMISSION countries (CY, ES, FR, HR, LU, PT, SI) introduced substantial changes. It is important to mention that in CY restrictions on end-of-season sales were abolished in 2016. 186

In ES, the law introduced a significant modification,187 providing retailers full freedom to determine when or for how long they will conduct end-of-season sales. In FR, legal reform abolished the previous existing regime of the so-called “floating sales”. While under the old regime retailers could introduce two additional weeks of sales per year at dates freely chosen by them, the amendment only made it possible to extend the traditional sales period188 by one week (from 5 to 6 weeks). In HR, the identified restrictions were adopted in 2015 for the first time by the regulation on conditions and procedure of seasonal sales. In LU, the regime has been recently reformed189 by abolishing the restrictions regarding the period during which traders advertise sales in advance. In PT, the law was amended190 in order to create more favourable conditions for retailers. This was done by liberalising the period of sales, which now can take place any month of the year, with a maximum duration of 4 months in total. Furthermore, the new rules broadened the applicability of the regulation of sales carried out at a distance or by other methods outside the establishments, such as e- commerce. In SI, on 16 November 2016, the administrative board of the Slovenian Chamber of Commerce adopted a cancellation decision relating to regulations specifying the seasonal sale of textile products and footwear.

In the remainder of the countries (BE, EL, RO) the changes consist mainly of providing clarifications regarding the text of the law.

Future plans for reform With respect to the restrictions for end-of-season sales identified in the countries, as described above, there is no information available on notable future plans to reform the current regime.

3.4.2 Restrictions on end-of-business sales

Introduction

Restrictions on end-of-business sales are rules that limit retailers’ freedom to sell products with a discount due to the end of activity of a shop irrespective of the reason. Table 19 gives an overview of the restrictions identified in this category across the 29 countries that were researched.

186 By Law 25(I)/2016. 187 By Royal Decree 20/2012, amending Law 7/1996. 188 Traditional periods of sales are those held in January and July according to Article L310-3 of the Commercial Code. 189 By Law of 23 December 2016 on seasonal sales and street trading, and misleading and comparative advertising. 190 Decree-Law 70/2007 was amended by Decree-Law 10/2015.

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Table 19 Overview of end-of-business sales restrictions

Category of data Observed in which countries? Restriction(s) for end-of-business sales AT, BE, BG, EL, ES, FR, HR, IT, LV, NO, PT, RO, SI Level of the National AT, BE, BG, EL, ES, FR, HR, IT, LV, NO, PT, restriction(s) RO, SI Regional ES, IT Exceptions AT, HR Applicability to e-commerce AT, BE, ES, FR, HR, IT, LV, NO, PT, RO, SI Sanctions AT, BE, BG, EL, ES, FR, HR, IT, LV, NO, PT, RO, SI Recent reforms AT, BE, ES, HR, PT, RO, SI Future plans for reform of the None regulation(s) Source: Spark Legal Network Notes: conditions upon which end-of-business sales can take place. For instance, the possibility of justifying end-of-business sales only under specific circumstances (e.g. total or partial termination of the commercial activities of the undertaking, renovation or relocation of the shop, cases of force majeure etc.), prohibitions to include newly purchased products in end-of-business sales, obligation to conduct these kind of sales at the place of sale where products are usually sold, maximum sales duration, requirement for ex ante authorisation and the obligation to accompany these sales with relevant advertisement.

Description of the restriction

Restrictions for end-of-business sales have been identified in thirteen countries, namely in AT, BE, BG191, EL, ES, FR, HR, IT, LV, NO, PT, RO and SI192. These restrictions confine retailers’ freedom to decide on the

In all but one county (SI) end-of-business sales can only be justified by specific reasons which vary from country to country. Total or partial termination of the commercial activities of the undertaking is the most common reason found in each of the above-mentioned countries. Other commonly identified reasons are the renovation of the shop (BE, BG, FR, HR, NO, PT, RO) or relocation of the business (AT, ES, IT, RO). In another four countries, such sales may take place in cases of force majeure such as disasters, water or fire damages (BE, ES, NO, PT). Lastly, end-of-business sales may take place in cases of substantial modification of the business (ES, FR, RO), such as change of legal form or even in cases of seasonal suspension193 of the commercial activities (FR, RO). Less commonly found conditions are the retailer’s death (AT, RO), retirement (BE) or bankruptcy (EL).

191 In BG, the identified restrictions apply uniformly to end-of-season, end-of-business, and discounted sales; see the Bulgarian Consumer Protection Act from 10.06.2006, Art. 6, 63, 64, 65, 66 (Закон за защита на потребителите от 10.06.2006 г. Чл. 6, 63, 64, 65, 66)). This restriction will therefore be mentioned under each relevant category of promotional activity. 192 In SI, the identified restrictions apply uniformly to end-of-season, end-of-business and discounted sales; see Article 28 Consumer Protection Act (Zakon o varstvu potrošnikov, Official Gazette of RS, Nos. 98/04, 114/06, 126/07, 86/09, 78/11, 38/14, and 19/15, adopted on 26 February 1998; came into force on 28 March 1998. This restriction will therefore be mentioned under each relevant category of promotional activity. 193 In FR, the seasonal activity is defined by the social security code, which stipulates that: "A limited period of time is defined as a seasonal activity corresponding to tasks that normally repeat each year, at the same periods, in accordance with the rhythm of the seasons or the collective lifestyles". Thus, a company is seasonal when its activity responds to a regular cycle according to seasons (summer, winter, etc.), or collective lifestyles (holidays, schools, etc.). For example, a retailer in a tourist area may only run a business in the summer time. At the end of the summer season, the retailer will be able to suspend business activity until the following summer season.

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Furthermore, in BE, EL, ES, NO and RO the law only allows products which are part of the stock to be sold during end-of-business sales. This means that the retailer cannot include newly purchased products.

BE, EL and RO laws state that clearance sales must take place at the point of sale where products are usually sold.

In nine countries (BE, BG, EL, ES, FR, IT-Lombardy, NO, PT, RO) the law mentions a fixed time period during which this kind of sales shall take place.

In BE, the duration is limited to 5 months, which can be extended up to 12 months only in the case of retirement.194 In BG, these sales may not be applied for a period longer than six months and shorter than one working day and can last for a period longer than one month but not exceeding six months.195 In EL, the maximum duration is four months, which can be renewed by the president of the Court of First Instance for another four months only in the event of exceptional circumstances and after the retailer’s request. In ES, end-of-business sales may last for one year.196 In FR, the maximum duration can be 2 months or 15 days in the case of seasonal suspension of activity. In NO, the law does not provide specific maximum duration but it mentions that the end-of-business sales should take place within a short, fixed period of time. Furthermore, in IT and, in particular, in Lombardy the duration can be either 13 weeks in case of termination of commercial activities and transfer of business or 6 weeks in case of renovation or conversion of business. Likewise, in RO, the period of end-of-business sales cannot exceed 15 days per year, 60 days per year or 90 days per year depending on the specific circumstances described in the law. Lastly, in PT, the end-of-season sales period cannot exceed 90 days.

The table below gives a complete overview of how this is regulated across these Member States.

Table 20 End-of-business sales: fixed time periods

End-of-business sales: fixed time periods

Time period Extension possible? Belgium Up to 5 months. Yes, up to 12 months. Bulgaria Up to 6 months. No. Greece Up to 4 months. Yes, up to 4 months. Spain National level: Up to 12 months. No.

194 Articles VI. 22 to VI. 24, Code of Economic Law (Code de droit économique). 195 Even though in principle in BG restrictions on promotional activities are identical for end-of-season, end- of-business and discounted sales, Art. 66 par. 1 of the Bulgarian Consumer Protection Act specifically regulates the duration of end-of-business sales. 196 There are no differences between the national and regional laws with the exception of Cantabria (Art. 29 of Law 1/2002) and Comunidad Valenciana (Art. 78 of Law 3/2011), where the regional laws fix a limit of 3 months for end-of-business sales.

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Cantabria: up 3 months. Valencia: up to 3 months. France 2 months or 15 days. No. Norway Within a ‘short, fixed period of time’. No. Italy 13 weeks or 6 weeks. No. (Lombardy) Portugal Up to 90 days. No. Romania Up to 15, 60 or 90 days per year No.

Source: Spark Legal Network

In seven countries (AT, EL, ES - some regions, FR, IT, PT, RO) the law requires an ex ante authorisation or notification to a national authority. Authorisations are required in AT, EL, FR, while a prior notification is required in ES (at regional level197), IT, PT and RO.

In AT, the retailer must request an authorisation from the District Administrative Authority. The latter shall be submitted in writing and must contain the following information, together with the documents required to support the request: i) goods that will be sold according to quantity, quality and value of sale, ii) the exact location of the sale, iii) the period during which the sale will take place, iv) the reason for the sale (e.g. the death of the business owner, the discontinuation of the commercial business, the relocation of the business or other verifiable facts198). Before deciding on the application, the district administrative authority must ask the Chamber of Commerce to issue an expert opinion within a period of two weeks. The district administrative authority must decide on the application within one month of its receipt. The Authority will issue a licence for the end-of-business sale which will specify the goods to be sold, the exact location of the sale, the period during which the sale is going to take place and the reasons for the sale. In EL, the retailer needs to request an authorisation from the president of the Court of the First Instance. The latter will check whether the conditions are fulfilled and, if this is the case, will grant a licence to the retailer. Furthermore, during the end-of-business sales and specifically within the first five days of each month, the retailer must submit inventory tables, including the remaining goods of the last month, to the Chamber of Commerce. In FR, the retailer who intends to carry out the end-of-business sale is obliged to submit a prior declaration to the municipality where the commercial business is located, 2 months before the starting date of the sales. This declaration must contain the legal reasons that justify the retailer’s right to conduct an end-of-business sale, the duration of the sale (maximum 2 months) and must be accompanied by an inventory of the merchandise. Following the submission of the declaration, the mayor must issue a receipt for the declaration of end-of-business sales within fifteen days from receipt of the complete file.199 If the file is incomplete, the mayor must request the missing documents from the retailer within seven days. If the retailer does not provide the requested documents within the given period, then the mayor will not issue a declaration receipt. End-of-business sales cannot take place without the receipt of the declaration issued by the mayor.200

197 Asturias, Navarra, Castilla la Mancha, Cataluña, Galicia, Andalucía, Islas Baleares, Castilla y Leon, Aragon, Cantabria, Rioja, Basque Country. 198 Bundesgesetz gegen den unlauteren Wettbewerb 1984 – UWG § 33a. (1). 199 Article R310-3 of the Commercial Code. 200 Article R310-3(3) of the Commercial Code.

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In the above-mentioned regions in ES, a notification to the competent authority is required. More specifically, in Cataluña the notification to the competent authority must be done at least one month before the start of end-of-business sales.201 In IT, in the region of Lombardy202, the retailer must notify the competent municipality (where the shop is located) via certified mail at least 15 days before commencing the sales. The communication must include the following information: the location of the shop, the beginning and end date of the promotional activity, the goods on sale, indicating their quality. The notification procedure does not require explicit approval of the competent municipality. The retailer must commence the end-of-business sales on the date communicated to the municipality. Likewise, in PT, the retailer must make a declaration to the Food and Economic Security Authority (ASAE) up to 15 days in advance, which must include information regarding the retailer’s identification, the reasons for the sale, description of the type of products to be sold and the start and end dates of the sale. In RO, a notification to the town hall is required 5 or 15 days in advance, depending on the reason for the end-of-business sale. The retailer is obliged to provide, upon request, the legal documents proving the grounds on which it intends to hold the end of business sale, within a maximum of 10 or 45203 days from the end of the sale.204

In FR and RO, this kind of sale must be accompanied by a relevant announcement, which announces the sale of the goods concerned and indicates the period of the price reduction.

Also, in SI, enterprises must announce clearance sales and provide information on the type of goods offered, the percentage of reduction and the duration period of such sales. It is noteworthy that in SI, if the reduction is declared as a percentage range, the highest percentage reduction must account for at least one-quarter of the value of all goods offered in the clearance sale.

Level of the restriction In all the countries where we have identified restrictions for end-of-business sales (AT, BE, BG, EL, ES, FR, HR, IT, LV, NO, PT, RO, SI), the restrictions apply at national level. In ES and IT, rules exist at both national and regional level. Specifically, in ES, almost every Autonomous Community205 has its own regulation regarding end-of-business sales. In IT, the regions and autonomous provinces of Trento and Bolzano which are part of Trentino Alto Adige Region, have the competence to regulate end-of-business sales. As a result, a national regulatory framework is in place, which is further regulated at regional level.

201 Legislative Decree 1/1993, 9 March and Decree 150/1996, 30 April. 202 Lombardy Regional law 6/2010, article 114 paragraph 8. 203 When modifying the operational conditions of that shop if the necessary works exceed 30 days and are to be made in its interior space and the shop being closed for that period or other modification of the operational conditions following the cessation of a distribution agreement. 204 Art. 16-56 of the Government Ordinance no. 99/2000 regarding the products and services trade on the market. 205 Asturias, Navarra, Castilla la Mancha, Cataluña, Galicia, Andalucía, Islas Baleares, Castilla y Leon, Aragon, Cantabria, Rioja, Basque Country.

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Policy objective/Rationale of the restrictions In 9 countries (BG206, ES207, FR208, HR209, IT210, LV211, PT212, RO213, SI214) the main rationale behind end-of-business sales is the protection of consumers. The prevention of unfair competition can be found as a policy objective in AT215, BE, ES, FR and RO. In EL, even though the policy objective is not explicitly provided, it can be drawn from the law that this should be the prevention of unfair competition. Additionally, in RO, the law216 provides a long list of objectives such as business development, development of SMEs, protection of commercial activity of market services in disadvantaged areas, encouraging free enterprise and free movement of goods. In NO, § 1 of the Norwegian act of 9 January 2009, relating to the Control of Marketing and Contract Terms, mentions as rationale for the imposed restriction: “to control the marketing, commercial practices and contract terms and conditions in consumer relations”.217

Exceptions to the restrictions Exceptions to the above restrictions have been identified in AT and HR. For instance, in AT, the retailer can start end-of-business sales without the authorisation of the District Administrative Authority in the case of emergency situations such as flood, burst water pipes, fire, fire attack, storm damage.218 Furthermore, in HR, the obligation to display both the original price and the sale price shall not apply to contracts executed outside of the business premises, distant contracts for public services provided to customers and in cases in which a special type of sale does not last longer than 3 days.219

Applicability to e-commerce The identified restrictions for end-of-business sales are applicable to e-commerce in all the above-mentioned countries, with the exception of BG. In this country, the Consumer Protection Act220 provides that the restrictions on promotional activities do not apply to distance and off-premises contracts. Hence, they are not applicable to e- commerce. Furthermore, it is important to note that in EL, the law that imposes the restrictions on end-of-business sales does not make any reference to e-commerce. One could presume that these restrictions are applicable to e-commerce, since both the restrictions on end-of-season sales and sales below cost apply to e-commerce. However, the law does not explicitly provide this applicability, which can be explained by the fact that the law dates from 1914 and was last amended in 1961.

206 In BG, the policy objective was provided by the national authority in the completed EC Questionnaire. 207 In ES, the policy objective was provided by the national authority in the completed EC Questionnaire. 208 In FR, the policy objective was provided by the national authority in the completed EC Questionnaire. 209 In HR, the policy objective was provided by the national authority in the completed EC Questionnaire 210 Legislative Decree 114/1998, Article 1, Article 2 of the Lombardy Regional Law 6/2010. 211 Section 2 of the Unfair Commercial Practice Prohibition Law. 212 Preamble of Decree-Law No. 70/2007. 213 Art. 2 of the Government Ordinance No. 99/2000. 214 Article 28 Consumer Protection Act (Zakon o varstvu potrošnikov, Official Gazette of RS, Nos. 98/04, 114/06, 126/07, 86/09, 78/11, 38/14, and 19/15). 215 The policy objective was provided by the national authorities in their responses to the European Commission’s questionnaire. 216 Government Ordinance no. 99/2000 regarding the products and services trade on the market. 217 The AT authorities mentioned in their response to the EC Questionnaire that the rules are part of the Unfair Competition Act, whereas the HR authorities mentioned that the purpose is to let traders sell goods at a reduced price, should the conditions given in the Consumer Protection Act be fulfilled. 218 Bundesgesetz gegen den unlauteren Wettbewerb 1984 – UWG § 33a (6). 219 Art. 18, para. 5, Consumer Protection Act. 220 Art. 61a § 2.

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Sanctions provided for by law The legal frameworks of all the above countries (AT, BE, BG, EL, ES, FR, HR, IT, LV, NO, PT, RO, SI) provide for sanctions in cases of breach of their regulations. The sanctions consist of pecuniary fines in each of the countries, whereas in some of them (ES, LV, NO, RO, SI) non-pecuniary penalties are also found. Indicatively, in ES, the fines range from EUR 6,000 to EUR 900,000 depending on the gravity of each infringement.221 In addition, the retailer may be penalised with forfeiture of the merchandise. In the case of very serious infringements222, in the event of a third recurrence, the autonomous communities may decree temporary closure of the offending enterprise for up to one year. Closure decisions must determine any supplementary measures needed to be fully effective. In LV, the non-pecuniary sanctions consist of blocking the enterprise’s webpage and domain name as well as closure of the company.223 Moreover, in NO, the infringer may be subject to imprisonment of up to six months, unless a stricter penal provision applies.224

Recent reforms Recent reforms regarding the restrictions for end-of-business sales have been found in seven countries (AT, BE, ES, HR, PT, RO, SI).

In AT, the last amendment took place in November 2016225, and it introduced that in the event of emergency situations such as floodwater, fire etc. the retailer did not have to undergo an authorisation procedure, which can be time consuming, and replace it with an advertisement.226 In BE, the law was amended fairly recently227 and it abolished the retailer’s obligation to notify the sales to the competent authority. Furthermore, in ES, a 2012 law228 increased the allowed duration of end-of-business sales from 3 months to 1 year. In HR, the identified restrictions were adopted recently, in 2015.229 In PT, amendments were made to the law230, specifying the applicability of the regulation and also to sales carried out at a distance or by other methods outside the establishments, such as e-commerce. In SI, the existing regulation was recently reformed. Namely, in November 2016, the administrative board of the Slovenian Chamber of Commerce adopted a cancellation decision relating to regulations specifying the seasonal sale of textile products and footwear. Lastly, in RO, the latest amendment to the law took effect in 2015.231 However, the changes introduced concern mainly minor clarifications regarding the text of the law, meaning that the content of the restriction remained unchanged.

It is interesting to note that some of the above-mentioned reforms have led to a more liberal regime (AT, BE) whereas others (HR, PT), introduced or increased already

221 Very serious infringements are punished with a fine of EUR 30 000 to 900 000, serious infringements are punished with a fine of EUR 6000 to 30 000 and minor infringements are punished with fines of up to EUR 6 000. 222 The law 7/1996 provides a detailed list, with minor, serious and very serious infringements. 223 Article 15.2 of the Unfair Commercial Practice Prohibition Law. 224 Section § 48 of the Norwegian act of 9 January 2009. 225 BGBl. I Nr. 99/2016. 226 Bundesgesetz gegen den unlauteren Wettbewerb 1984 – UWG § 33a. (6) Z15. 227 Book VI Market Practices and Consumer Protection of the Code of Economic Law (CEL) was introduced by the Law of 28 February2013 Pratiques du marché et protection du consommateur. 228 Art. 28.7 of the Real Decreto-ley 20/2012. 229 Art. 20 of the Consumer Protection Act. 230 Decree-law 70/2007 was amended by Decree-law 10/2015. 231 Law 57/2015, amending Government Ordinance 99/2000.

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3.4 | Restrictions on promotional activities existing restrictions. For instance, in BE, the amendment consisted of the abolition of the restriction and, in AT, a more lenient provision was enacted. On the other hand, in HR, the identified restrictions were adopted for the first time in 2015232, whereas in PT, the restrictions started to apply also to sales carried out at a distance or by other methods outside the establishments, such as e-commerce.

Future plans for reform Our desk research did not identify any publicly available information on notable future plans to reform the current regime on restrictions on end-of-business sales as described above.

3.4.3 Restrictions on discounted sales

Restrictions on discounted sales are rules that may limit retailer’s freedom to sell products for a reduced price, other than at the end of season or due to the end of activity of a shop. Table 21 gives an overview of the restrictions identified in this category across the 29 countries that were researched.

Table 21 Restrictions on discounted sales

Category of data Observed in which countries? Restriction(s) for discounted sales BG, CY, ES, FR, HR, LV, PT, RO, SI Level of the National BG, CY, ES, FR, HR, LV, PT, RO, SI restriction(s) Regional ES Exceptions HR, LV Applicability to e-commerce ES, FR, HR, LV, PT, RO, SI Sanctions BG, CY, ES, FR, HR, LV, PT, RO, SI Recent reforms HR, PT, RO, SI Future plans for reform of the None regulation(s) Source: Spark Legal Network

Description of the restriction

As the table above shows, our research identified restrictions with regard to discounted sales in nine countries (BG233, CY, ES, FR, HR, LV, PT, RO, SI234). These restrictions refer to regulations which limit retailers’ freedom to decide upon the conditions on which discounted sales can take place, which are found in a variety of forms, such as obligations to display both the original and the discounted price, limited duration of sales, prohibitions on selling certain products at discount and the obligation to provide specific information with regard to the offered products.

In the majority of the above countries (BG, CY, ES, FR, HR, LV, PT, SI), the law explicitly stipulates that when products are offered at a discount, there is the obligation to clearly display both the old and the new price as well as the percentage of the reduction. For instance, in BG, the words "new price" and "old price” must be

232 by Art. 20 of the Consumer Protection Act. 233 In BG, the identified restrictions apply uniformly to end-of-season, end-of-business, and discounted sales; see the Bulgarian Consumer Protection Act from 10.06.2006, Art. 6, 63, 64, 65, 66 (Закон за защита на потребителите от 10.06.2006 г. Чл. 6, 63, 64, 65, 66). This restriction will therefore be mentioned under each relevant category of promotional activity. 234 In SI, the identified restrictions apply uniformly to end-of-season, end-of-business and discounted sales; see Article 28 Consumer Protection Act (Zakon o varstvu potrošnikov, Official Gazette of RS, Nos. 98/04, 114/06, 126/07, 86/09, 78/11, 38/14, and 19/15), adopted on 26 February 1998; came into force on 28 March 1998. This restriction will therefore be mentioned under each relevant category of promotional activity.

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EUROPEAN COMMISSION followed by the relevant amounts.235 In CY, the retailer is obliged to display both the sale offer price and the previous price.236 Likewise, in ES, at national level,237 when products are offered at a reduced price, the sales and former price must be clearly specified. The former price shall be understood to mean the price applied to identical products during at least thirty days in the last six months. Additionally, in Cataluña, the law states that there must be enough products in stock to cover the offer while it lasts, and it is forbidden to apply these offers to damaged products or products acquired specifically for this purpose.238 Similarly, in LV, both the old price and the lowered price must be clearly indicated. Furthermore, the initial price must have been applied for at least 2 weeks, whereas the discounted price cannot be offered for a longer period than the basic price. Lastly, both in PT and in SI, the law states that when products are sold at a discount, the percentage of the discount has to be clearly indicated.

Similar to the other types of sales restrictions as described above, in some countries (BG, FR, LV, PT, SI) discounted sales can only take place for a limited period of time, which must be clearly indicated by the retailer. More specifically, in BG, the duration of the discounted sales may not be applied for a period longer than one month and shorter than one working day. Also, in LV, the discounted sales should not last for a period longer than 4 weeks. In FR, PT and SI the law does not provide for a specific amount of time but it is stated that these sales must have a limited duration.

Table 22 Discounted sales: fixed time periods

Time period Extension possible? Bulgaria Up to 1 month No France “occasional and short-lived” No Latvia Up to 4 weeks No Portugal “limited duration” No Slovenia “limited duration” No

Source: Spark Legal Network

In BG, PT and SI, when discounted sales take place, the retailer must provide unambiguous information with regard to the offered products. For instance, in BG, the law239 prescribes that retailers have the obligation to inform the consumer in advance when the products offered are used (second-hand), if the expiry date has passed (this is allowed for non-food products as long as there is no danger imposed on the consumers) and the general condition of the product. In PT and SI, the retailer must provide clear information about the type of products offered at discount.

235 Art. 64 of the Bulgarian Consumer Protection Act. 236 Art. 3 of The Conditions for the Sale of Merchandise in Sales Prices Law 1990 (L. 34/1990). 237 Art. 27 of Law 7/1996. 238 Art. 34 of the Legislative Decree 1/1993, 9 March. 239 Bulgarian Consumer Protection Act (Art. 6).

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3.4 | Restrictions on promotional activities

In FR240 and RO241, the applicable laws state that retailers can carry out discounted sales as long as they fulfil certain conditions, one of which is that the reduced price should not be less than the acquisition cost.242

Furthermore, in BG, the Bulgarian Consumer Protection Act states that the retailer has to designate specific areas, separate from the rest of the business premises, and clearly indicate the goods which are sold at discount.

Lastly, in SI, if the percentage reduction is declared as a percentage range, the highest percentage must apply to at least one quarter of the value of all goods offered.243

Level of the restriction In all the above-mentioned countries, the restrictions apply at national level. Additionally, in ES, some of the Autonomous Communities244 have their own regulations for discounted sales, which do not differ significantly from the national rules.

Policy objective/Rationale of the restrictions In order to justify restrictions on discounted sales, nine Member States (BG245, CY246, ES247, FR248, HR249, LV250, PT251, RO252 and SI253) refer to the protection of consumer interests.

In RO, the law254 provides a long list of further objectives, such as business development, development of SMEs, protection of commercial activity of market services in disadvantaged areas, encouraging free enterprise and free movement of goods.

Lastly in FR255, an additional objective provided is combating unfair commercial practices.

240 Code de la consommation : articles L121-1 à L121-7 . 241 Art. 32 of the Government Ordinance no. 99/2000. 242 It is important to note that there is a distinction between the restrictions for sales below cost and the restrictions for discounted sales. In RO, Art. 32 of the Government Ordinance 99/2000 regulates the restrictions regarding discounted sales where one of the requirements that need to be fulfilled in order to conduct this kind of sales is the prohibition to sell products below the acquisition cost. Sales below cost are regulated by Art. 17 of the Government Ordinance 99/2000 which provides that it is in principle prohibited to sell below cost. In FR Art. L121-1 a L121-7 Code de la consummation (Consumer Code) provides that discounted sales can take place as long as the sale price is not below cost, while Art. L442-2 Code de la consummation (Consumer Code) states that it is forbidden to resell products below cost. 243 Art. 28 of the Consumer Protection Act (Zakon o varstvu potrošnikov, Official Gazette of RS, Nos. 98/04, 114/06, 126/07, 86/09, 78/11, 38/14, and 19/15). 244 Cataluña, Galicia, Principado de Asturias, Cantabria, La Rioja, Comunidad Valenciana, Aragón, Castilla la Mancha, Islas Canarias, Extremadura. 245 In BG, the policy objective was provided by the national authority in the completed EC Questionnaire. 246 In CY, the policy objective was provided by the national authority in the completed EC Questionnaire. 247 In ES, the policy objective was provided by the national authority in the completed EC Questionnaire. 248 Code de la consommation: articles L121-1 à L121-7 (Consumer code). 249 Proposal of the Act on amendments and supplements of the Consumer Protection Act dated 23 July 2015. 250 Section 2 of the Unfair Commercial Practice Prohibition Law. 251 Preamble of Decree-Law No. 70/2007. 252 Art. 2 of the Government Ordinance no. 99/2000. 253 Article 28 Consumer Protection Act. 254 Government Ordinance no. 99/2000 regarding the products and services trade on the market. 255 Code de la consommation : articles L121-1 à L121-7 (Consumer code).

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Exceptions to the restrictions The study team has identified exceptions to restrictions on discounted sales in HR and LV. More specifically, in HR, the obligation to display both original price and sale price shall not apply to contracts executed outside of the business premises, distant contracts for public services provided to customers and in cases in which a special type of sale does not last longer than 3 days.256 In LV, the above-mentioned restrictions do not apply to food and seasonal products.257

Applicability to e-commerce The above-mentioned restrictions for discounted sales are applicable to e-commerce in seven out of nine countries (ES, FR, HR, LV, PT, RO and SI).

In BG and CY, the laws explicitly state that these restrictions do not apply to e- commerce. In particular, in BG258, the restrictions on promotional activities do not apply to distance and off-premises contracts and hence it appears that they are not applicable to e-commerce. In CY, the dual pricing requirement does not apply to distance (including online) sales or off-premises contracts. The Conditions for the Sale of Merchandise in Sales Prices Law 1990 (L. 34/1990), regulates only businesses using physical premises. Hence its provisions are not applicable to e-commerce.

Sanctions provided for by law In each of the nine countries where discounted sales restrictions apply (BG, CY, ES, FR, HR, LV, PT, RO, SI), sanctions have been identified in the case of breach of the respective restrictions.

In BG, HR and PT, the sanctions provided for by law consist of a monetary fine, the amount of which varies from country to country. For instance, in HR the fines range between HRK 10,000 and HRK 100,000 (approx. EUR 1,300 – EUR 13,100).259

In the remainder of the countries (CY, ES, FR, LV, RO, SI), the law includes both monetary fines and non-monetary penalties in their legal frameworks. For example, in CY, violation of the law’s provisions may entail imprisonment of up to six months and/or a fine of EUR 1,500.260 In LV, an administrative fine may be applied of up to 10% of the previous year's net turnover (max. EUR 100,000). If the infringement does not cease, the state authority may block the website and domain name used in conducting the commercial practice, as well as ordering the operation of the company to cease.261 Furthermore, in SI, pecuniary fines can be imposed, which vary according to the gravity of each infringement. Also, the competent inspection body shall issue a decision prohibiting the sale of the goods until the fault has been rectified.

256 Art. 18, para. 5, Consumer Protection Act. 257 Sections 5.2.4., 6.5.9. 258 Art. 61a § 2 of the Consumer Protection Act. 259 Art. 138, Consumer Protection Act. 260 Art. 5 of the Law 34/1990 “The Conditions for the Sale of Merchandise in Sales Prices Law 1990”. 261 Article 15.2 of the Unfair Commercial Practice Prohibition Law (Negodīgas komercprakses aizlieguma likuma 15.2 pants).

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Recent reforms Recent reforms have taken place in four countries: HR, PT, RO and SI. In HR, prior to the amendments of the Consumer Protection Act in 2015, discounted sales were limited in duration to a maximum of 30 days. In 2015, this restriction was deleted, which removes the limitation in duration of discounted sales. The reason for this reform was the harmonisation of the Croatian legal system with the Unfair Commercial Practices Directive. In RO, the applicable law was modified in 2012 and 2015262, but mostly to detail or clarify the initial wording of the text, so there is no impact on the content of the restriction. In PT, amending legislation263 also broadens the applicability of the regulation to sales carried out at a distance or by other methods outside the establishment, such as e-commerce. In SI, the existing regulation was recently reformed. Namely, in November 2016, the administrative board of the Slovenian Chamber of Commerce adopted a cancellation decision relating to regulations specifying the seasonal sale of textile products and footwear.

It is noteworthy that in ES in 2012, amendments to the law were intended to liberalise discounted sales.264 In particular, the law aimed to eliminate the requirement that products offered as remnants must have belonged to the retailer at least six months before the beginning of the sales. The consequence would thus be that also newly purchased products could be sold during discounted sales. However, Cataluña brought an action of unconstitutionality against this amendment, which was upheld by the Constitutional Court,265 which annulled the provision. The Constitutional Court decided that this provision deals with issues for which competencies are with the Autonomous Communities (domestic trade and consumer protection).

Future plans for reform No future plans to reform the current regime on restrictions on discounted sales have been identified.

3.4.4 Restrictions on sales below cost

Introduction Restrictions on sales below cost are rules that may limit retailer’s freedom to sell products at a price which is lower than the one paid by the retailer for the same product.266 Table 23 gives an overview of the restrictions identified in this category across the 29 countries that were researched. It is important to mention that, in line with the scope of this project as described under Chapter 2, this study does not include restrictions on sales below cost, that stem from EU competition law267 and are

262 OUG no. 22/2012 and Law no. 57/2015. 263 Decree-law 70/2007 was amended by Decree-law 10/2015. 264 By Royal Decree 20/2012, Article 28. 264. 265Judgement 18/2016 of the Spanish Tribunal Court, 4 February 2016 (Pleno. Sentencia 18/2016, de 4 de febrero de 2016. Recurso de inconstitucionalidad 1983-2013. Interpuesto por la Generalitat de Cataluña en relación con varios preceptos del Real Decreto-ley 20/2012, de 13 de julio, de medidas para garantizar la estabilidad presupuestaria y de fomento de la competitividad). Available at: https://www.boe.es/boe/dias/2016/03/07/pdfs/BOE-A-2016-2335.pdf. 266 Predatory pricing (setting prices at a low level with the purpose of eliminating or substantially damaging a competitor) is excluded. 267 According to Art. 102 TFEU “Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States. Such abuse, in particular, consist in: (a) Directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; (b) […]”. Furthermore, according to the general principles of European Competition law, Art. 102 TFEU prohibits the abuse of a dominant position which may take various forms (such as the imposition of unfair purchase or selling prices/sales below cost). See also C-62/86 AKZO v EC.

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EUROPEAN COMMISSION generally not only applicable to retailers but apply to a broader group of stakeholders.268

Table 23 Restrictions on sales below cost

Category of data Observed in which countries? Restriction(s) for sales below cost BE, ES, FR, HR, IT, PT, RO Level of the National BE, ES, FR, HR, IT, PT, RO restriction(s) Regional ES Exceptions BE, ES, FR, HR, IT, RO Applicability to e-commerce BE, ES, FR, HR, RO Sanctions BE, ES, FR, HR, IT, PT, RO Recent reforms BE, EL, HR, LU, RO Future plans for reform of the None regulation(s) Source: Spark Legal Network

Description of the restrictions Restrictions on sales below cost269 have been identified in seven countries (BE, ES, FR, HR, IT, PT, RO). These restrictions refer to regulations which either impose on retailers a complete ban on selling products below cost or introduce certain conditions that need to be fulfilled in order to allow sales below cost. In BE270, ES271, HR272, PT273 and RO274, it is generally prohibited to sell products below cost. In ES, at regional level, some of the Autonomous Communities have chosen to include in their retail laws a reference about sales below cost, however no differences have been identified between these and the national rules.

It is important to note that in IT275, when sales below cost take place, they are subject to certain restrictions. In particular, they must be communicated to the municipality where the retail store is located at least 10 days before carrying it out.276 Furthermore, retailers are allowed to carry out only three below cost sales during a

268The study team found examples of national rules (for example in BG, DE and HU) that include restrictions on sales below cost which are not included in the present report because they implement EU competition law and they do not apply to the retail sector alone. More specifically, in BG, Art. 36, Para. 4 of the Competition Protection Act prohibits the sale to the domestic market of significant quantities of goods over an extended period of time at prices lower than the costs of their production and marketing. This restriction aims to ensure fair competition in the market and applies to any economic operator. In DE, §§ 19, 20 of the Competition (Countering Restrictive Practices) Act (Gesetz gegen Wettbewerbsbeschränkungen, GWB), provides restrictions that apply in general to any economic operator active in the market (so not only to retailers). In HU, Act CLXIV of 2005 on Trade (a kereskedelemről szóló 2005. évi CLXIV. Törvény) provides that market players with significant market power should not sell products below cost. 269 The definition of sales below costs is given as the price which is lower than the purchase invoices price, increased by the value-added tax and all other taxes or charges related to the nature of the product, and decreased by any rebates or contributions related to the product. 270 Book VI Market Practices and Consumer Protection (“Pratiques du marché et protection du consommateur”/ “Marktpraktijken en Consumentenbescherming”) of the Code of Economic Law (CEL). 271 Art. 17 Law 7/1996, 15 January Regulation of Retail Trade. 272 Zakon o trgovini, Trade Act, (Official Gazette no. 87/2008, 96/2008, 116/2008, 76/2009, 114/2011, 68/2013 and 30/2014) in its Chapter VII, Art. 64 par.1. 273 Article 5 of Decree law 166/2013, 27th December, amended Decree law 220/2015, 8th August: “Individual restrictive trade measures”. 274 Art. 17 of Government Ordinance no. 99/2000 regarding the products and services trade on the market. 275 Presidential Decree 218/2001. 276 Art. 15, paragraph 7, Legislative Decree 114/1998 and Art. 1 Presidential Decree 218/2001.

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3.4 | Restrictions on promotional activities year. These three times per year have to be separated by at least 20 days and each sale below cost cannot last more than 10 days. Each time retailers carry out sales below cost, they cannot sell more than 50 products. Lastly, sales below cost are not allowed during the 30 days preceding end-of-season sales.

It is interesting to note that in FR the term "resale below cost277" is defined in a similar manner as the concept of sales below cost in this section. In general, these are prohibited by law.

Level of the restriction The above-mentioned restrictions apply in all the seven countries at national level. Additionally, in ES, some of the Autonomous Communities278 include in their retail laws references on sales below cost, which are in line with national law.

Policy objective/Rationale of the restrictions In BE279, HR280, FR281,IT282, RO283, ES284, PT285, the policy objective for the restrictions mentioned above is to ensure that all market players perform their commercial activities under equal conditions and in a way which does not prevent or distort healthy market competition. Another important policy objective that was identified (in ES, IT, RO), is the protection of consumers. Furthermore, in FR, PT and RO, the development and protection of small and medium sized enterprises appears to be an additional rationale behind the existing restrictions.

Exceptions to the restrictions In BE, ES, FR, HR, IT and RO, exceptions to the restrictions to sales below cost have been found in the legal frameworks.

In the majority of the above countries (BE, ES, FR, HR, IT), sales below cost are permitted for perishable goods such as foodstuff to prevent them from spoiling or becoming unsalable. Furthermore, the law may allow sales below cost during end-of- season or end-of-business sales (BE, ES, FR, HR, IT, RO). In BE, FR, IT and RO, another reason that may justify sales below cost may be selling damaged goods which are safe for sale or old-fashioned products that have become less attractive to consumers. Other reasons for allowing sales below cost are to align with competitors’ prices (ES, FR, RO), or in the case of products unsold within 3 months from acquisition (RO).

Applicability to e-commerce In five out of seven countries (BE, ES, FR, HR, RO) the above-mentioned restrictions clearly apply to e-commerce. In IT286 these restrictions are not applicable to e- commerce. In PT, the law prescribes that the restriction is applicable only to companies established in the national territory of Portugal. It appears therefore that the rules do not apply to companies that offer products and services over the internet if these companies are established outside of PT.

277 Art. L 442-2 French Commercial code (code de Commerce). 278 Galicia, Cantabria, Aragón, Extremadura, La Rioja, Islas Canarias, Islas Baleares, Comunidad de Madrid, Castilla y León. 279 Art. VI 116 (1) CEL. 280 Trade Act. 281 Article L 442-2 French Commercial code (code de Commerce). 282 Presidential Decree 218/2001; Law 114/1998; Article 2598 of the Italian Civil Code. 283 Art. 2 Government Ordinance no. 99/2000 regarding the products and services trade on the market. 284 The policy objective was provided by the national authority in their responses to the EC Questionnaire. 285 Preamble of Decree-law 166/2013, 27th. 286 Ministry of Economic Development Resolution 11th June 2013, No. 97761 and Article 3, Decree-law 4th July 2006, No. 223.

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Sanctions provided for by law In BE, ES, FR, HR, IT, PT and RO, the legal frameworks provide for sanctions in the case of breach of the applicable regulations.

In FR and PT, the sanctions are monetary fines. For instance, in FR, if the trader does not comply with the existing restrictions, s/he shall be liable to a fine of EUR 75,000 for natural persons. A fine of EUR 375,000 may be imposed on legal persons.287 In PT, the fines range between EUR 750 up to EUR 2,500,000 depending on the nature of the legal entity that infringes the restriction.288

In ES, HR, IT and RO, the sanctions can be both pecuniary and non-pecuniary. Indicatively, in IT in case of breach of the regulation, an administrative pecuniary sanction of 1,000,000 to 6,000.000 Lira (500-3,000 EUR) is provided for by Article 22 par. 3 of the Law 114/1998. The same sanction is provided for in Article 5, Presidential Decree 218/1998, which also states that in cases of gravity or recidivism289, the applicable administrative sanction is the suspension of the retail business for a maximum of 20 days. In ES, the fines range from EUR 6,000 to EUR 900,000 depending on the gravity of each infringement.290 In addition, the retailer may be penalised with forfeiture of the merchandise. In case of very serious infringements291, in the event of a third recurrence, the autonomous communities may decree temporary closure of the offending enterprise for up to one year. Furthermore, in 2008, an agreement was signed between the Central Government and the Autonomous Communities to guarantee consistency in the application and interpretation of these rules.292

Lastly, in BE, the Code of Economic Law provides for the possibility of criminal sanctions on the infringers of the restrictions. Additionally, the Belgian Supreme Court (Cour de Cassation), classifies the prohibition to sell below cost as a matter of “public order” (“ordre public”). Hence, sales contracts where there is a sale at a loss can be declared null (nullity sanction).

Recent reforms Recent reforms regarding the restrictions for sales below cost have been found in BE, EL, HR, LU and RO. It is noteworthy that in LU the restrictions on sales below cost were abolished in 2016.293 The policy objectives for this reform were to: i) ensure fair

287 Article L 442-2 French Commercial code (code de Commerce). 288 Article 10 of Decree-law 166/2013, 27th December, amended Decree-law 220/2015, 8th August provides: (A) if carried out by an individual, a fine of at least EUR 750 and a maximum fine of EUR 20 000; (B) if carried out by a micro-enterprise, a fine of at least EUR 2 500 and a maximum of EUR 50 000; (C) if carried out by a small enterprise, a fine of at least EUR 3 000 and a maximum fine of EUR 150 000; (D) if carried out by a medium-sized enterprise , a fine of at least EUR 4 000 and a maximum fine of EUR 450 000; (E) if carried out by a large enterprise, a fine of at least EUR 5 000 and a maximum of EUR 2 500 000. 289 In this case, recidivism means the same violation committed twice during a year in the same retail store. 290 Very serious infringements shall be punished with a fine of EUR 30 000 to EUR 900 000, serious infringements shall be punished with a fine of EUR 6000 to EURO 30 000 and minor infringements shall be punished with fines of up to EUR 6 000. 291 The law 7/1996 provides a detailed list with minor, serious and very serious infringements. 292 Annex VI: Agreement for the inspection and sanction of sale below cost. 293 Law of December 23, 2016 on sales and street sales, and misleading and comparative advertising (Loi du 23 décembre 2016 sur les ventes en soldes et sur trottoir et la publicité trompeuse et comparative).

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3.4 | Restrictions on promotional activities treatment of all market participants, ii) simplify existing legislation, iii) comply with requirements of the EU Competition law, and iv) promote consumer welfare or economic efficiency.294 Likewise, in EL, the prohibition to sell below cost was abandoned in 2012.295 The Greek government proceeded with this reform as part of the commitments it undertook in the second memorandum of understanding296 in order to receive financial assistance from its creditors.

In HR, the Consumer Protection Act297 was amended in 2014 and 2015298 with the purpose of introducing a specific regime regarding the fines to be imposed in cases of infringement of the restrictions. In BE and RO, the reforms concerned minor amendments, mostly to detail or clarify the initial wording of the text, which does not consist of a material change to the restriction.

Future plans for reform With respect to the restrictions for sales below cost identified in the countries as described above, there is no information available regarding future plans to reform the current regime.

3.4.5 Promotional activities (other)

Table 24 Restrictions on promotional activities (other)

Category of data Observed in which countries? Restriction(s) on promotional activities DK, EE, FI, FR, EL, LV, LT, NL (other) Level of the National DK, EE, FI, FR, EL, LV, LT, NL restriction(s) Regional - Exceptions EE, FI, LV, LT, NL Applicability to e-commerce DK, FR, EL, LV (only for energy drinks and medicines), LT, NL Sanctions DK, EE, FI, FR, EL, LV, LT, NL Recent reforms FI, FR, LV, LT, NL Future plans for reform of the DK, EE, FI, LV, NL regulation(s) Source: Spark Legal Network

In DK, EE, FI, FR, EL, LV, LT and NL, we have identified additional restrictions related to promotional activities which do not fit the description of the other categories of promotional activities as described above. These restrictions principally concern rules governing the advertisement of specific products or the manner in which the discounts and sales activities should be communicated to consumers.

In EE, FI, LV, LT and NL, the identified restrictions relate to the advertisement of specific products such as alcohol, tobacco products, energy drinks, explosive substances and pornographic products. While we are aware that alcohol and tobacco advertising is restricted throughout the EU and falls outside the scope of our study, we have included some notable illustrative restrictions in our description. For instance, in EE, it is prohibited to advertise alcohol within 300 metres of pre-school childcare

294 Opinion of Chamber of Commerce of 27 September 2016, Document 7038/02, Opinion of the Council of State of 28 October 2016, Document 7038/03. 295 Article 248 par.8 of Law 4072/2012. 296 See link (in Greek), p.29. Furthermore, see The Second Economic Adjustment Programme for Greece (March 2012). 297 Art. 70 par. 1. 298 Official Gazette no. 41/2014 and 110/2015.

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EUROPEAN COMMISSION institutions, schools, vocational training institutions, youth clubs, youth and project camps.299 In LV and NL, there are restrictions on the advertising of tobacco products which appear to go beyond the relevant provisions of the European legislation.300 In LV, it is prohibited to offer tobacco products, herbal smoking products, electronic cigarettes and refill containers free of charge for advertising purposes.301 In NL, the Tobacco- and Tobacco Products Act bans any form of tobacco products, electronic cigarettes and refill packages advertising and forbids retailers from giving away tobacco products and electronic cigarettes.302

In EE, it is prohibited to advertise explosive substances and pyrotechnic articles303, as well as works containing pornography.304

In LV there are restrictions on advertising energy drinks.305 More specifically, at least 10 per cent of the amount of the advertisement must include information which warns the consumers about the adverse effects of excessive consumption of energy drinks. It is prohibited to advertise energy drinks or audio and audio-visual commercial notifications related to energy drinks to persons under 18 years old and it is prohibited to use young people under 18 in the advertising of energy drinks. It is prohibited to create the impression in an advertisement of energy drinks that energy drinks are used when participating in sports competitions to improve health. Lastly, energy drinks must not be advertised in educational institutions.

In EE, EL and FR, we have identified general restrictions for the advertisement of promotional activities. In EE the words "final sale", "everything must go", "closing down sale", "sale", "discount” or other words or expressions with a similar meaning may be used to provide information about the sale of goods at a discount only under the following circumstances: i) all goods for sale or a limited selection of the goods are to be put on final sale; ii) the sale is for a limited period of time; iii) the price of the goods to be sold under such conditions is significantly lower than the usual price.306 In EL, the advertising of offers and discounts is prohibited 30 days prior to the beginning of the sales period.307 In FR, there are restrictions concerning the advertising of discounted sales. In particular, advertising must indicate the duration of

299 Advertising Act, § 28. Advertising of alcohol / Reklaamiseadus, § 28. Alkoholi reklaam (RT I 2008, 15, 108). 300 Directive 2014/40/EU of the European Parliament and of the Council on the approximation of laws, regulations and administrative provisions of Member States concerning the manufacture, presentation and sale of tobacco and related products. 301 Article 7 and 9 of the Law on Handling of Tobacco Products, Herbal Smoking Products, Electronic Smoking Devices and Their Liquids, adopted on 21 April 2016. 302 Art. 5, 9 of the Tobacco- and Tobacco Products Act. 303 Advertising Act, § 20. Advertising of explosive substances and pyrotechnic articles / Reklaamiseadus, § 20. Lõhkematerjali ja pürotehnilise toote reklaam (RT I 2008, 15, 108). 304 Advertising Act, § 24. Advertising of works which contain pornography or promote violence or cruelty / Reklaamiseadus, § 24. Pornograafilise sisuga ning vägivalda ja julmust propageeriva teose reklaam (RT I 2008, 15, 108). 305 Section 4 of The Law on the Handling of Energy Drinks. 306 Trading Act, § 11. Communication of discount sale of goods / Kaubandustegevuse seadus, § 11. Kauba soodustingimustel müügist teavitamine (RT I 2004, 12, 78). 307 Art. 15 Law 3377/2005: Rules on market improvement.

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3.4 | Restrictions on promotional activities the sales or the start date and the volume of products concerned. It must also indicate the reduced price and the reference price.308

Lastly, in DK, the Danish Marketing Practices Act provides a general restriction on advertising aimed at young people. When marketing is addressed to children and young people under the age of 18, it must not mention or include images of, or references to, intoxicants including alcohol, and violence.309

Level of the restriction All the above-mentioned restrictions are applicable at national level.

Policy objective/Rationale of the restrictions In FI310, LV311, LT312 and NL313, the policy objective that drives the identified restrictions is the protection of public health and the prevention of the detrimental effects that alcoholic and tobacco products cause to society. In EL314 and FR315, the healthy functioning of the market and enhancement of competition is the rationale behind the existing restrictions. Additionally, in FR, consumer protection is mentioned as a policy objective. In DK316, special attention is paid to children and young people because of their inherent naiveté, lack of experience and critical sense which imply that they can be easily influenced.

Exceptions to the restrictions In EE, FI, LV, LT and NL, exceptions to the above-mentioned restrictions have been identified.

For instance, in EE, the outdoor advertising of alcoholic beverages with low ethanol content is allowed.317 Regarding advertising explosive substances and pyrotechnic articles, it is allowed only at the business premises and at special exhibitions.

In FI, strong alcoholic beverages are only allowed to be advertised in trade journals of hotels or catering businesses or retail trades approved by the Product Control Agency.318

In LT, the identified exceptions relate to restrictions on the sale of tobacco products. The prohibition of advertising shall not apply to information which is provided at retail outlets where tobacco products are sold to the consumer. This information includes the name of the seller and their registered address, the names of the tobacco products offered for sale, the price etc.319

308 Arrêté du 11 mars 2015 relatif aux annonces de réduction de prix à l'égard du consommateur/ Order 11 March 2015 on Advertising. Rules that apply to the reduction of price can apply to all or part of the stock. 309 The Danish Marketing Practices Act, section 8 (2-3), 25th September 2013, no. 1216. 310 Section 1 of the Alcohol Act, Section 1 of the Tobacco Act. 311 Article 2 of the Law on Handling of Tobacco Products, Herbal Smoking Products, Electronic Smoking Devices and Their Liquids. 312 Article 1 Part 1 of the Law on Control of Alcohol. 313 The Preamble of the Tobacco- and Tobacco Products Act. 314 Explanatory Memorandum of Law 4177/2013. 315Article L.121-1 of the consumer code on misleading advertising. Order of 11 March 2015 on the advertising of price reductions to the consumer. 316 The Danish Marketing Practices Act, section 8, sub-section 1, 25th September 2013, no. 1216. 317 Advertising Act § 28. 318 Section 33 of the Alcohol Act 319 Art. 17 of the Law on the Control of Tobacco, Tobacco Products and Related Products of the Republic of Lithuania

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In NL, the ban on advertising excludes the presentation of tobacco products when they are shown in a closed package and display of prices exclusively at points of sale of tobacco products. Furthermore, these points of tobacco sale should be clearly separated from the rest of the shop and the advertisement on the facade of a tobacco or electronic cigarettes retailer may cover no more than 2 m2 - or may only be present in the enclosed area of the point of sale.320

Applicability to e-commerce In the majority of the above-mentioned countries (DK, FR, EL, LV, LT, NL), the restrictions apply also to e-commerce. It should be noted that in LV, only the restrictions regarding energy drinks and medicines are applicable to e-commerce. In EE, the legal act that provides the restrictions does not explicitly differentiate between traditional commerce and e-commerce. In FI, the restriction is not applicable to e- commerce. Likewise, in LV, the restrictions regarding alcohol and tobacco products do not apply to e-commerce since it is prohibited to sell these products online.

Sanctions provided for by law In all the above-mentioned countries (DK, EE, FI, FR, EL, LV, LT, NL), the legal frameworks provide for sanctions in cases of breach of the regulations. EE, EL, LV and NL include only pecuniary penalties in their laws. For instance, in EE, in case of breach of the regulations regarding advertising of explosive substances and pyrotechnic articles, advertising of works containing pornography and advertising of alcohol, the imposed fine will be up to 300 fine units. The same act, if committed by a legal person, is punishable by a fine of up to EUR 10,000. With regard to the general rules on how the discounts should be communicated to the public, the fine to be imposed will be up to EUR 640.321

In LV, in cases of violation of the regulations regarding tobacco and alcohol, the imposed fines for natural persons range from EUR 7 to EUR 210 and for legal persons from EUR 15 to EUR 700. If the same infringement is recommitted within one year, then the fine for natural persons is from EUR 210 to EUR 350, but for legal persons is from EUR 700 to EUR 1,400.322 Regarding energy drinks, the Consumer Rights Protection Centre is entitled to impose a fine of up to EUR 14,000 for provision or dissemination of advertising not conforming to the requirements of laws and regulations.323 In cases of breach of the regulation regarding medicines, an administrative fine may be imposed, the amount of which is between EUR 35 and EUR 700 for natural persons and EUR 350 to EUR 14,000 for legal persons.

In DK, FR, LT and FI, the sanctions imposed can be both pecuniary and non-pecuniary. In DK, a breach of the regulation can lead to an injunction or enforcement notice by the Maritime and Commercial Court, or by the Danish Consumer Ombudsman. Violation of an injunction or enforcement notice is punishable by fine or a prison sentence of up to four months.324 Additionally, the Danish Marketing Practices Act provides for criminal liability.325 In FI, in cases of breach of the regulation, fines may be imposed, combined with other penalties, such as forced removal of the product

320 Tobacco- and Tobacco Products Act, Article 5.5.b. 321 Advertising Act, Chapter 6, § 33-35 322 Article 155 of the Administrative Violations Code. 323 Section 20 (1) of the Advertising Law (Reklāmas likuma 20.panta pirmā daļa). 324 The Danish Marketing Practices Act, section 8 (2-3), 25th September 2013, no. 1216. 325 Section 30, sub-section 1, 25th September 2013, no. 1216.

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3.4 | Restrictions on promotional activities from the market. Furthermore, when it is urgently necessary to prevent a repeat infringement, a temporary prohibition, prior to the final settlement, may be issued.

Recent reforms In five countries (FI, FR, LV, LT, NL), recent reforms have taken place in their legal frameworks. More specifically, in FI326 and FR327, the identified restrictions were introduced for the first time in the national legal framework in 2015. In LV, the new Law on Handling of Tobacco Products, Herbal Smoking Products, Electronic Smoking Devices and Their Liquids entered into force on 20 May 2016, introducing several new sales restrictions, as well as provisions for newly developed tobacco products and electronic cigarettes. In LT, the latest amendments to the Law on Alcohol Control were introduced in November 2015, May 2016328 and December 2016329. In NL, the Tobacco Act was amended on 20 May 2016 and it prohibits the advertising of e- cigarettes, apart from inside the shop of an electronic cigarette retailer. Furthermore, the Alcohol Licensing and Catering Act was amended in 2013 with the aim of reducing alcohol consumption among young people, reducing alcohol-related disturbances of public order, and curbing administrative costs. This amendment moved the responsibility of monitoring and enforcing compliance with the Act from the Netherlands Food and Consumer Product Safety Authority (NVWA) to the municipalities and mayors, as the legislator believed local authorities were better placed to anticipate local conditions.

Future plans for reform In DK, EE, FI, LV and NL, future plans to reform the current legal regime have been discovered. Illustratively, in DK the Danish Marketing Practises Act is currently under review in order to be simplified.330 In LV, draft amendments to the Law on Handling of Tobacco Products, Herbal Smoking Products, Electronic Smoking Devices and Their Liquids have been developed. These amendments provide a ban on the production and marketing of sweets, snacks, as well as toys and other objects that are visually reminiscent of cigarettes or other tobacco products, electronic smoking devices and refill containers and thus can attract the attention of minors, as well as a ban on the use of national images (flag, etc.) and animated images on the tobacco products.

3.5 Restrictions on sourcing

Introduction This section describes the results of the desk research with regards to restrictions on sourcing. This type of restriction refers to regulations which limit, directly or indirectly, retailers’ abilities to source products.

Under this category of restriction, we have identified a direct sourcing restriction and an indirect sourcing restriction that concerns origin labelling. The latter type of restriction refers to regulations which impose an obligation to mention the origin of the product on the label, which may indirectly limit retailers' abilities to source products. Both restrictions were found in RO.

326 The Alcohol Act, Alcoholilaki. 327 Order of 11 March 2015 on the advertising of price reductions to the consumer, Article L.121-1 of the consumer code on misleading advertising. 328 In legal force since 1 November 2016. 329 In legal force since 1 January 2017. 330 See Draft Legislation to the Danish Marketing Practices Act, 12th October 2016, no. 40 (Link in Danish).

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3.5.1 Direct sourcing restrictions

RO is the only country in which our desk research has identified a direct sourcing restriction in the legal framework (within the scope of this study), while it should be noted that in both CZ and SK, relevant sourcing restrictions were repealed in 2016.

In addition, it is noteworthy that in BG, there is a draft law331 that would amend and supplement the Law on Food.332 In particular, Art. 23a of the draft law introduces a requirement for the obligatory presence of Bulgarian food in the market. Food retailers with an annual turnover of over 2 million BGN must source certain quantities of domestically produced traditional products in BG. The requirement concerns certain commodity groups of food such as: at least 51% fresh fruit and vegetables within their production season and at least 30% outside the production season, at least 70% of milk and dairy products, at least 25% of meat and meat products (except chicken), 50% of chicken products, at least 75% of wine and spirits. According to the “Motives Section” attached to the draft law, the policy objective of the proposed amendments is to secure the interest of Bulgarian farmers against unfair commercial practices in the local market and also against unacceptable actions of traders. Furthermore, it states that the proposed legislation is directly geared towards improving the health of the citizens of the Republic of Bulgaria.

This section does not include a comparative overview as provided in the previous sections, however it describes the identified restriction, including details on its scope, policy objective, sanctions, recent reforms and future plans.

Description of the restriction Law no. 150/2016 on the marketing of Romanian food products, which modifies and amends Law no 321/2009 on trade of food products333 provides that retailers with a turnover of more than 2 million Euros per year are obliged to sell at least 51% of certain products (meat, eggs, vegetables, honey, fruits, dairy and bread products) offered for sale from Romanian sources, i.e. from farms and production facilities located in Romania.334 The regulation also imposes the obligation to acquire food products using the short chain of supply which is defined by law as a supply chain which implies a limited number of economic operators engaged in local cooperation and development activities as well as close geographical and social relationships between producers, processors and consumers. Furthermore, retailers are obligated to promote Romanian products through specific organised activities.335

Level of the restriction The restriction applies at national level to all retailers with a turnover exceeding 2 million Euros per year in equivalent local currency.

331 According to the protocol of the parliamentary session, the vote on the draft is scheduled for Autumn 2017 (a specific date has not been determined yet). 332 § 3: In Chapter Four, a new Art. 23a is created: “In sites trading in food, with an annual turnover of over 2 million BGN, part of the quantities of marketed products, the production of which is traditional for Bulgaria: fresh fruit and vegetables, milk and dairy products, meat and meat products, wine and spirits, should necessarily be produced in the country. The part is determined by the annual or seasonal turnover”. 333 Published in Official Gazette no. 534 of 15.07.2016. The Law entered into force on 18.07.2016, but the restrictions on sourcing of food products came into force within 6 months from the publication, 15.01.2017, see Article II of the Law. Relevant Articles are: 10(3) – 10(6) and 11. Following recent changes to the proposed Law, it is proposed to enter into force on 1 January 2018. 334 Relevant Art. 103 – 10 6, 11 of the Law 150/2016. 335 Ibid.

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3.4 | Restrictions on promotional activities

Policy objective/Rationale of the restrictions The law provides the following justification for this restriction: the promotion of Romanian products and more specifically the revitalisation of the traditional producers, small and family enterprises in the agricultural field.336

Exceptions to the restrictions Exotic fruits are exempted from this restriction.337 The law does not provide for a detailed definition of “exotic fruits”, however it refers to “exotic fruits imported from foreign countries”338, which are fruits not produced in Romania because of weather, soil or any other climate conditions.339 As such, fruits cannot be considered as a national product, they would have to be imported by Romanian retailers from a third country.

Applicability to e-commerce RO law does not specify if the restriction applies to e-commerce, however it does not exclude e-commerce from its application either. It could be argued that the nature of the restriction (which has a national focus) would imply that it is at least not intended to apply to cross-border e-commerce.

Sanctions provided for by law Art. 11 (1) (a) to (c) of Law 321/2009 (as amended by Law 150/2016) provides the sanctions in cases of breach of the restrictions. The relevant fines range between 100,000 to 150,000 lei (approximately EUR 25,000 to 37,000).

Recent reforms The above-mentioned restriction was introduced into the legal framework by Law 150/2016, which modifies and amends Law no 321/2009 on trade of food products.340

Future plans for reform On 16th of March 2017, the Deputies Chamber – Commission for Agriculture, initiated discussions related to the proposed amendments to the above-mentioned restrictions. The proposed amendments were the following: i) Removing the “(...) and selling” from the text. The initial form was “acquisition and selling of 51%...”.341 ii) Removing the reference to “short supply chain”. There are two proposals here, but they were not disclosed in the meeting’s minutes of the Commission for Agriculture in the Deputies Chamber of the Romanian Parliament. iii) proposal to remove the reference “to promote Romanian products” iv) Proposal to remove from the text of the bill the complementary sanction regarding the suspension of the economic operator's activity for a period of 6 months. On 12 July 2017, The Agriculture Committee from the

336 The policy objective is given in the rationale of the law. 337 See Article 10 of Law 150/2016. 338 A definition of “exotic fruits imported from foreign countries” may be included in the still-to-be-adopted Methodological Norms of the law. These shall be adopted by Government Resolution; no public information is available on when these guidelines will be adopted. 339 The law does not provide a definition of “exotic fruits”. 340 Published in Official Gazette no. 534 of 15.07.2016. The Law entered into force on 18.07.2016, but the restrictions on sourcing of food products came into force within 6 months from the publication, 15.01.2017, see Article II of the Law. Relevant Articles are: 10(3) – 10(6) and 11. The law entered into force on 18.07.2016, but the restrictions on the sourcing of food products came into force within 6 months of publication, 15.01.2017. 341 If this amendment is passed, then the sourcing restriction will concern only the acquisition and not the selling of Romanian products. However, this amendment would not considerably change the ultimate purpose of the restriction, since the retailer who acquires Romanian products will have to sell those products to the consumers.

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Chamber of Deputies proposed amending the law to refer to ‘local products’ and stipulating that the payment for fresh products must be made to the producer within seven business days. The law should come into force on 1 January 2018. 342

3.5.2 Indirect sourcing restrictions: origin labelling

Introduction

This section describes the results of the desk research with regard to restrictions on origin labelling. This type of restriction refers to regulations which impose the obligation to mention the origin of the product on the label which thereby may indirectly limit retailers' abilities to source products. Due to the restricted scope of this study, origin-labelling restrictions presented in the current report are limited to those that exclusively affect the retail sector.343 RO is the only country in which our desk research has identified a restriction in the legal framework that falls within the scope of this study.344

Hence, this section does not include a comparative overview as provided in the previous sections, however it describes this restriction in detail, including details on its scope, policy objective, sanctions, recent reforms and future plans.

Description of restriction Pursuant to RO legislation,345 food labels must indicate the place of origin of the food if its omission is likely to cause confusion to consumers regarding the food’s real origin. Furthermore, recent law346 introduced new compulsory provisions for labelling which apply specifically to milk and dairy products. The indication “Romanian product” will be mandatory only with regard to labels of those products that contain 100%

342 Ştirile PRO TV ProTV. 343 Please see Chapter 2 for a detailed description of the scope of this study. 344 The current study does not describe restrictions on origin labelling that impose a burden beyond or other than the retail sector, such as producers. Such restrictions can be found in FI, FR, IT, LT and PT. These countries have recently incorporated laws that concern origin-labelling restrictions with regard to certain foods such as meat and/or milk and dairy products. They mostly apply to producers but in some cases they also apply to retailers. These types of restrictions may indirectly limit retailers' abilities to source products. In FI (Section 4 of the Decree of the Ministry of Agriculture and Forestry on Indicating the Country of Origin of Certain Foods 218/2017) and in FR (Decree No. 2016-1137 of 19 August 2016) these restrictions concern dairy and meat products and they affect both producers and retailers. Furthermore, in FI, there is currently discussion at national level to amend the Decree of the Ministry of Agriculture and Forestry 834/2014 “Information for non-prepacked foods”. This Decree concerns information on the country of origin of meat and fish used as an ingredient in meals and other non-prepacked foods. It seems that, following this discussion, the amended piece of legislation should be notified to the European Commission. In IT (Decreto 9 dicembre 2016, Indicazione dell'origine in etichetta della materia prima per il latte e i prodotti lattieri caseari, in attuazione del regolamento (UE) n. 1169/2011, relativo alla fornitura di informazioni sugli alimenti ai consumatori), the restriction concerns the indication of the origin of raw material for milk and processed milk-based products and it is not retail-specific. In LT (Order of the Minister of Health of the Republic of Lithuania on the List of Milk and Dairy Products) and in PT (Decree-Law 62/2007) the rules do not affect the retail sector but only the milk processing enterprises, providing that the labels must indicate the country of origin of the milk. 345 Article 5 of Annex 1 to G.R. no. 106/2002. 346 Law 88/2016.

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3.4 | Restrictions on promotional activities unfiltered milk as raw material sourced from Romanian farms.347 Likewise, further legislation348 introduced new mandatory provisions for labelling on meat products. According to the new law, the trader is obliged to visibly include the indication “Romanian meat” on the label. For meat food products which are sold on Romanian territory, it is mandatory to mention on their label the percentage of meat coming from Romania.349

Level of the restriction The restriction applies at national level.

Policy objective/Rationale of the restrictions The Romanian restriction aims to serve consumers’ right to be fully informed on the origin of the products they consume. Furthermore, laws 88/2016 and 150/2016 provide as policy objective for the existing restrictions the need to promote Romanian milk and dairy products as well as Romanian meat products.

Exceptions to the restrictions No exceptions to the above restrictions have been identified.

Applicability to e-commerce Ro law does not specifically exclude the online applicability of this restriction, which could lead to the conclusion that it applies equally to internet sales.

Sanctions provided for by law In cases of breach of the obligation to indicate the place of origin of the food on the food labels, the sanctions imposed will be fines of between 1,000-10,000 lei (approx. EUR 222 - 2,222).350 The law351 provides for fines of between 15,000-20,000 lei (approximately EUR 3,330 - 4,440) if the regulation with regard to milk and dairy products is infringed.

Lastly, in cases where the restriction on meat products is breached, then the law352 provides for fines from 100,000 to 150,000 lei (approximately EUR 25,000 - 37,000).

Recent reforms In RO in 2016 the legislator introduced new restrictions with regard to origin labelling on dairy and meat products.

Future plans for reform No public information regarding future reforms has been identified.

3.6 Financial restrictions

Introduction

347 Law 88/2016 was adopted to amend Law 321/2009 regarding commercialisation of food products. Law 88/2016 introduced new compulsory provisions for labelling applied to milk and dairy products. The relevant articles are Art. 3 (1) f); Art. 5 (b). 348 Law 150/2016. 349 Law no. 150/2016 modified and completed the general framework concerning food products commercialisation introduced by Law no. 321/2009. It introduces new mandatory provisions for meat products commercialisation, including the origin labelling. The relevant article is Art. 102. 350 Art.2 of the Government Resolution (G.R.) no 106/2002. 351 Art. 8 of law 88/2016. 352 Article 16 (1) (a)-(c) of law 321/2009 as it was modified by law 150/2016.

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Another type of restriction that the Study team has researched, is what we call financial restrictions. Financial restrictions as referred to in this project are described as: regulations imposing taxes and fees specifically on the retail sector excluding any product-based taxes and fees. Financial restrictions that fall within the scope of this study were only identified in a handful of Member States and mainly related to taxes levied on large retail stores.353 The Table below provides an overview of these restrictions.

Table 25 Financial restrictions

Category of data Observed in which countries? Financial restrictions ES, FR, PL, PT Level of the National FR, PL, PT restriction(s) Regional ES Exceptions ES, FR, PL, PT Applicability to e-commerce - Sanctions ES, FR, PL, PT Recent reforms ES, FR, PL, PT Future plans for reform of the - regulation(s) Source: Spark Legal Network

The vast majority of countries do not have regulations in place at national or regional level that impose taxes and fees specifically on the retail sector. Financial restrictions exclusively levied on retail operators have been identified in four Member States (ES, FR, PL, PT). Within this group, taxes applicable to large retail stores, on the basis of their retail sales area, have been found in ES and PT. In FR, the tax is related to certain retail areas in combination with a certain turnover threshold. The tax rules identified in PL354 apply mainly to large retail companies, but this is established on the basis of their turnover rather than the sales area.

With regard to ES, a tax which applies to large commercial establishments355 on the basis of their sales areas has been identified in the regions of Aragón, Asturias and Cataluña356.

353 Other financial restrictions, such as business rates and administrative fees that are applicable to traders in general (and as such also apply to the retail sector) will not be described in this section, as they do not fall within the research scope of this study, as described under chapter 2. The same applies to certain financial restrictions that apply at municipal level. 354 The Retail Sales Tax Act of 6th July 2016 (Journal of Laws of 2016, item 1155). 355 Large commercial establishments are considered as: large individual commercial establishments of the retail sector which have a sales area equal to or greater than 2,500 square metres; large collective commercial establishments integrated into a group of establishments which have a sales area equal to or greater than 2,500 square metres; large commercial establishments which have a sales area equal to or greater than 1,300 square metres and which are located outside the urban area. Large individual commercial establishments which have a sales area equal to or greater than 2,500 square metres. An establishment that does not have the status of a large individual commercial establishment because it does not meet the minimum surface requirement is subject to tax when, as a result of an extension, it equals or exceeds 2,500 or 1,300 square metres of sales area. 356 Law 5/2017 of 28th March, on tax, administrative, financial measures of the public sector, creation and tax regulation on large commercial establishments, stays in tourist establishments, radiotoxic elements, bottled sugary drinks and carbon dioxide emissions (Articles 5 – 21). Taxes on large retail outlets have been identified also in the regions of Asturias (Law 15/2002 as amended in 2015 and Decree 139/2009) and Aragón (Law 13/2005 as amended in 2016). Details of the legislation are provided for Cataluña, which is economically most important of the three regions.

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3.4 | Restrictions on promotional activities

In FR, a tax system applies which is referred to as TASCOM (La taxe sur les surfaces commerciales, tax on commercial retail surface areas).357 Shops with a retail area of more than 400 m², with a turnover of EUR 460,000 and above, are subject to the tax on commercial premises.358 The area to be taken into account for the calculation of the tax is the surface in retail stores used for customer traffic for shopping or for the presentation of the goods offered for sale, payment or for the movement of personnel for presenting the goods for sale. If an establishment has mixed activities (e.g. service and wholesale), only turnover related to retail is taken into account, provided that the different activities are accounted for separately. Similarly, if a retail sale is carried out in the course of a service (for example, a sale of spare parts that is incidental to repair or after-sales service, which constitute services), it must not be included in the calculation of the taxable portion.

In PL, tax applies to companies that operate in PL and are active in the retail sale of goods. However, the application of the rules is currently suspended until 1st January 2018, due to the fact that that the Commission has opened an investigation into this tax regime. The Commission has concerns that the progressive rates based on turnover would give companies with a low turnover a selective advantage over their competitors in breach of EU state aid rules. Under this tax regime, companies operating in the retail sector must pay a monthly tax to the State on the basis of their turnover from retail sales. In particular, the retail tax features a progressive rate structure with three different brackets and rates359.

Furthermore, in PT, two retail-specific taxes have been found. The first is a so-called ‘one-shot tax’360 applicable to retail stores with a sales area equal to or greater than 2,000 m2 (if stand-alone), and shopping centres with a gross leasable area equal to or greater than 8,000 m2. This one-shot tax is due at the opening of the retail store once a joint authorisation361 for the opening of the store is given.362 The second financial restriction identified in PT concerns tax related to food safety.363 In particular, an annual fee is due as a contribution towards guaranteeing food quality and safety, by establishments that sell products of animal or vegetable origin, fresh or frozen, processed, raw and / or pre-packaged products (namely markets and grocery shops).

Level of the restriction The identified financial burdens are set out at national level in three Member States (FR, PL, PT), while in ES, Cataluña sets its own specific rules.

Policy objective/Rationale of the restrictions

357 Law No 72-657 of 13 July 1972 establishing measures for certain categories of elderly traders and craftsmen; Decree No 95-85 of 26 January 1995 on “La taxe sur les surfaces commerciales”. 358 The tax also applies to retailers whose commercial retail area is 400 square metres or less when they are controlled either directly or indirectly by one and the same person, operating under the same trading name, and where the combined area of all establishments exceeds 4 000 square metres. 359 The progressive rate works as follows: 1) a tax rate of 0% applies to the part of the company’s monthly turnover below PLN 17 million; 2) a tax rate of 0.8% is levied on the part of the company’s monthly turnover between PLN 17 million and PLN 170 million; 3) a tax rate of 1.4% is levied on the part of the company’s monthly turnover above PLN 170 million. 360 Articles 6, 13 and 18 of Decree law 10/2015; Article 2 of the Ordinance 60-B/2015, 2nd March. 361 The joint authorisation is a procedure for which the following are responsible: DGAE (the central public body that coordinates all the previous authorisations), the local mayor of the town hall, and the chairman of the local CCDR (regional public body). 362 The tax is calculated as follows: The tax rate is calculated using the following values: 1) retail stores (over 2000 m2 and not included in a shopping centre: EUR 20/m2; 2) shopping centres over 8000 m2: EUR 15/m2. 363 Article 9, Decree Law N. 119/2012, 15th January.

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Policy objectives and /or rationales are provided for all identified financial restrictions. Policy objectives are provided by law in FR364 and in the preamble of the law in PT (tax related to food safety), while in PL it can be found in a draft law365. In ES and PT (one shot tax on large retail shops) the policy objective was provided by the national authority366.

In FR, PL and PT (tax related to food safety), the objective of the restrictions appears to be related to the support of the state budget, whilst in PT (taxes on large retail outlets) the rationale behind the restrictions is to reduce the impact of large retail stores on traditional shops, and in ES, the rationale is to redress the adverse impact of large commercial establishments on the territory, the environment and urban trade in Cataluña.

Exceptions to the restrictions Exceptions vary depending on the type of financial restriction. In France, the TASCOM tax does not apply to the following retail companies: opened before 1960; with turnover under EUR 460,000 per year and retail shops with a sales area not exceeding 400 m².367

In PL, the above-mentioned retail tax does not concern the supply of certain services and specific products such as medicines, medicinal devices and foodstuff intended for particular nutritional purposes.368 Furthermore, for companies with a monthly turnover below PLN 17 million (approximately EUR 3.9 million), the tax rate is 0%, hence such companies are exempted.

In PT, the tax on food safety does not apply to establishments with an area for sale smaller than 2000 m2 or belonging to micro-enterprises369, whilst in Cataluña, the regulation does not apply to local markets.

Applicability to e-commerce The identified financial restrictions, due to their nature, do not apply to e-commerce.

Sanctions provided for by law Three Member States (FR, PL, PT) provided for specific sanctions in cases of breach of their respective regulations.

In FR, different penalties are applied depending on the type of breach of the regulation. In cases of non-payment or late payment, a 5% tax increase and interest at a rate of 0.40% per month (starting point for the calculation is the first day of the final deadline for the payment of the tax) apply; if the breach consists of non- submission or late submission of the tax return form, the penalty is calculated on the basis of interest at a rate of 0.40% per month (starting point for the calculation is the first day of the final deadline for the submission of the tax return form) plus a penalty

364 Law No 72-657 of 13 July 1972. 365 Draft of the law: http://www.sejm.gov.pl/Sejm8.nsf/PrzebiegProc.xsp?nr=928. 366 Policy objectives for ES and PT were provided by the national authorities which completed the European Commission’s Questionnaire on Operational Restrictions. 367 Article L. 233-3 of the Commercial Code. 368 The Act of Food and Nutrition Safety, Art 3(3) p. 43. Foodstuffs intended for particular nutritional purposes are foodstuffs in which content or way of preparation differs significantly from regular foodstuffs

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3.4 | Restrictions on promotional activities of 10% tax increase if the tax return form is sent by registered mail voluntarily within 30 days of the deadline or 40 % increase if the tax return form is not sent by registered mail within 30 days following the deadline. Furthermore, in cases of fraud, if the error on the tax return form was made in good faith (there is a presumption), the penalty applicable is interest only, calculated at the rate of 0.40% per month, while if the error is intentional/dishonest (the burden of proof is on the administration to demonstrate bad faith), the penalty applicable is 40% of the tax owed. The penalty can reach 80% of the tax owed if the error was intentional following dishonest manoeuvres (e.g. the tax return has been modified intentionally).

In PL, in the case of violation of the regulation, default interest would be claimed.370 Additionally, the retailer would be subject to general sanctions for tax avoidance.371 The sanctions may vary depending on the particular case. They may include a fine, imprisonment, or both.

In PT, there is no sanction imposed for the one-shot tax which applies to large retail shops, whilst a monetary fine and subsidiary sanctions are imposed in cases of breach of the regulation concerning the annual fee related to food safety.372

In ES, the regulation does not provide for specific sanctions, but it states that the general regime of infringements and penalties in the field of taxes applies.373

Recent reforms Reforms have been carried out recently in all four Member States (ES, FR, PL, PT). In Spain, Cataluña introduced a new regulation which modified the system of determination of the taxable base for all establishments subject to the tax.374 Under this law the taxable base is calculated on the basis of a specific formula which takes into account the number of vehicles entering the commercial establishment375, whereas previously the calculation was based on the size of the commercial establishment.

In FR, three amendments to the TASCOM tax were introduced in 2012, 2014 and 2015. The first reform376 introduced improvements with regard to the tax base and the definition of retail sale;377 the second reform378 introduced a 50 % increase of the TASCOM for establishments with a sales area of over 2,500 m². Finally, the third reform379 involved two modifications to the law. Firstly, it specified the calculation methods applicable in the case of incomplete operation of commercial premises in the course of the year, and secondly, it created a new taxable event for the operator of a commercial area whose service terminates their holding during the year.

370 The Tax Ordinance Act of 29th August 1997, (Journal of Laws of 2017, item 201), Articles 53, 56. 371 The Tax Penal Code of 10 September 1999 (Journal of Laws of 2016, item 2137), Articles 54, 56, 57. 372 Decree-law N. 119/2012, 15th January, article 9. 373 Law 5/2017, 28th March, Article 19. 374 Law 5/2017, of 28 March entered into forced on 31st March 2017. Moreover, the law was modified on the 7th April 2017. 375 In Cataluña, the taxable base is calculated with the following formula: BI = (N - E) Cc. [Taxable base = number of vehicles entering the commercial establishment – number of workers’ vehicles and rental vehicles) x Coefficients set in the Law]. 376 Law No 2012-1510 of 29 December 2012 on amending finances for 2012, Article 37. 377 Law No 2012-1510 of 29 December 2012, Article 37. 378 Law No 2014-1655 of 29 December 2014, Supplementary Finance Act for 2014, Article 46. 379 Law No 2015-1786 of 29 December 2015, amending Finance Law for 2015, Article 66.

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In PL, a group of MPs proposed a draft act380 to Parliament to repeal the Retail Sales Tax Act, due to its consequences for large enterprises. However, so far the draft has been negatively assessed the majority of the MPs and by a parliamentary commission.

Furthermore, in PT, recent amendments simplified the authorisation procedure to make it less burdensome for retailers.

Future plans for reform

No major future plans for reform regarding the above-mentioned rules were identified in the course of our research

3.7 Key findings and conclusions

Our analysis shows a relatively fragmented landscape among the twenty-eight EU Member States and NO with regard to the legal frameworks concerning operational restrictions in the retail sector.

Restrictions on sales activities

Operational restrictions on sales activities show a relatively diverse framework across the countries. All countries have regulations on sales activities. However, variation exists among countries with regard to the regulatory details within each subcategory of restriction analysed (shop opening hours, distribution channels for alcohol, medicines, tobacco and sales activities (other)).

Shop opening hours With regard to shop opening hours, this study found that fifteen countries381 restrict retailers’ freedom to organise their sales activities during weekdays, Saturdays, Sundays, and public holidays. Furthermore, it should be noted that labour legislation may, in practice, indirectly affect retailers’ opening times in all countries. Member States provide a series of justifications for restrictions on opening times, such as the protection of employees’ rights, conditions and interests, as well as consumers’ interests, (Sunday) rest, ensuring fair competition, and economic growth. Moreover, the majority of countries have recently reformed their regulations, liberalising or introducing more flexible measures.

Distribution channels Research shows that restrictions on distribution channels are mainly found in relation to non-prescription medicines, alcohol and tobacco. Firstly, restrictions on distribution channels have been found with regard to non-prescription medicines. All Member States provide for restrictions on medicines which do not need a prescription to be sold to the public, which are mainly referred to as over-the-counter medications (OTCs). Nonetheless, eighteen Member States382 allow the sale of (certain) OTCs / non- prescription medicines outside of pharmacies. Varying rules on outlets and types of medicines sold as OTCs apply across countries. Similarities have been found regarding the reasons behind the restrictions, which are aimed at protecting public health and

380The draft act: http://www.sejm.gov.pl/Sejm8.nsf/PrzebiegProc.xsp?nr=928 . 381 AT, BE, CZ, DE, DK, EL, ES, FR, LU, MT, NL, NO, PL, SK, UK. 382 AT, BG, CY, CZ, DK, EL, FI, HU, IE, IT, NL, NO, PL, PT, RO, SI, SE, UK.

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3.4 | Restrictions on promotional activities safety as well as ensuring safe and proper use and secure and high quality of medicines. Restrictions on selling medicines online have been identified in all countries, which generally follows from EU law.

Regulations which restrict the distribution of alcohol exist in sixteen Member States.383 In the majority of these countries only specific shops, which hold a licence or comply with other specific requirements, can sell alcohol. These barriers have been justified by national authorities on the basis of the protection of public health, young people and consumers in general. In several countries the restrictions also apply to online sales. Recent and future plans for reforms, even when aimed at deregulating the sale of alcohol, try to find a balance between lowering the legal age limits for buying alcohol and reducing the negative impact of alcohol consumption.

With regard to restrictions on distribution channels for tobacco, in fourteen countries384 the legal framework stipulates that shops should either have a licence, an authorisation or meet specific criteria to sell tobacco products. Varying policy objectives were found across these countries, to justify the restrictions in place, for instance protection of health and safety, young people as well as reducing smoking uptake and the unauthorised sale of tobacco products. The restrictions apply to e- commerce only in five Member States.

Other restrictions on sales activities The majority of countries have other sales restrictions in place, which relate to a wide range of products such as alcohol, tobacco, books and fireworks, pertaining to age limits and fixed hours of sales. These mainly consist of age restrictions related to alcohol and tobacco.

Restrictions on promotional activities

It has been observed that the majority of EU countries, as well as NO, include restrictions on promotional activities in their legal systems. Only 7 countries (CZ, IE, MT, PL, SK, SE, UK) do not include any kind of restrictions on promotional activities in their national laws. Within each type of promotional activity, a large variation of requirements can be found. Requirements thus range from limitations in terms of time periods in which the sales can take place, the products to which the sale would apply, or the place in which the sale would take place, to notification obligations before the start of sales. In most cases, the policy objectives behind the restrictions are the protection of consumers’ interests and the prevention of unfair commercial practices. Furthermore, almost all the restrictions apply equally to e-commerce with only a limited number of exceptions. Quite often the laws do not explicitly provide applicability to e-commerce, either because they were drafted before the existence of e-commerce or because it is considered self-evident that e-commerce fits into the category of so-called ‘distance sales’.

End-of-season sales As regards restrictions on end-of-season sales, it has been noted that thirteen countries385 include such restrictions in their legal frameworks, where requirements and / or conditions vary significantly from country to country. Fixed periods of sales are commonly observed restrictions for end-of-season sales, while some countries prohibit the application of discounts during the period preceding the end-of-season sales. In some countries, retailers are obliged to notify the competent authorities regarding their intention to conduct such kinds of sales, whereas in other countries the

383 AT, CY, CZ, DK, FI, FR, IE, LV, LT, LU, NL, NO, PL, SE, SK, UK. 384 AT, BG, CY, CZ, DK, ES, FI, FR, HU, IE, IT, SI, SK, UK. 385 BE, BG, EL, ES, FR, HR, IT, LV, LU, NO, PT, RO, SI.

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End of business sales Restrictions for end-of-business sales have been identified in thirteen countries386 and most of the legal frameworks allow this kind of sale only for specific reasons such as total or partial termination of the commercial activities of the undertaking, renovation or relocation of the business premises, the retailer’s death or retirement or bankruptcy and in cases of force majeure. In many of these countries the law mentions the maximum amount of time during which end-of-business sales shall take place. Furthermore, in several countries the law requires ex ante authorisation or notification to the competent authority. Other restrictions identified include a prohibition on selling newly purchased products, an obligation to conduct these sales at the usual business premises and an obligation to accompany the sales with relevant advertising which announces the latter.

Discounted sales Restrictions on discounted sales were found in the legal systems of nine countries.387 In the majority of these countries there is an obligation to clearly display both the old and the new price as well as the percentage of the reduction. Additionally, in some countries discounted sales can only take place for a limited period which must be clearly indicated by the retailer.

Sales below cost The current study identified restrictions on sales below cost which do not stem from EU competition law. Seven countries388 have restrictions on sales below cost in their legal systems. In five389 of these countries it is generally prohibited to sell products below cost. In the remaining countries, the identified regulations introduce certain conditions that need to be fulfilled in order to allow sales below cost.

Promotional activities (other) In eight countries390 restrictions on promotional activities were observed that did not fit any of the above categories. These restrictions mainly concern rules governing the advertising of specific products or, in general, the manner in which the discounts and sales activities are communicated to consumers.

Direct and indirect sourcing restrictions It has been noted that within the scope of this study, only one direct sourcing restriction was identified in RO. RO law provides that retailers with a turnover of more than EUR 2 million per year should acquire and sell at least 51% of the products offered for sale from Romanian sources. Furthermore, a draft law in BG is likely to impose a similar restriction on food retailers with an annual turnover of over BGN 2 million.

386 AT, BE, BG, EL, ES, FR, HR, IT, LV, NO, PT, RO, SI. 387 BG, CY, ES, FR, HR, LV, PT, RO, SI. 388 BE, ES, FR, HR, IT, PT, RO. 389 BE, ES, HR, PT, RO. 390 DK, EE, FI, FR, EL, LV, LT, NL.

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3.4 | Restrictions on promotional activities

National desk research has found a recently enacted391 restriction in RO on origin labelling, which obliges retailers to indicate the Romanian origin of milk and meat products. According to the legislator, the ultimate purpose is to serve consumers’ interests by giving them all the necessary information regarding the origin of the products. The justification provided by the legislator consists of the promotion of Romanian milk and dairy products as well as Romanian meat products.

Financial restrictions

Desk research shows that a large majority of countries do not provide for retail-specific taxes and fees. Nonetheless, financial restrictions have been found in a handful of Member States (ES, FR, PL, PT). It can be said that the identified financial restrictions concern taxes applicable to large retail stores. In ES (Aragón, Asturias and Cataluña) and PT, taxes apply to large retail stores, on the basis of their retail sales area, while in FR the tax is related to retail areas above a certain size in combination with a certain turnover threshold. The tax rules identified in PL apply mainly to large retail companies on the basis of their turnover. However, it should be noted that the application of the rules in PL is currently suspended until 1st January 2018, due to an ongoing investigation into the tax regime. In FR, PL and PT (tax related to food safety), the restrictions appear to be justified by the aim of supporting the state budget, whilst in PT (taxes on large retail outlets) the rationale behind the restrictions is to reduce the impact of large retail stores on traditional shops in PT, and in ES, the rationale is to redress the adverse impact of large commercial establishments on the territory, the environment and urban trade.

391 i) Law 150/2016 which modifies and completes the general framework (Law no. 321/2009) concerning food products commercialisation., ii) Law 88/2016 which was adopted to amend Law 321/2009 regarding commercialisation of food products. Law 88/2016 introduced new compulsory provisions for labelling applied to milk and dairy products.

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4 IDENTIFICATION BY THE RETAIL SECTOR OF THE MOST BURDENSOME RESTRICTIONS

4.1 Introduction

In addition to the comprehensive identification of all the restrictions affecting retailers in their operation discussed in the previous two chapters of the report, a number of interviews with retailers and retail trade associations were carried out. The objective of these interviews was to gather the European retail sector’s views and perspectives on the 10 restrictions judged to be the most problematic in the different EU-28 Member States and Norway.

In total, 162 interviews were carried out including different types of retailers.

4.2 Ranking of the 10 most problematic operational restrictions faced by retailers

This section provides aggregate tables for different groups of retailers of the 10 most problematic restrictions according to retailers. The severity of each restriction was quantified by converting as follows the qualitative assessment of the interview participants:

 3 for high impact;  2 for significant impact;  1 for low impact;  0 for no impact.

An overall score for each restriction was then derived by aggregating across the different interview participants the quantitative assessment of the severity of the restriction.

The results of each table are based on a different numbers of respondents. Detailed information on the number of respondents per group and subgroup of retailers are provided in the fiches in a stand-alone annex.

The results of the interviews with retailers operating both in the food and non-food sector are provided in Table 29. The views of online retailers are presented in Table 30 respectively.

Specific rankings for the views on the severity of operational restrictions in each of the 29 countries covered by the research are presented in the respective country fiches included in a stand-alone annex. The table below provides the list of all the restrictions discussed during the interviews.

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Table 26 Description of restrictions covered in the interviews

Legend 5a

Restrictions on sales activities: Regulation of shop Restriction 1 opening hours (i.e. maximum number of hours a shop can be open on weekdays/Saturdays/Sundays/public holidays) 5b

Restriction 2 Restrictions on sales activities: product-specific sales restrictions (i.e. requirements for certain products to

be sold only in certain shops)

5c Restrictions on advertising: product-specific Restriction 3 advertising restrictions (advertising of alcohol and tobacco are out of scope) 5d

Restriction 4 Restrictions on promotional activities: Restrictions on end-of-season sales (e.g. fixing specific sales periods, imposing specific conditions) 5e Restrictions on promotional activities: Restrictions on Restriction 5 end-of-business sales (e.g. mandatory prior authorisations, imposing specific conditions, limiting duration) 5f

Restrictions on promotional activities: Restrictions on Restriction 6 discounted sales (outside specific sales periods - if fixed) (e.g. restrictions on the characteristics and quantities of products permissible for discounting, restrictions on duration) 5g

Restrictions that apply to the physical retail channel retail physical only channel toapply Restrictionsthatthe Restriction 7 Restrictions on promotional activities: Restrictions on sales below cost (e.g. complete ban, restrictions on duration and occurrences). 5h

Restriction 8 Financial restrictions: regulations imposing taxes and fees specifically on the retail sector excluding any product-based taxes and fees 5i Restrictions on sourcing: regulations which limit, Restriction 9 directly or indirectly, retailers' abilities to source products

Restriction 10 Restrictions on sales activities: Regulation of delivery times (i.e. weekdays/Saturdays/Sundays/public holidays) 6k Restrictions on sales activities: product-specific sales Restriction 11 restrictions (i.e. requirements for certain products to be sold offline) 6l

Restriction 12 Restrictions on advertising activities: Restrictions on online retail channel only onlinechannel retail the advertising of online products (advertising for Restrictions that apply to the toapplyRestrictionsthatthe alcohol and tobacco are out of scope)

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Restrictions on promotional activities: Restrictions on Restriction 13 online promotional sales (e.g. fixing specific promotional periods, fixing specific promotional hours, imposing specific conditions) 6n

Restriction 14 Restrictions on promotional activities: Restrictions on sales below cost (e.g. complete ban, restrictions on duration and occurrences). 6o

Restriction 15 Financial restrictions: regulations imposing taxes and fees specifically on the online retail sector excluding any product-based taxes and fees 6p Restrictions on sourcing: regulations which limit, Restriction 16 directly or indirectly, retailers' abilities to source products Source: VVA

4.2.1 Operational restrictions in the EU-28 and Norway The following rankings of the severity of different restrictions are based on the assessment of the interviewed retailers and retail associations. In comparison to the results of the legal analysis in the previous chapter, it is worth noting that the interviewed individuals were no legal experts and some of the concerns they voiced were fully or partly out of scope for this study. The main added value of the rankings in the present chapter is therefore the provision of an overview of the concerns of retailers in the EU-28 and Norway regarding restrictions. Any of the results presented and discussed below should be interpreted in this context.

Overall in the EU-28 and Norway, the interviewed retailers are most often concerned with financial restrictions. Several Member States charge an extra tax on larger retail establishments while retailers in other Member States find themselves limited by other restrictions which would not fall into the scope of this study (local or regional taxes, property and commercial (non-retail specific) taxes, and other fees).

Second and third on the list of concerns are product-specific sales restrictions and restricted shop-opening hours. Restrictions on the sale of tobacco, alcohol, and pharmaceuticals are widespread but there are occasional examples of other product- related restrictions too. Limitations on shop-opening hours (found in 15 Member States) on Sundays and in the evening are also one of the top three concerns of retailers. Even if the issue is out of scope for this study, sometimes retailers complained that the limitations on shop opening hours are caused by labour market regulation instead of direct restrictions. This is the case for Luxembourg and Scandinavian countries.

Another group of restrictions among the top 10 concerns for retailers are restrictions restricting the pricing policy of retailers. Some Member States limit or prohibit sales below cost (fourth and tenth in the list for the physical and online channels). Even if not directly regulated, and therefore outside the scope of this study, in some countries, large retailers pointed out how competition law forbids them from selling products below cost when they are in a dominant market position. At the same time,

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SMEs expressed concerns about the below-cost selling of large players. Some Member States restrict the timing and extent of end of business sales (9th most important concern) or generally limit discounted sales (5th most important concern) by limiting the discount rates or the frequency of discounts.

Restrictions on end-of-season sales (6th) were also assessed to be burdensome by retailers and retail associations. The restrictions relate to fixed periods of sales, notification obligations to authorities, requirements to indicate the original and sales price, prohibitions on applying discounts prior to end-of-season sales, etc. In the majority of these countries (BE, EL, ES, FR, HR, IT, LU, PT, RO), end-of-season sales can only take place during fixed periods.

Advertising (7th) restrictions limit the advertising of end-of-season sales or limit advertising of alcohol, tobacco, explosives, and other products. In one case, the restriction specifically targeted advertising aimed at young people.

Sourcing restrictions (8th) score relatively high as well on the list of retailers’ concerns. During the interviews, restrictions on the country from which products could be sourced (e.g. a quota of national products) were only observed in Romania. But it was still a major concern of retailers in several additional countries. Most of the concerns raised by retailers fall outside the scope of this research and are related to B2B relationships between suppliers and retailers (i.e. large producers imposing on retailers sourcing restrictions on their products). In some cases, the question was interpreted as relating to the stocking of physical retail stores. In this case, some retailers complained about local and municipal laws restricting and limiting access to city centres.

The table below provides a detailed assessment for each restriction.

Table 27 The ten most problematic operational restrictions faced by retailers in the EU-28 and Norway

Total number of Ranking of restrictions points Explanation / Comment Financial restrictions (physical channel) / Observed in ES, FR, PL, and PT. In ES and PT taxes apply to large retail stores based on the retail sales area. In FR and PL, the tax is based on the size of the retail store and applies only to larger retail stores. In 1 Restriction 8 573 most other Member States, the retailers also considered financial restrictions to be important even though the restrictions they identified fall outside the scope of this study (e.g. local fees, property taxes and other fees). Product-specific sales restrictions (physical channel) / Such restrictions apply to alcohol, medicine, and tobacco. Selling of alcohol is restricted at the national level in 16 Member States (AT, CY, CZ, DK, FI, FR, IE, LV, LT, LU, NL, NO, PL, SE, SK, some regions of the UK). All countries restrict 2 Restriction 2 486 medicine sales. Medicines are divided into prescription medicines (in ten countries - BE, DE, EE, ES, FR, LT, LU, LV, MT, SK- such medicines can only be sold in pharmacies) and non-prescription medicines (16 countries - AT, BG, CY, CZ, DK, EL, FI, HU, IE, IT, NL, NO, PL, PT, RO, SI, SE, UK- allow the sale of such medicines in premises other than

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pharmacies). In the case of tobacco sales, 14 Member States (AT, BG, CY, CZ, DK, ES, FI, FR, HU, IE, IT, SI, SK, UK) require a licence or an authorisation, or restrict sales to specific shops or to specific customer groups. Regulation of shop-opening hours (physical channel) / This regulation (restriction on selling at weekends and sometimes not-in- scope labour 3 Restriction 1 402 regulation) is seen as an obstacle by retailers in 15 Member States (AT, BE, CZ, DE, DK, EL, ES, FR, LU, MT, NL, NO, PL, SK, UK) at the regional or national level. Restrictions on sales below cost (physical channel) / Observed in BE, ES, FR, HR, IT, PT, and RO for all retailers and in DE and HU for dominant market players. In AT, BG, CZ, FI, and SK they are 4 Restriction 7 398 also seen as an issue but the concerns are about other dominant market players and not about regulation and therefore outside the scope of the study. Restrictions on discounted sales (physical channel) / Observed in BG, CY, ES, FR, HR, LV, PT, 5 Restriction 6 393 RO, and SI and ranked among the three most problematic in NL, PT, RO, UK and FI (no legal measure but involvement of an Ombudsman). Restrictions on end-of-season sales (physical channel) / End-of-season sale restrictions (e.g. notifications or limited periods) were observed in a 6 Restriction 4 361 total of 13 countries at the national (BE, BG, EL, FR, HF, LV, LU, NO, PT RO, and SI) and regional level (ES and IT). Restrictions on advertising (physical channel) / Restrictions on advertising specific products (i.e. alcohol, tobacco, pornographic products, explosive substances, and energy drinks) were found in DK, 7 Restriction 3 297 EE, FI, FR, EL, LV, LT, and NL. Restrictions on the manner in which the discounts should be communicated to consumers were found in EL and in FR. Restrictions on sourcing (physical channel) / Observed in RO, repealed in CZ and SK in 2016. In LU and SI this is also considered to be among the 8 Restriction 9 291 three most problematic restrictions. Nevertheless, the concerns are about market power of international companies and therefore fall outside the scope of this study. Restrictions for end-of-business sales (physical channel) / These restrictions were identified in 11 countries at the national level, namely in AT, BE, BG, 9 Restriction 5 248 EL, FR, HR, LV, NO, PT, RO and SI and in 2 (ES and IT) at the regional level. The restrictions define for example the occasion and the products that can be sold in an end-of-business sales. Restrictions on sales below cost (online channel) / In BE, DE, ES, FR, HR, and RO, the 10 Restriction 14 190 restrictions on sales below cost also apply to e- commerce. In PT, the law prescribes that the

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restriction only applies to companies established in the national territory of the country. Ranked among the top three restrictions in ES, as well as AT and HU (where the restriction is only for dominant market players) Source: VVA elaboration

4.2.2 Operational restrictions by retailers’ size Compared to the general results above, the ranking of concerns of the smaller retail companies interviewed differed in some important aspects:

 Financial restrictions: These restrictions were viewed as less important by smaller companies than by larger companies as some of the taxes mentioned in the interviews were only applicable to large retailers.  Product-specific restrictions were slightly more important to smaller retailers than for larger retailers, apparently because they felt more restricted in their business operations by the restrictions. Product-specific restrictions often relate to relatively high value products which, for smaller retailers, are more important as they cannot compete in high-volume, low-value goods. For the same reason, the advertising restrictions on those goods are also thought to be more restrictive by small retailers.  Limitations on shop opening hours are more important for smaller companies than larger ones. There are different reasons for this: amongst others, SMEs fear competition from online retailers more than larger companies, and they are concerned that restrictions on shop opening hours can push consumers towards online retailing. In some countries, there are no restrictions on shop opening hours for shops up to a certain size, raising concerns by SMEs above this threshold. This is the case in the Czech Republic, where shops below 200 square meters are exempted from restrictions on opening hours. Even if the issue is out of the scope of the study, SMEs are more concerned than large companies by limitations to shop opening hours flowing from labour market regulations. Presumably this is due to the greater difficulties encountered by small and medium-sized retailers in paying the higher salaries required by the regulation on specific days (i.e. weekends).

The following table shows the ranking of the most problematic restrictions for small- and-medium-sized retailers to highlight the differences and similarities with large retailers.

Table 28 The ten most problematic operational restrictions faced by the small and-medium-sized retailers in the EU 28 and Norway

Total number of Ranking of restrictions points Explanation / Comment Product-specific sales restrictions (physical channel) / are considered the most burdensome restrictions by small and medium-sized retailers but 1 Restriction 2 213 not by large retailers. This might be due to the fact that such restrictions impact the SMEs’ turnover more than that of large retailers. Financial restrictions (physical channel) / Ranks slightly lower for SMEs than for large retailers as some taxes only apply to large retailers. Large 2 Restriction 8 206 physical retailers also seem to acknowledge more how property-related taxes harm them in competition with large purely online retailers.

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Regulation of shop opening hours (physical channel) / Ranks higher for SMEs than for large 3 Restriction 1 155 retailers as for some small retailers long or flexible shop opening hours are an important competitive tool. Restrictions on advertising (physical channel) / Ranks slightly higher for SMEs than for large retailers as some of these restrictions impose a 4 Restriction 3 137 heavy administrative burden, which disproportionately affects small organisations (i.e. the requirement to keep a record of pricing to prove discounts are relative to the original price). Restrictions on discounted sales (physical channel) / Ranks lower for SMEs than for large 5 Restriction 6 133 retailers. Large companies are likely to benefit more from an optimised sales period strategy (to optimise stock and allow a fast rotation of fashion lines). Restrictions on sales below cost (physical channel) / Ranks lower for SMEs than for large retailers. In FR, DE, HU, PT, and RO, the restrictions exist in part to support and protect SMEs. In CZ, the ban only applies in the context of market 6 Restriction 7 130 dominance, but small retailers expressed concerns that it is not enforced, and that larger retailers compete heavily on discounts. In some cases, the absence of such a restriction was also considered a problem, as large companies were seen to exploit the ability to sell below cost. Restrictions on end-of-season sales (physical channel) / Ranks slightly lower for SMEs than for large retailers, as large retailers, with their large 7 Restriction 4 109 and diverse stocks, benefit even more from an optimised sales period strategy (e.g. to optimise stock and fast rotation of fashion lines). Restrictions on sourcing (physical channel) / Ranks lower for SMEs than for large retailers. Most 8 Restriction 9 90 of the concerns raised were out of the scope of the study and linked to perceived market dominance of large international retailers. Restrictions for end-of-business sales 9 Restriction 5 86 (physical channel) / Ranks relatively low for both large and small and medium-sized retailers. Product-specific sales restrictions (online channel) / Ranks higher for SMEs than for large 10 Restriction 11 81 retailers. This may be due to the administrative burden associated with dealing with the product- specific restrictions. Source: VVA elaboration

4.2.3 Operational restrictions by retailing sector (food/non-food) The analysis of the responses of food retailers shows the following differences from the non-food sector:

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 Sourcing: Even though sourcing restrictions in Romania were especially aimed at food retailers, the food retailers seem to be less concerned by those restrictions than the non-food retailers. This again points to the conclusion that most of the “sourcing restrictions” identified by the interviewees were not operational restrictions within the scope of the study.  Sales below cost: Restrictions on sales below cost rank higher for food retailers than for non-food retailers. Due to the perishable nature of food products, food retailers are more concerned about sales below cost restrictions as it represents a solution to sell such products when they are close to the “best before” or “use by” date. Furthermore, in some countries, sales below cost restrictions exclusively target food products as they are meant to protect food producers.  Shop opening hours: restrictions on shop opening hours affect the food retail sector more, as in some countries such as France, non-food retailers have less regulated shop opening hours during the weekend.

The following table shows the ranking of the most problematic restrictions for food retailers to highlight the differences and the similarities to non-food retailers.

Table 29 The ten most problematic operational restrictions faced by retailers operating in the food sector in the EU-28 and Norway

Total number of Ranking of restrictions points Explanation / Comment Financial restrictions (physical channel) / 1 Restriction 8 391 Ranks at the top for retailers in both the food sector and non-food sector. Product-specific sales restrictions (physical channel) / Affects equally food and non-food retailers (ranked as the second most important 2 Restriction 2 366 concern for both), probably because the restrictions affect both food products (alcohol and sugary food) and non-food products (medicine, tobacco, and second-hand products) equally. Restrictions on sales below cost (physical channel) / Ranks higher for food retailers than for non-food retailers. Stakeholders suggested that in some countries (particularly DE and HU) the restrictions only apply to food products. Due to the 3 Restriction 7 295 perishable nature of food products, food retailers are also more concerned about restrictions on sales below cost as selling below cost represents a solution to sell products close to their the “best before” or “use by” date. Regulation of shop opening hours (physical channel) / Ranks just slightly higher for food retailers than for non-food retailers. In some 4 Restriction 1 294 countries, such as FR, food retailers face more shop opening hours restrictions compared to the non-food sector. Restrictions on discounted sales (physical channel) / Ranks slightly higher than for non-food 5 Restriction 6 291 producers, as stock management is even more important for food retailers, due to the perishable nature of food.

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Restrictions on end-of-season (physical channel) / Ranks higher for non-food retailers as 6 Restriction 4 253 most of the end-of-season regulation is related to non-food products (i.e. clothing). Restrictions on advertising (physical channel) / Ranks approximately the same for both types of 7 Restriction 3 246 retailers, due to the fact that they apply to various types of products or specific target groups. Restrictions on sourcing (physical channel) / Ranks lower for food sector retailers than non-food retailers, although in RO the restriction applies specifically to the food sector. As explained above, 8 Restriction 9 204 most retailers would put the concerns about sourcing from international retailers or concerns about the traffic congestion in inner cities under this category. Restrictions on end-of-business sales (physical channel) / Affects equally food and 9 Restriction 5 161 non-food retailers (ranked as the ninth most important concern in both instances). Restrictions on sales below cost (online channel) / Ranks as the tenth most important 10 Restriction 14 139 concern for both food sector and non-food sector retailers. Source: VVA elaboration

4.2.4 Operational restrictions by retail channel (brick and mortar/online) The ranking of the concerns of brick and mortar retail companies interviewed differed in some important points from those of online retailers:

 Sales below cost: the restrictions on sales below cost are considered to be more burdensome by online retailers. These restrictions can be an important restriction to optimal stock management, which is even more important for online retailers than for offline retailers due to a business model focused on optimising storage costs.  Financial restrictions: financial restrictions are considered to be less important for online retailers, as many of the identified restrictions are based on shop size and physical shop fees and are therefore not applicable to online retailers.  Shop opening hours/delivery times: restrictions on shop opening hours are a more important concern for brick and mortar retailers, while the equivalent restrictions on delivery times are not a very pressing concern of online retailers. According to the interviewees, there are no major restrictions on delivery times in their countries. The Norwegian retail association highlighted that online retailers can ship alcohol products on Sunday, providing an advantage compared to brick and mortar retail shops.

The following table shows the ranking of the most problematic restrictions for online retailers to highlight the differences and similarities with brick and mortar retailers.

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Table 30 The seven most problematic operational restrictions faced by online retailers in the EU-28 and Norway

Total number Ranking of restrictions of points Explanation / Comment Restrictions on sales below cost (online channel) / Restrictions are largely the same as for physical stores. 1 Restriction 14 190 Considered to be in the top three most troublesome restrictions by ES, HU, and AT. Product-specific sales restrictions (online channel) / Restrictions on online sales are often stricter than on physical stores, especially for tobacco, and regulation is often designed without taking the online environment 2 Restriction 11 172 into account. For example, in FI, when selling alcohol, the seller must verify the age of the buyer, which means that alcohol delivery becomes too complicated (age cannot be verified by the delivery person), therefore all alcohol is sold on a click-and-collect basis. Financial restrictions (online channel) / While the identified in-scope legal restrictions do not by their nature apply to e-commerce (very often property related), this restriction was ranked in the top three in 3 Restriction 15 167 BE, DK, IE, and NO. Reasons given included local administrative fees, VAT, commercial tax rates, and Waste Electrical & Electronic Equipment (WEEE) regulations. Restrictions on online promotional sales / Not considered to be in the three most troublesome restrictions in any of the Member States. Rules are 4 Restriction 13 145 considered to be mostly aligned with the rules for physical stores. In FI, IT, and LU, it was noted that less restrictions/monitoring of online stores puts physical stores at a disadvantage. Restrictions on the advertising of online products / Not considered to be in the three most troublesome restrictions in any of the Member States. Rules are considered to be mostly aligned with the rules for physical stores. In LU, it was pointed out that online 5 Restriction 12 103 shoppers have more opportunities to compare price and quality than offline shoppers, and that online shoppers are more restricted by the lack of information on potential applicable restrictions in the destination country. Regulation of delivery times (online channel) / Not considered to be in the three most troublesome restrictions in any of the Member States. Rules are 6 Restriction 10 96 considered to be mostly aligned with the rules for physical stores. In NO, buying alcohol online was noted to be a way around the restrictions for physical stores, as pickup on a Sunday was also a possibility. Restrictions on sourcing (online channel) / Not considered to be in the three most troublesome 7 Restriction 16 89 restrictions in any of the Member States. Rules are considered to be mostly aligned with the rules for physical stores. Source: VVA elaboration

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4.3 Key findings and conclusions

The 162 interviews with retailers and retail associations provide a broad overview of the views and concerns of European retailers regarding the operational restrictions they are facing. As the operational restrictions stem from national, regional, or even local regulations the specific concerns of the different retailers differ across Europe but the rankings provided show some important common trends and similarities:

Type of restriction

- Financial restrictions: according to the scope of the study, the focus is on retail- specific restrictions and therefore the study focused on retail-specific taxes. The interviews showed that retail-specific taxes are an issue in some Member States (especially for larger companies) but in many more countries other taxes and fees that are not retail-specific raise very important concerns for retailers. Some taxes might be very burdensome to retailers even though they are not retail-specific as such and, therefore, they were not analysed in the legal analysis preceding this chapter. - Sourcing restrictions: Retailers in a number of Member States reported concerns about such restrictions. When further questioned, the interviewed retailers did not focus on government regulations but on their difficulties in sourcing freely due to B2B contractual restrictions. Large producers of goods, especially food products, tend to limit the selling of some of their products to specific markets only, limiting the sourcing of the same product in other countries.

Type of retailer

- Small retailers: the financial restrictions are less important for SME retailers than for larger retailers as some retail-specific taxes only apply to larger retailers, but SMEs are more concerned about product-specific regulations (e.g. regulating the sale of pharmaceuticals, alcohol, and tobacco) than larger retailers. - Online retailers: for online retailers, restrictions on pricing (e.g. sales below cost) were more important, while the financial restrictions were less of a concern (compared to offline retailers). Shop opening hours were a major concern for offline retailers. The same restriction does not apply to online retailers, who do not face any limitations on shipping and delivery times.

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5 | Methodology for measuring the burden of complying with operational restrictions

5 METHODOLOGY FOR MEASURING THE BURDEN OF COMPLYING WITH OPERATIONAL RESTRICTIONS

5.1 Introduction

In this chapter, we first provide a summary of the results of a literature review (see for full literature review) that considered articles and studies which discuss and apply a range of approaches to measure the impact of regulations and particularly the burden that procedures put in place to ensure compliance with regulations represent for retailers.

This element of desk research leads into a proposed framework of analysis containing the concrete definition of all elements of regulatory costs that will be investigated in the subsequent methodology.

The third element of this chapter is the outline of the methodology to measure the burden that procedures to ensure compliance with regulations represent for retailers in their day to day operations.

Finally, the last section in this chapter sets out the data collection methodology and presents the survey questionnaire that was used to collect data on the impact of operational restrictions (as perceived by retailers) and on the direct costs to businesses of such restrictions.

5.2 Main findings from the literature

Task 3 involved a literature review which considered articles and studies that discuss and apply a range of approaches to measure the impact of regulations on businesses. In particular, the focus was on studies that formulate and apply methodologies to assess the burden that the processes and procedures, put in place to ensure compliance with regulations, represent for retailers.

Frameworks for regulatory burden assessment in the literature

The first part of the literature review considered definitions and taxonomies of the various types of regulatory burdens. The studies found in the literature cover a wide range, from the very narrow - which consider only the costs related to “information obligations” - to sector-wide or even economy-wide impacts of regulation. In rough order, from the more narrowly focused to the broader, the following are the categories of regulatory impacts that different studies consider.

Information and administrative burdens, including primarily costs incurred by regulated entities to demonstrate compliance with regulations. This is the category of costs that a large part of the literature focuses on. The Standard Cost Model (SCM Network) is the most prominent example of this approach. Substantive compliance costs, including costs that are more than purely administrative, such as equipment, software, materials, and labour training. The Dutch Compliance Cost tool extends the SCM approach to include these types of costs. Another type of substantive costs is less often considered by the literature, namely, the impact of regulatory restrictions on operations. Restrictions can result in businesses, for example, changing their pricing, sourcing and investment strategies. Some of these are considered for example in OECD (2008).

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In the category of indirect and/or market effects, impacts at a more macro level are considered. In particular, this category recognises that regulation may have market-wide or economy-wide impact on prices, product range, innovation, investment and employment. There exist several retail sector studies on these types of impacts. The impacts in these studies arise from restrictions on opening hours. Examples include Blanchard & Giavazzi (2003), Shy & Stenbacka (2008), and Wenzel (2011). Given the present study’s focus on burdens on businesses, the analysis of effects of retail restrictions at this level is largely outside the scope of the present study.

An additional category of analysis, also outside the scope of the study and of a somewhat different nature, considers the perspective of the regulatory and enforcing entities, and the costs of administration and enforcement, such as monitoring, enforcement and adjudication costs.

Regulatory burden quantification methods in the literature

Another important element of the literature deals with quantification of regulatory burdens. Most quantification methodologies of the regulatory burdens on businesses used in these studies rely on a combination of surveys and desk research.

The basic approach to quantification, which can be taken as a starting point for most of the literature, is that encompassed in the application of the SCM, as summarised in the figure below.

Figure 0 Quantification steps in the Standard Cost Model

Source: SIRA Consulting Workshop on simpler and more effective business regulation http://vi.is/files/Peter%20Bex%20- %20The%20concept%20of%20regulatory%20burdens%20and%20differ ent%20ways%20to%20measure%20them_1929968721.pdf

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Typically, surveys are used to gather data on the compliance procedures and associated costs, and to gain insight into subjective perceptions of regulatory burdens. This source of information is then combined with desk research to quantify particular costs – such as labour costs – and to infer from the targeted survey sample the cost to the whole of the relevant population of businesses.

Prominent examples of this type of approach include CEPS (2013a and 2013b), Joint Research Centre (2014), and Technopolis Group (2016). These studies offer particularly helpful guidance for the analysis in Task 4 given their generally applicable and carefully detailed approach to quantification of burdens.

The literature review also includes studies of broader impacts of regulation. Here, the object of analysis can be quite varied, including impacts on prices, GDP, or competition. Not all of these studies seek to quantify effects and some rely on theoretical models that make predictions in terms of the relationships between the variables of interest. The techniques for quantification of impacts in these studies are quite different from the more limited regulatory cost frameworks described above, and some techniques such as econometric analysis are better suited to assess impacts on macroeconomic variables than to assess direct burdens on businesses.

Some of the studies reviewed use methodologies that are general and therefore mostly applicable to a range of sectors. The only studies, identified as part of the literature review as specifically analysing the impacts of regulation in the retail sector, focus on the broader economic impacts rather than on the compliance burdens faced by businesses. In addition, some of these studies are based on theoretical models and do not seek to quantify but rather to analyse particular effects.

International indices of regulatory burdens

Another approach to investigating regulatory burdens is through time series of indices, which are typically constructed across several countries and sectors. Such indices also often rely on a combination of desk research and business surveys. They do not provide a quantified measure of burdens but they help trace the evolution of burdens over time and highlight how these burdens vary across regions and sectors. They are typically aggregated either at country level or at the level of groups of sectors. These indices, therefore, can contain limited sector-specific information of the type sought for the present study.

For example, the OECD’s product market regulation (PMR) index (see Koske, Wanner, Bitetti, & Barbiero, 2015)392 does contain such retail sector specific information on the level of regulatory burdens. As the figure below illustrates, these burdens decreased in the majority of Member States between 2008 and 2013. Better-performing countries include Bulgaria, Latvia, Slovenia, and Sweden. Relatively more retail regulation is seen in Belgium and Luxembourg. The most significant improvements (deregulation) across the period 1998 – 2013 can be seen in Austria, France, Greece, Italy, Portugal and Spain. It is also interesting to note the exceptions to this decreasing trend observed in the Czech Republic, Hungary, Ireland and Luxembourg.

392 The six components of the index are: Licences or permits needed to engage in commercial activity; Specific regulation of large outlets; Protection of existing firms; Regulation of shop opening hours; Price controls; and Promotions/discounts.

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Figure 1 OECD’s aggregate retail regulation indicator – evolution 1998-2013 (6=highest level of regulation)

Retail regulation - evolution of aggregate indicator (6=lowest level of regulation) 6

1998 2003 2008 2013

Note: Where the level is shown as zero, this is indicative of missing data rather than highest level of regulation. Source: OECD PMR index http://www.oecd.org/eco/growth/indicatorsofproductmarketregulationhomepage.htm#indicato rs

5.3 Conceptual framework for the analysis of the impacts of operational restrictions

This section develops an analytical framework for the assessment of the impacts of operational restrictions on retail businesses.

The main questions that the framework for the quantification of the impact needs to address are listed in the figure below.

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Figure 2 Questions that the quantification framework should address

(1) What is the baseline against which the impacts of the regulations are to be measured?

(2) What costs should be measured? (2a) costs arising as a result of which regulations? (2b) which cost categories should be considered?

(3) What is the population in relation to which these costs will be measured?

(4) What approach will be followed to estimate costs of operational restrictions?

Source: LE Europe (1) What is the baseline against which the impacts of the regulations are to be measured?

In order to estimate the impact, it is necessary to specify a “counterfactual” situation for the affected retailers. This should take into account actions that retailers would take even in the absence of regulatory requirements. In addition, technological progress and changing market conditions may impose costs and benefits whether or not regulations are introduced.

(2) What costs should be measured?

(2a) costs arising as a result of which regulations?

The analysis in the present report focuses on the cumulative effect of all regulations, in part because it could be quite difficult to assess the separate impacts for each of the many restrictions facing retailers.

(2b) which cost categories should be considered?

The majority of studies of the costs of regulations put greater emphasis on direct costs of compliance than on indirect costs and benefits, often because the former are more easily quantifiable. The present work also focuses on direct compliance costs and takes as a starting point the Standard Cost Model approach.

One advantage of the SCM framework as a starting point for a broader analysis is the quantifiable nature of the types of impacts it seeks to assess and the applicability of its associated methodology to a wide range of contexts.

However, the SCM framework includes only costs imposed on businesses by information obligations related to compliance with regulations. This is a narrow definition of regulatory costs even within the already narrow category of administrative costs. For our purposes, therefore, while the SCM is a practical starting point, it is too narrow relative to the broader range of impacts that we aim to assess.

In addition to costs directly relating to information obligations and administration of compliance requirements, the study also considers substantive compliance costs, which are those caused by substantive duties or obligations on retailers. This is in line with the Dutch Compliance Cost tool, a framework which extends the SCM to consider

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In addition to information obligations and substantive compliance costs, some additional categories of cost will be considered, and the respective quantification challenges investigated.

(3) What is the population in relation to which these costs will be measured?

The population for whom costs of regulations are to be assessed includes all types of retailers in all retail subsectors under the NACE393 classification G47: Retail trade, except a) motor vehicles and motorcycle retailing and fuel retailing.

It is important to recognise that regulated businesses can be affected differently and, therefore, the analysis of impacts should first group targeted businesses according to relevant differences and similarities.

(4) What approach will be followed to estimate costs of operational restrictions?

The quantification is based on stratified sampling of the target population of businesses and a survey of retailers to gather information on the perceived costs to individual businesses.

The survey questionnaire aimed to elicit from respondents estimates of the levels of cost for the several categories of cost. Categories of cost were presented to respondents at a reasonably detailed level so that estimates are as precise as possible. An extrapolation and grossing of total costs for the entire respective group and then for the entire target population was then carried out to generate economy-wide cost estimates.

5.3.1 Cost categories in the analytical framework

The analytical framework considers the following categories of regulatory costs:

Information and administrative burdens This category pertains to costs incurred by regulated entities, primarily to demonstrate compliance with regulations. Prominent among these are information obligations associated with the regulations. Examples include costs of making, keeping and providing records, costs of notifying the authorities of certain activities, and costs of conducting tests.

393 The NACE classification is the statistical classification of economic activities in the European Community/ See http://ec.europa.eu/eurostat/statistics- explained/index.php/Glossary:Statistical_classification_of_economic_activities_in_the_European_Community _(NACE).

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Administrative costs include the time taken to demonstrate compliance with the regulation as well as the associated travel costs. Delay costs can also be included under this heading. These relate to expenses and/or loss of income while regulatory conformity is being assessed.

Some businesses may choose to outsource all or part of these informational and administrative functions.

Within this category, we also group costs that may be perceived at a more subjective level, for instance because the regulations are perceived as inordinately complex and difficult to comply with. Alternatively, the subjective perception of regulatory burdens may be lower if businesses understand and support the broader aims of regulation.

Figure 3 A framework for analysis of cost impacts of regulations Hassle costs/ subjective views of regulation Information and administrative burdens – with in-house resources Information and administrative burdens – Information and administrative burdens externally sourced

Fees and charges

Cost of equipment, labour and materials Substantive compliance - costs

Regulations may constrain decisions about e.g. product range, price, levels of service

Substantive compliance - operations Effects on investment, strategy

Effects on revenues, profits

Indirect / market effects Effects on strength of competition

Differentiated effects across competitors

Market efficiency, competitiveness

Administration and enforcement costs For authorities: monitoring, enforcement and adjudication costs

For firms: inspections, fines, disputes

Source: LE Europe

Substantive compliance costs Substantive compliance involves costs that are more than purely administrative, such as costs incurred as a result of buying equipment, software, materials, or providing labour training. These are the costs that are incurred to deliver the regulated outcomes. The associated expenses may be one-off (i.e. occur one single time) or recurrent.

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The definition of fees and charges includes only charges linked to a regulation that are payable to respective authorities, such as administrative charges, licence and permit fees, levies, and mandatory insurance premiums (where remitted to government).

In principle, fines and other costs incurred due to non-compliance should not be included. This is, however, a difficult area from the perspective of a regulatory cost assessment. The corresponding costs would not normally be considered as a cost of regulation but affected businesses may argue in some cases that compliance requirements are excessively complex and onerous, and, thus, incurring fines is practically inevitable.

Substantive compliance - operations Although more challenging to quantify, there are other effects of regulation that could also be considered. This category includes the impacts that regulation and restrictions have on the actual operations and possibly the strategic decisions of the retail businesses.

Particular restrictions may impact on prices that otherwise would be set or on product ranges that could otherwise be offered, to name a few examples. At this level it is important to consider, conceptually, the counterfactual business operations, in the absence of the restrictions in question.

Opportunity costs (other than delay-related) Opportunity costs are the value of opportunities that cannot be realised because of the regulatory intervention. Quantifying them can be difficult because of the complexities of accurately predicting what a business would do in response to the removal or lessening of a regulation. The effort required to obtain robust estimates may be worthwhile to undertake when measuring changes to the most important regulatory regimes.

Loss of efficiency, competitiveness, access to markets These are costs that may arise indirectly from the impacts of regulatory restrictions. These may impact on the efficiency of the targeted businesses if it raises their costs of production and/or overheads. It may make these businesses less competitive than others in the same market if the regulations have different effects on the different competitors. The regulations may be onerous enough that they effectively restrict access to markets or submarkets.

Indirect / market effects Moving away from the firm-level impacts, this category of effects considers at a more macro level the extent to which regulation may have market-wide or economy-wide impact on prices, product range, innovation, investment and employment. The analysis of the effects of retail restrictions at this level is largely outside the scope of the present study.

Costs of administration and enforcement An additional category of costs considers the administration and enforcement costs for authorities, such as monitoring, enforcement and adjudication costs. The costs to authorities lie outside the scope of the present study which is focused on regulatory burdens on retail businesses. However, enforcement practices can give rise to a range of burdens on firms, which in some cases can lead to concerns about the proportionality of enforcement.

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5.4 Survey methodology

This section presents the questionnaire used in the survey and the sample of retailers surveyed as part of the study.

5.4.1 Questionnaire structure

The survey instrument394 comprises four main parts, each focusing on the different types of costs identified in the analytical framework:

1) Part 1 questions – characteristics of the retailers (size, age, etc.)

2) Part 2 questions - retailers' views on regulatory burdens, and administrative, informational and implementation costs

3) Part 3 questions - impacts on operations and strategy

4) Part 4 questions – disproportionate enforcement intensity

The second part of the survey seeks to elicit subjective perceptions of regulation and regulatory burden. In particular, this includes questions about whether regulation is perceived as desirable, excessive, overly complex to understand and comply with, and whether burdens have increased over time.

This is an area where responses are by nature qualitative rather than quantitative, and respondents were asked to consider the full range of regulations and restrictions facing them.

The other questions within this second part of the questionnaire follow closely the type of survey recommended by the Standard Cost Model. Respondents are presented with a series of questions about the administrative resources that they expend in order to comply with regulation.

Again, respondents were asked to consider in aggregate all regulations and restrictions facing them. However, this part of the survey yielded quantitative answers. Some of the activities involve person-hours which can be monetised using an appropriate average wage rate, while others involve directly quantifiable costs of the acquisition of services or equipment.

The third part of the survey investigates the extent to which regulation affects business decisions at either an operational or strategic level. Here, it is clear that different categories of restrictions have different potential to impact retailer decision making. For example, restrictions on sales and promotions affect business decisions about price setting but may also, indirectly, affect other medium-term decisions such as quantity and range of products to hold in stock. Restrictions on opening hours impact opening hours of only those businesses that would open longer hours if they were able to. Another set of impacts may arise from sourcing or selling restrictions. Therefore, the survey asks questions which are specific to individual types of restrictions.

These impacts do not lend themselves well to quantification so the survey questions instead focus on a qualitative assessment by the respondents of the extent to which particular restrictions forced them to change operational and/or strategic decisions.

394 The complete survey questionnaire can be found in the stand-alone Methodological Annex.

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Finally, the fourth part of the survey considers grouped categories of regulation and asks, also qualitatively, about perceived, actual or potential, enforcement burdens. These can include, for example, disproportionate fines and frequent and costly inspections.

5.4.2 Questions to online retailers

An additional aspect that the survey investigates is the extent to which burdens and perceptions of costs of regulation differ between offline and online retailers. While some burdens appear to be lower for online retail, it will also be important to allow for the perception of burdens that may be exclusive to the online environment.

Besides the retail restrictions applying equally to brick and mortar retail and e- commerce, there exist a few specific requirements that online retailers must abide by. Specifically, rules about provision of information and about return of goods. Therefore, the questionnaire for online retailers includes questions on these:

costs associated with the 14-day return rule; costs associated with provision of information in the purchaser’s language; cross border sellers are required to comply with the consumer protection regulations of all the countries where they sell.

5.4.3 Sampling methodology

In order to determine an appropriate sampling methodology, it is important to consider the universe of retail businesses that are within the scope of the study and to select appropriate groupings within this universe. The classification of retail businesses into classes aims at grouping together businesses that are likely to incur similar impacts from retail restrictions. For example, retail businesses can be classified according to retail subsector(s) in which they operate, to type/format, and to size.

In order to estimate total retail sector costs from a sample of individual firms it is important to consider whether the structure of costs differs as a function of a range of criteria such as size of firm and retail subsector. In relation to the latter, the table below provides a list of these subsectors according to the NACE classification.

Table 31 Retail NACE codes

G47 Retail trade, except of motor vehicles and motorcycles G47.1 Retail sale in non-specialised stores G47.2 Retail sale of food, beverages and tobacco in specialised stores Retail sale of information and communication equipment in specialised G47.4 stores G47.5 Retail sale of other household equipment in specialised stores G47.6 Retail sale of cultural and recreation goods in specialised stores G47.7 Retail sale of other goods in specialised stores

While this classification is not ideal in terms of grouping retailers for quantifying the impacts of restrictions and regulation, it has the advantage of being the retail categories used by the Structural Business Statistics (published by Eurostat) which will be used for the grossing-up of the survey results to the total population.

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The table below describes the sample of the 1,455 survey respondents according to three main characteristics: country, size395 and NACE subsector. Annex 2 provides additional information on the response sample by NACE code and company size for each of the EU-28 Member States.

Table 32 Description of the sample of retailers having participated in the survey NACE code of Firm Country Number Number survey Number size respondents Austria 56 micro 964 47396 91 Belgium 79 small 363 471 173 Bulgaria 59 medium 119 472 171 Croatia 47 large 9 473397 68 Cyprus 33 474 122 Czech Republic 44 475 194 Denmark 52 476 109 Estonia 57 477 310 Finland 48 479398 217 France 46 Germany 50 Greece 67 Hungary 57 Ireland 52 Italy 68 Latvia 25 Lithuania 32 Luxembourg 27 Malta 15 Netherlands 60 Poland 58 Portugal 50 Romania 71 Slovakia 61

395 There was limited information in the survey responses about the turnover of individual respondents and so they were classified according to number of employees only. Micro firms are those with less than 10 employed persons, small firms between 10 and 49 employed persons, medium sized firms are those with 50 to 249 employed persons, and large firms are those with 250 or more employed persons. There were 9 large firms in our sample and this is a small number to treat separately in most of the graphs below so they have been grouped together with the medium-sized firms.

396 Some respondents did not specify their NACE sector and are classified as NACE 47.

397 Although retailers which the proprietary database listed under sub-sector 4.73 (retail of automotive fuels) were not targeted, some respondents nonetheless selected this sub-sector. For our analysis, they are grouped under the unspecified retail level of NACE 47.

398 Respondents reporting NACE 479 and all respondents who had been identified as online retailers in one of the databases used to create the survey sample frame are included in this NACE category.

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Slovenia 50 Spain 63 Sweden 94 United Kingdom 34 Total 1455 1455 1455 Norway 50

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6 SURVEY RESULTS AND QUANTIFICATION OF THE BURDEN OF OPERATIONAL RESTRICTIONS IN THE RETAIL SECTOR IN THE EU28 AND NORWAY

The present chapter presents the main results of the three parts of the survey and provides quantitative estimates of the burden of operational restrictions. The detailed survey results are provided in a stand-alone annex.

As already noted in the previous chapter, the three parts of the survey sought retailers’ views on:

1) regulatory burdens, and administrative, informational and implementation costs

2) impacts of operational restrictions on operations and strategy

3) the enforcement intensity of operational restrictions

6.1 Retailers’ views and opinions on general statements about legislation in the EU

Respondents were asked the extent to which they agreed with a series of statements about legislation in the EU.

The statements are grouped into favourable statements about the merits of legislation in the EU:

 In general, in the EU, legislation is reducing or removing the differences in legal requirements in different Member States, and this benefits companies  In the EU, legislation improves access to suppliers and customers  In the EU, legislation helps the companies to be competitive  In the EU, legislation encourages companies to invest  In general, in the EU, legislation contributes to creating a level playing field for all companies  In the EU, legislation helps ensure the quality and the safety of products and services

And less favourable:

 In the EU, legislation applying to businesses is an obstacle to innovation  In the EU, legislation increases the cost of administrative processes for companies  In the EU, legislation increases the amount of paperwork for companies  In the EU, legislation hinders your business growth

The views on each of these statements were put into four different cross-tabulations: by country, by size of respondent, by type – physical or mostly physical versus online or mostly online, and by NACE sub-code.

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Figure 4 Positive views about the merits of legislation in the EU – number of respondents overall 750

500

250

0 More similar legal Legislation in the EU Legislation in the EU Legislation in the EU Legislation in the EU Legislation in the EU requirements in improves access to helps the companies encourages contributes to a level helps ensure the different Member suppliers and to be competitive companies to invest playing field quality and the safety States benefit customers of products and companies services

Strongly agree Somewhat agree Somewhat disagree Strongly disagree Don't know

Source: Survey Q1: To what extent do you agree or disagree with each of the following statements?

In terms of positive statements about legislation in the EU, there are strongest overall levels of agreement with the statements that legislation in the EU helps ensure quality and safety of products and that it improves access to suppliers and customers. The lowest level of agreement is with the statement that legislation encourages companies to invest.

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Figure 5 Negative views about the merits of legislation in the EU – number of respondents overall

750

500

250

0 Legislation in the Legislation in the Legislation in the Legislation in the EU is an obstacle to EU increases the EU increases the EU hinders your innovation cost of amount of business growth administrative paperwork for processes for companies companies

Strongly agree Somewhat agree Somewhat disagree Strongly disagree Don't know

Source: Survey Q1: To what extent do you agree or disagree with each of the following statements?

In terms of agreement with the negative effects of legislation in the EU, the strongest level of agreement is with the statement that legislation in the EU increases the cost of administrative processes and to an extent that it increases the amount of paperwork for companies.

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Figure 6 Positive views about the merits of legislation in the EU – (sum of) share of respondents that agree or strongly agree with each statement – by country 6 Legislation in the EU helps ensure the quality and the safety of products and services

Legislation in the EU contributes to a level playing field

Legislation in the EU encourages companies to invest

Legislation in the EU helps companies to be competitive

Legislation in the EU improves access to suppliers and customers

5 Similar legal requirements in different Member States benefit companies

1.0 1.0 0.8 0.9 1.0 0.9 0.9 0.8 0.8

4 0.8 0.8

0.9 0.9 0.9 0.7 0.8 0.9 0.7 0.8 0.9 0.9 0.7 0.7 0.6 0.8 0.8 0.9 0.9 0.8 0.8 0.6 0.7 0.6 0.7 0.7 0.8 0.8 0.5 1.0 0.6 3 0.5 0.7 0.7 0.8 0.5 0.8 0.7 0.5 0.7 0.8 0.8 0.6 0.4 0.7 0.6 0.8 0.6 0.5 0.6 0.6 0.6 0.7 0.8 0.5 0.6 0.5 0.6 0.3 0.7 0.3 0.4 0.6 0.5 0.6 0.5 0.9 0.7 0.5 0.8 0.8 0.4 0.6 0.4 0.4 0.4 2 0.7 0.4 0.7 0.7 0.7 0.6 0.5 0.6 0.4 0.4 0.7 0.7 0.8 0.6 0.7 0.7 0.2 0.5 0.6 0.7 0.5 0.4 0.3 0.5 0.6 0.6 0.6 0.4 0.9 0.5 1.0 0.9 0.9 0.8 0.8 0.8 0.9 0.9 0.9 0.9 0.3 0.7 0.8 0.7 0.8 0.7 0.8 0.8 0.8 0.9 0.6 1 0.8 0.8 0.8 0.6 0.7 0.7 0.6 0.5 0.7

0.8 0.8 0.9 0.8 0.9 0.9 0.8 0.8 0.8 0.8 0.8 0.8 0.7 0.7 0.7 0.7 0.7 0.7 0.6 0.6 0.6 0.6 0.6 0.6 0.5 0.5 0.4 0.4 0.3

Source: Survey Q1: To what extent do you agree or disagree with each of the following statements?

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Note: The graph reports the percentage of respondents that either strongly agree or agree over the total of respondents that did not answer “don’t know”. The levels are shown stacked for the six statements. Each bar therefore has a maximum height of 6 if all respondents either strongly agree or agree with all 6 respective statements. There is a notable level of disagreement with the statement that legislation in the EU hinders business growth. The opinions are roughly balanced on whether or not legislation in the EU is an obstacle to innovation.

In terms of positive statements about legislation in the EU, the countries that show the greatest support include Cyprus, Malta, Romania, Slovenia and Ireland. The least favourable is France followed by the Czech Republic and Denmark.

Figure 7 Negative views about the merits of legislation in the EU – (sum of) share of respondents that agree or strongly agree with each statement – by country

4 Legislation in the EU hinders your business growth

Legislation in the EU increases the amount of paperwork for companies

Legislation in the EU increases the cost of administrative processes for companies

Legislation in the EU is an obstacle to innovation 3

0.4 0.6 0.5 0.6 0.5 0.5 0.5 0.2 0.3 0.3 0.4 0.2 0.4 0.3 0.2 0.3 2 0.3 0.4 0.3 0.3 0.9 0.4 0.4 0.3 0.4 0.4 0.8 0.7 0.8 0.2 0.8 0.7 0.8 0.8 0.3 0.8 0.3 0.8 0.8 0.7 0.8 0.7 0.8 0.8 0.3 0.7 0.8 0.6 0.7 0.6 0.8 0.7 0.7 0.7 0.7 0.7 0.6 0.6 0.9 1 0.8 0.8 0.7 0.7 0.9 0.9 0.7 0.8 0.8 0.8 0.6 0.7 0.8 0.8 0.7 0.7 0.8 0.6 0.8 0.6 0.7 0.7 0.8 0.5 0.7 0.5 0.7 0.8

0.6 0.6 0.6 0.6 0.6 0.5 0.5 0.5 0.5 0.6 0.5 0.4 0.4 0.5 0.4 0.4 0.4 0.4 0.5 0.5 0.4 0.5 0.3 0.3 0.3 0.4 0.3 0.2 0.2 0

Source: Survey Q1: To what extent do you agree or disagree with each of the following statements? Note: The graph reports the percentage of respondents that either strongly agree or agree over the total of respondents that did not answer “don’t know”. The levels are shown stacked for the

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four statements. Each bar therefore has a maximum height of 4 if all respondents either strongly agree or agree with all 4 respective statements.

In terms of agreement with the negative effects of legislation in the EU, the Czech Republic, Greece, Portugal and Cyprus have somewhat higher than average levels. Lower levels of agreement with these negative statements are observed in Bulgaria and Croatia.

Figure 8 Positive views about the merits of legislation in the EU – share of respondents that agree or strongly agree with each statement – physical versus online retailers 1

0.8

0.6

0.4

0.2

0 Similar legal Legislation in Legislation in Legislation in Legislation in Legislation in requirements the EU the EU helps the EU the EU the EU helps in different improves companies to encourages contributes to ensure the Member States access to be competitive companies to a level playing quality and the benefit suppliers and invest field safety of companies customers products and services

All or mainly physical stores All or mainly e-commerce

Source: Survey Q1: To what extent do you agree or disagree with each of the following statements? Note: The graph reports the percentage of respondents that either strongly agree or agree, over the total of respondents that did not answer “don’t know”. Each bar has a maximum height of 1 if all respondents either strongly agree or agree with the respective statement.

There are no significant differences between the views of physical or mainly physical retailers on the one hand and online or mainly online retailers on the other.

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Figure 9 Negative views about the merits of legislation in the EU – share of respondents that agree or strongly agree with each statement – physical versus online retailers 1

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All or mainly physical stores All or mainly e-commerce

Again, when it comes to potentially negative aspects of legislation in the EU, there are only very small differences between the views of online and physical retailers. E- commerce has a generally less unfavourable view of legislation in the EU, with the biggest difference being in relation to legislation’s associated administrative costs.

Figure 10 Positive views about the merits of legislation in the EU – share of respondents that agree or strongly agree with each statement – by firm size

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0.4

0.2

0 Similar legal Legislation in Legislation in Legislation in Legislation in Legislation in requirements the EU the EU helps the EU the EU the EU helps in different improves companies to encourages contributes to ensure the Member access to be companies to a level playing quality and States benefit suppliers and competitive invest field the safety of companies customers products and services

micro small medium

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Medium sized firms have generally higher levels of agreement, while micro firms are most often the ones that least agree with these positive statements. The differences are nonetheless quite small and either statistically non-significant or borderline significant (for the fifth of the statements above).399

Figure 11 Negative views about the merits of legislation in the EU – share of respondents that agree or strongly agree with each statement – by firm size 1

0.8

0.6

0.4

0.2

micro small medium

The larger firms are slightly less likely to agree with negative statements about legislation in the EU. In terms of negative views, it is the small rather than the micro companies that have the greatest level of agreement.

399 A chi-square test of the statistical significance of the difference in responses between micro and medium sized firms, for example, has one degree of freedom and has a critical value of 3.84 at the 95% confidence level. Only for the statement “EU legislation contributes to a level playing field” is the difference in responses between micro and medium sized firms statistically significant at that confidence level and even in that case the significance is borderline (test statistic is 4.8).

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Figure 12 Positive views about the merits of legislation in the EU – share of respondents that agree or strongly agree with each statement – by NACE sub- code 1

0.8

0.6

0.4

0.2

0 Non-specified Retail sale in non- Retail sale of food, Retail sale of Retail sale of other Retail sale of Retail sale of other Online specialised stores beverages and information and household cultural and goods in specialised tobacco in communication equipment in recreation goods in stores specialised stores equipment in specialised stores specialised stores specialised stores

Similar legal requirements in different Member States benefit companies Legislation in the EU improves access to suppliers and customers Legislation in the EU helps companies to be competitive Legislation in the EU encourages companies to invest Legislation in the EU contributes to a level playing field Legislation in the EU helps ensure the quality and the safety of products and services

There are only small differences among responses by NACE sub-codes.

One interesting finding is that online respondents were less likely to agree that legislation in the EU encourages companies to invest. Similarly, retailers of cultural and recreational goods were less likely to agree that similar legal requirements in different Member States benefit companies.

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Figure 13 Negative views about the merits of legislation in the EU – share of respondents that agree or strongly agree with each statement – by NACE sub- code 1

0.8

0.6

0.4

0.2

0 Non-specified Retail sale in non- Retail sale of Retail sale of Retail sale of Retail sale of Retail sale of Online specialised stores food, beverages information and other household cultural and other goods in and tobacco in communication equipment in recreation goods specialised stores specialised stores equipment in specialised stores in specialised specialised stores stores

Legislation in the EU is an obstacle to innovation Legislation in the EU increases the cost of administrative processes for companies Legislation in the EU increases the amount of paperwork for companies Legislation in the EU hinders your business growth

Again, there appear to be only small differences across NACE sub-codes. It can be noted that retailers of ICT equipment are the least likely to agree that legislation in the EU is an obstacle to innovation.

6.2 Views on the burdens imposed by different compliance tasks

Respondents were asked to consider the burdens imposed by specific compliance tasks.

Figure 14 Rating of compliance tasks by degree of time-consuming, share of respondents

0.6

0.4

0.2

0.0 Understanding what is Completing paperwork: Having to provide the Having to keep up to date required in order to such as filling out forms, same information more with regulatory changes comply with legislation keeping records and than once to authorities obtaining certificates of compliance

extremely time-consuming somewhat time-consuming not very time-consuming not time-consuming at all Source: Survey Q2 Note: Q2: For compliance with legislation, can you tell me to what extent the following tasks are time-consuming or not?

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A very large majority of respondents finds all four tasks either extremely or somewhat time-consuming. Of the four categories of task, the one that was least often considered “extremely time consuming” was “understanding what is required in order to comply with legislation”. The most often considered “not time-consuming at all” was “having to provide the same information more than once”, but only by around 10% of respondents.

6.3 Impact of retail restrictions on operational aspects of businesses

The survey was carried out on a range of retailers in all 28 Member States. Retailers interviewed were both large and small, brick and mortar and online, as well as operating in the food and non-food sectors. The aggregated results of the survey therefore show the overall picture and not necessarily reflect the actual impact of specific regulatory restrictions affecting only specific types of retailers in a given Member State. It is important to bear in mind that the retailers surveyed might perceive the regulatory restrictions in a broader context, from the perspective of a range of other factors that have an impact on their business decisions and which are not covered by the survey, such as the prices they pay to suppliers, rents and general business taxes, competitors' behaviour, consumer demand, etc.

The survey contained a group of questions which sought to investigate respondents’ perceptions of the impact of several types of retail restrictions on a range of operational aspects of businesses.

6.3.1 Impact on businesses of sales and promotions restrictions

Respondents were asked to rate the impact on their business of sales and promotions restrictions for the following effects:

. Impact on the prices at which they sell . Impact on the amount and range of products that they stock . Impact on revenues and profits . Impact on turnover . Impact on the number of customers that visit their shop . Impact on the organisation of their supply chain . Impact on productivity, e.g. sales per m² . Impact on their decisions regarding cross-border expansion (in the case of differing rules in different countries)

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Figure 15 Rating of sales and promotions restrictions by level of impact on different aspects of the business – overall, number of respondents 800

600

400

200

0 Impact on Impact on Impact on Impact on Impact on Impact on Impact on Impact on prices range of revenues and turnover customer supply chain productivity appeal of products profits traffic cross-border expansion

High impact Medium impact Low impact No impact

Source: Survey Q11

This type of restriction was considered to have a medium to high impact on revenues and profits by about half the respondents. Impacts on productivity and on decisions to trade cross-border were considered to be lower. These differences are statistically significant at the 95% confidence level.400

The figure overleaf provides a country-by-country breakdown.

In the vast majority of countries, less than half of respondents consider the impacts to be medium or high. Croatia, Cyprus, Slovenia and Romania are the only four exceptions. Respondents from Estonia, Denmark and Sweden give the lowest overall ratings for the various impacts of these restrictions. These responses are to some extent consistent with the findings from chapter 3. In particular, Croatia, Romania and Slovenia have a series of sales restrictions (but not Cyprus). In addition, Estonia, Denmark and Sweden have practically no restrictions on sales activities. On the other hand, there are several countries with restrictive legislation but in which respondents do not seem to feel burdened, Bulgaria and Portugal being the main examples.

400 Chi-square test statistics for the difference between the share of respondents who consider this type of restriction to have medium or high impact on revenues and profits and those who consider them to have medium to high impact on productivity and on appeal of cross-border expansion are 72.01 and 68.03 respectively, well above the 95% confidence level cut-off of 3.84.

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Figure 16 Rating of sales and promotional restrictions by level of impact on different aspects of the business – by country

8 Impact on your decisions regarding cross-border expansion (in case the of differing rules in different countries)

Impact on productivity, e.g. sales per m²

7 Impact on the organisation of your supply chain

Impact on the number of customers that visit your shop

Impact on turnover 6 Impact on revenues and profits

Impact on the amount and range of products that you stock

5 Impact on the prices at which you sell

0.4 0.4 4 0.5 0.5 0.3 0.4 0.3 0.6 0.4 0.5 0.5 0.3 0.4 0.4 0.5 0.5 0.4 0.5 0.4 0.4 0.4 0.3 0.4 0.3 0.5 0.6 0.4 0.4 0.5 0.5 0.5 0.4 3 0.5 0.3 0.5 0.4 0.3 0.7 0.3 0.2 0.3 0.5 0.5 0.2 0.5 0.4 0.6 0.4 0.6 0.5 0.6 0.4 0.3 0.2 0.3 0.3 0.5 0.3 0.2 0.5 0.3 0.5 0.3 0.4 0.3 0.5 0.4 0.3 0.4 0.2 0.5 0.5 0.4 0.4 0.3 0.3 0.3 0.3 0.2 0.4 0.2 0.3 0.2 0.4 0.5 0.3 0.3 0.4 0.4 2 0.7 0.3 0.6 0.6 0.3 0.2 0.3 0.3 0.6 0.3 0.3 0.7 0.4 0.6 0.2 0.5 0.1 0.5 0.3 0.4 0.5 0.2 0.5 0.6 0.2 0.5 0.3 0.5 0.4 0.2 0.5 0.3 0.3 0.4 0.4 0.4 0.7 0.5 0.3 0.3 0.2 0.3 0.5 0.4 0.6 0.4 0.6 0.2 0.5 0.6 0.7 0.5 0.4 0.5 0.6 0.6 0.2 0.4 0.6 0.5 0.2 0.6 0.5 0.5 0.5 0.4 0.5 0.5 0.6 0.3 0.2 0.4 0.3 0.5 0.3 1 0.4 0.5 0.4 0.5 0.5 0.4 0.5 0.5 0.4 0.3 0.4 0.4 0.5 0.5 0.5 0.3 0.5 0.5 0.4 0.4 0.5 0.5 0.5 0.4 0.5 0.3 0.4 0.4 0.4 0.3 0.3 0.3 0.2 0.3 0.3 0.3 0.3 0.2 0.7 0.6 0.6 0.6 0.5 0.5 0.2 0.5 0.5 0.6 0.5 0.6 0.5 0.5 0.5 0.5 0.5 0.5 0.4 0.4 0.4 0.4 0.3 0.4 0.3 0.4 0.4 0.2 0.3 0.3 0

Source: Survey Q11 Note: Number of respondents who selected high or medium impacts relative to all responses (excluding “don’t know”); the maximum for this ratio is 1 if all respondents consider that the impact is either high or medium. The left axis therefore shows a maximum of 8 (for all 8 questions). Values below 4, for example, imply that, on average, across the 8 sub-questions less than half of the respondents considered the impact of this type of restriction to be high or medium.

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Figure 17 Rating of sales and promotional restrictions by level of impact on different aspects of the business – by NACE subsector

8.0 Impact on your decisions regarding cross-border expansion (in case the of differing rules in different countries)

Impact on productivity, e.g. sales per m² 7.0 Impact on the organisation of your supply chain

Impact on the number of customers that visit your shop 6.0 Impact on turnover

Impact on revenues and profits 5.0 Impact on the amount and range of products that you stock

Impact on the prices at which you sell 4.0

0.3 0.3 0.3 0.4 0.3 3.0 0.4 0.4 0.3 0.3 0.3 0.4 0.3 0.3 0.4 0.4 0.2 0.4 0.4 0.4 0.3 0.4 0.4 0.4 0.4 0.2 0.4 0.4 2.0 0.4 0.4 0.4 0.4 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.3 0.3 0.5 0.5 0.5 1.0 0.5 0.5 0.5 0.5 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.3 0.5 0.5 0.5 0.4 0.5 0.4 0.4 0.4 0.0

Source: Survey Q11 Note: Number of respondents that selected high or medium impact relative to all responses (excluding “don’t know”); the maximum for this ratio is 1 if all respondents consider that the impact is either high or medium. The left axis therefore shows a maximum of 8. Values below 4, for example, imply that, on average, across the 8 sub-questions less than half of the respondents considered the impact of this type of restriction to be high or medium.

The variation across NACE subsectors is less than across countries. Overall, this type of restriction impacts most retail in non-specialised stores.

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6.3.2 Impact on businesses of opening hours restrictions

Respondents were asked to rate the impact on their business of opening hours restrictions according to the following:

. Impact on their hours of operation . Impact on revenues and profits . Impact on turnover . Impact on the number of customers that visit their shop . Impact on the organisation of their supply chain . Impact on productivity, e.g. sales per m² . Impact on their decisions on cross-border expansion (in the case of differing rules in different countries)

Figure 18 Rating of opening hours restrictions by level of impact on different aspects of the business – overall, number of respondents

800

600

400

200

0 Impact on Impact on Impact on Impact on Impact on Impact on Impact on hours of revenues and turnover customer traffic supply chain productivity appeal of cross- operation profits border expansion

High impact Medium impact Low impact No impact

Source: Survey Q12

The majority of respondents find this type of restriction to have either low or no impact, with a much larger share selecting “no impact”. There is relatively small variation across the eight different categories of impact, with impact on profits and turnover highest and impact on considerations of cross-border expansion lowest.

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Figure 19 Rating of opening hours restrictions by level of impact on different aspects of the business – by country

Impact on your decisions on cross-border expansion (in the case of differing rules in different countries)

Impact on productivity, e.g. sales per m² 6 Impact on the organisation of your supply chain

Impact on the number of customers that visit your shop

5 Impact on turnover

Impact on revenues and profits

Impact on your hours of operation

4 0.4 0.4 0.5

0.6 0.5 0.3 0.5 0.3 3 0.6 0.3 0.5 0.5 0.5 0.4 0.3 0.5 0.4 0.5

0.5 0.4 0.4 0.4 0.4 0.5 0.3 0.2 0.3 0.3 0.2 0.2 0.6 0.3 2 0.6 0.4 0.2 0.2 0.1 0.3 0.3 0.2 0.3 0.3 0.3 0.3 0.3 0.5 0.3 0.6 0.2 0.3 0.4 0.2 0.1 0.2 0.2 0.2 0.3 0.7 0.4 0.3 0.2 0.3 0.1 0.3 0.4 0.3 0.3 0.2 0.2 0.2 0.3 0.3 0.6 0.3 0.4 0.3 0.6 0.6 0.3 0.3 0.3 0.2 0.3 0.5 0.2 0.6 0.2 0.3 0.3 0.5 0.2 0.2 0.3 0.3 0.4 0.3 0.3 0.3 0.2 0.2 0.1 0.5 0.2 0.2 0.3 0.3 0.2 1 0.3 0.2 0.5 0.3 0.7 0.3 0.2 0.4 0.6 0.1 0.1 0.3 0.4 0.3 0.4 0.3 0.4 0.3 0.4 0.4 0.4 0.5 0.4 0.6 0.6 0.3 0.1 0.2 0.3 0.4 0.3 0.5 0.3 0.3 0.5 0.1 0.1 0.5 0.3 0.3 0.4 0.1 0.2 0.4 0.3 0.1 0.3 0.4 0.4 0.2 0.4 0.4 0.1 0.4 0.4 0.4 0.3 0.4 0.3 0.4 0.2 0.3 0.3 0.6 0.5 0.2 0.3 0.5 0.5 0.4 0.2 0.5 0.3 0.3 0.4 0.3 0.3 0.3 0.3 0.1 0.2 0.2 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0 0.1 0.1 0.1 0.1

Source: Survey Q12 Note: Number of respondents that selected high or medium impact relative to all responses (excluding “don’t know”); the maximum is 1 if all respondents consider that the impact is either high or medium. The left axis therefore shows a maximum of 7.

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Opening hours restrictions are seen as generally low impact in Denmark, Estonia, Sweden and the United Kingdom. Impacts are felt most strongly in Cyprus, Lithuania and Romania.

These results are in contrast to findings in Section 3.3.2. where there is no evidence of opening hours restrictions in any of these three countries. At the same time, the countries which perceived the lowest impacts are all countries in which these restrictions are present. This indicates that the perception of the restrictions and their impact is not perfectly correlated with whether the restriction is present or not.

Figure 20 Rating of opening hours restrictions by level of impact on different aspects of the business – by NACE sub-sector

7.0

Impact on your decisions on cross-border expansion (in the case of differing rules in different countries)

Impact on productivity, e.g. sales per m² 6.0

Impact on the organisation of your supply chain

Impact on the number of customers that visit your shop 5.0

Impact on turnover

Impact on revenues and profits 4.0 Impact on your hours of operation

3.0 0.3

0.4 0.1 2.0 0.4 0.2 0.3 0.3 0.2 0.3 0.3 0.3 0.2 0.3 0.4 0.2 0.3 0.2 0.3 0.3 0.2 0.3 0.3 0.5 0.3 0.4 0.3 1.0 0.2 0.1 0.2 0.4 0.4 0.2 0.4 0.4 0.1 0.2 0.3 0.5 0.3 0.1 0.4 0.4 0.4 0.4 0.2 0.3 0.3 0.4 0.2 0.3 0.2 0.3 0.2 0.3 0.0 0.2 0.1

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Not surprisingly, online retail is least impacted by hours of operation restrictions. Retailers in non-specialised stores report overall larger impacts, particularly on profits and turnover.

6.3.3 Impact on businesses of restrictions on selling

Respondents were asked to rate the impact on their business of restrictions on selling according to the following:

. Impact on the range of products which you sell . Impact on revenues and profits . Impact on turnover

Figure 21 Rating of restrictions on selling by level of impact on different aspects of the business – overall, number of respondents

800

600

400

200

0 Impact on range of products Impact on revenues and profits Impact on turnover

High impact Medium impact Low impact No impact

Source: Survey Q13

Again, a large majority of respondents selected either low or no impact. Those who selected no impact outnumber those who selected high impact at a ratio greater than 3:1.

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Figure 22 Rating of restrictions on selling by level of impact on different aspects of the business – by country

3 Impact on turnover

Impact on revenues and profits

Impact on the range of products which you sell 2

0.6 0.5 0.5 0.5 0.4 1 0.4 0.5 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.3 0.6 0.4 0.6 0.3 0.5 0.5 0.4 0.4 0.3 0.4 0.3 0.3 0.4 0.2 0.4 0.4 0.2 0.4 0.4 0.2 0.4 0.3 0.4 0.2 0.3 0.2 0.2 0.3 0.1 0.2 0.3 0.2 0.3 0.3 0.2 0.2 0.6 0.2 0.2 0.4 0.1 0.5 0.2 0.1 0.4 0.4 0.4 0.5 0.4 0.3 0.4 0.3 0.4 0.3 0.4 0.4 0.3 0.3 0.1 0.1 0.2 0.2 0.2 0.3 0.2 0.2 0.2 0.2 0.2 0 0.1 0.1 0.1

Source: Survey Q13 Note: Number of respondents that selected high or medium impact relative to all responses (excluding “don’t know”); the maximum is 1 if all respondents consider that the impact is either high or medium. The left axis therefore shows a maximum of 3.

This type of restriction is considered to have generally low impact across the three impact categories in most countries. It is particularly low in Bulgaria, Czech Republic and Denmark, and somewhat higher in Croatia and Slovenia.

These results can be contrasted with the country-by-country description of the restrictions in Section 3.3.3. As in previous graphs, there is a weak connection between the presence/absence of restrictions and the perception of the corresponding burden.

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Figure 23 Rating of restrictions on selling by level of impact on different aspects of the business – by NACE sub-sector

3.0

Impact on turnover

2.3 Impact on revenues and profits

Impact on range of products

1.5

0.5 0.4 0.8 0.3 0.3 0.3 0.3 0.5 0.3 0.4 0.2 0.3 0.3 0.3 0.3 0.3 0.2 0.4 0.2 0.3 0.3 0.2 0.2 0.3 0.2 0.0

At the NACE subsector level, selling restrictions are deemed to have slightly greater impact in non-specialised stores.

6.3.4 Impact on businesses of restrictions on sourcing

Respondents were asked to rate the impact on their business of restrictions on sourcing according to the following:

. Impact on the prices at which you sell . Impact on the amount and range of products which you sell . Impact – lower incentive to invest . Impact on revenues and profits . Impact on the organisation of your supply chain/ on the efficiency of the supply chain

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. Impact on your decisions regarding cross-border expansion (in the case of differing rules in different countries)

Figure 24 Rating of restrictions on sourcing by level of impact on different aspects of the business – overall, number of respondents

800

600

400

200

0 Impact on prices Impact on range Impact – lower Impact on Impact on supply Impact on appeal of products incentive to invest revenues and chain of cross-border profits expansion

High impact Medium impact Low impact No impact

Source: Survey Q14

The impacts of sourcing restrictions are considered high by only a relatively small number of respondents. Around half of the respondents report “no impact”.

The views that respondents expressed in relation to sourcing restrictions are hard to reconcile with the legal background detailed in Chapter 3. According to this study’s investigation, there are no sourcing restrictions imposed on retailers by national legislation in any EU countries except Romania.

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Rating of restrictions on sourcing by level of impact on different aspects of the business – by country

6 Impact on your decisions regarding cross-border expansion (in the case of differing rules in different countries)

Impact on the organisation of your supply chain/ on the efficiency of the supply chain

Impact on revenues and profits 5

Impact – lower incentive to invest

Impact on the amount and range of products which you sell

4 Impact on the prices at which you sell

0.4

3 0.5 0.6 0.3 0.4 0.4 0.3 0.3 0.5 0.3 0.5 0.3 0.5 0.4 0.5 0.5 0.5 0.4 0.8 0.4 2 0.2 0.5 0.3 0.4 0.1 0.4 0.6 0.5 0.2 0.2 0.6 0.4 0.5 0.5 0.2 0.5 0.3 0.5 0.3 0.3 0.2 0.1 0.2 0.5 0.1 0.3 0.3 0.3 0.5 0.3 0.3 0.6 0.4 0.3 0.4 0.4 0.3 0.3 0.3 0.5 0.3 0.3 0.4 0.5 0.3 0.5 0.4 0.3 0.5 0.4 0.3 0.5 0.5 0.4 0.4 0.4 0.3 0.3 0.5 0.3 0.2 1 0.4 0.3 0.3 0.3 0.1 0.3 0.4 0.6 0.3 0.3 0.3 0.3 0.2 0.5 0.1 0.1 0.4 0.3 0.5 0.5 0.2 0.5 0.3 0.3 0.3 0.4 0.3 0.4 0.2 0.4 0.1 0.1 0.3 0.4 0.2 0.1 0.3 0.4 0.5 0.4 0.2 0.3 0.3 0.3 0.2 0.1 0.2 0.3 0.2 0.3 0.3 0.3 0.2 0.3 0.2 0.1 0.1 0.3 0.6 0.2 0.2 0.5 0.5 0.1 0.5 0.4 0.4 0.5 0.5 0.5 0.6 0.4 0.4 0.1 0.1 0.2 0.3 0.4 0.3 0.4 0.3 0.4 0.4 0.2 0.2 0.2 0.3 0.3 0.3 0.2 0.2 0 0.1 0.1

Source: Survey Q14

6.3.5 Rating of burdens from additional restrictions

The graph below summarises the responses to the following question: “To what extent are the following restrictions a burden for your business?” Ten restrictions were provided and respondents selected among (1) A large burden, (2) Medium burden, (3) Somewhat a burden, (4) Not a burden at all and “Don't know”.

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. Complying with consumer rights regulations in your country (including guarantees, returns, refunds and dispute settlement) . Complying with consumer rights regulations from different countries (including guarantees, returns, refunds and dispute settlement) . Complying with technical product requirements from different countries . Complying with product labelling requirements from different countries . Providing the specified information that must be made available to the customer before they complete their purchase . Providing the specified information that must be made available to the customer before they complete their purchase in a range of languages . Complying with data protection regulation . Complying with different tax requirements when selling cross-border, including VAT . Requirement to set up a local website for cross-border sales . Restrictions on cross-border sales imposed by manufacturers or suppliers

Figure 25 To what extent are the following restrictions a burden for your business? - overall sample

900

800

700

600

500

400

300

200

100

0 Complying with Complying with Complying with Complying with Providing the Providing the Complying with Complying with Requirement to set Restrictions to consumer rights consumer rights technical product product labelling specified specified data protection different tax up a local website cross-border sales regulations in your regulations from requirements from requirements from information that information that regulation requirements when for cross-border imposed by country (including different countries different countries different countries must be made must be made selling cross-border, sales manufacturers or guarantees, returns, (including available to the available to the including VAT suppliers refunds and dispute guarantees, returns, customer before customer before settlement) refunds and dispute they complete their they complete their settlement) purchase purchase in a range of languages

A large burden Medium burden Somewhat a burden Not a burden at all

Source: Survey Q15: To what extent are the following restrictions a burden for your business? Note: “don’t know” answers are excluded from graph.

The two restrictions, “Complying with consumer rights regulations in your country (including guarantees, returns, refunds and dispute settlement)” and “Providing the specified information that must be made available to the customer before they complete their purchase in a range of languages” are perceived to be relatively more burdensome. The greatest number of responses for “not a burden at all” were for “Requirement to set up a local website for cross-border sales” and “Restrictions on cross-border sales imposed by manufacturers or suppliers”.

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Figure 26 Rating of compliance burdens by mostly online versus mostly physical businesses

1.6 e-commerce or mainly e-commerce physical or mainly physical 1.4

1.2

0.8

0.6

0.4

0.2

0 Complying Complying Complying Complying Providing the Providing the Complying Complying Requirement Restrictions on with consumer with consumer with technical with product specified specified with data with different to set up a cross-border rights rights product labelling information information protection tax local website sales imposed regulations in regulations requirements requirements that must be that must be regulation requirements for cross- by your country from different from different from different made available made available when selling border sales manufacturers (including countries countries countries to the to the cross-border, or suppliers guarantees, (including customer customer including VAT returns, guarantees, before they before they refunds and returns, complete their complete their dispute refunds and purchase purchase in a settlement) dispute range of settlement) languages Source: Survey question 15

The figures below investigate whether perceptions of these various potential burdens varied across countries, business size, and between physical versus online retailers.

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Figure 27 To what extent are the following restrictions a burden for your business? - by country

18 Restrictions on cross-border sales imposed by manufacturers or suppliers

Requirement to set up a local website for cross-border sales

Complying with different tax requirements when selling cross-border, including VAT

Complying with data protection regulation

Providing the specified information that must be made available to the customer before they complete their purchase in a range of languages Providing the specified information that must be made available to the customer before they complete their purchase

15 Complying with product labelling requirements from different countries

Complying with technical product requirements from different countries

1.3 Complying with consumer rights regulations from different countries (including guarantees, returns, refunds and dispute settlement) Complying with consumer rights regulations in your country (including guarantees, returns, refunds and dispute settlement)

1.2 1.2 1 1.1 12 1 1.1 0.8 1.1 1.4 1.7 1 1.1 0.7 0.6 0.5 1 0.6 0.9 0.8 0.9 0.7 0.7 1.8 0.6 0.9 1.6 1.3 1.2 0.7 1.2 1.3 0.7 0.8 0.9 0.7 1.5 1.3 0.9 0.9 0.9 0.8 0.8 0.7 1.3 0.5 1.1 9 0.7 1 0.6 0.9 1.1 1 1 1.2 0.4 1.5 1.5 1.4 1.2 1.4 1.7 1.4 1 1.1 1 0.5 0.5 1.6 1 1.3 1.4 1 1.3 1 0.3 0.7 1.4 0.9 0.6 1.4 1.4 1.2 1 1.2 1.3 1.3 1.1 1 1.1 1.7 0.5 0.5 1.2 1 1.4 0.4 0.4 1.3 1.1 1 1.3 1.6 1.3 0.6 1.3 0.5 1.1 0.6 1.1 1.1 1 0.6 0.9 1.1 6 1 1.4 0.3 1.4 1.5 0.7 1.3 0.8 0.5 1.4 1.2 0.4 0.7 1 1.1 1 0.9 1.5 1.5 0.5 1 0.5 1.3 0.9 0.7 1.2 1.2 0.7 1.3 1.2 1.5 1.5 0.9 1.1 1.3 0.6 0.6 1 1 1 1.1 1.2 1.3 1.2 1.3 1.4 0.8 1.4 0.7 1.4 0.7 1.1 0.5 0.8 1.2 0.7 1.2 0.9 1 1.2 1.4 1.3 1.3 1.2 1.2 0.9 1.1 0.8 0.7 1.3 0.4 1.3 0.9 1 0.4 1.1 1.1 0.8 1.3 0.8 1.4 1.1 0.9 1.5 0.8 3 1 0.7 0.7 0.9 1 1.3 1.1 0.8 1 1.1 0.9 0.9 1.2 1.2 1.1 1 0.7 0.7 1 1 0.6 0.9 0.6 1.3 1.4 0.6 1.1 1.4 1.1 1.2 0.7 0.7 0.5 1.2 0.6 1.1 0.6 1.1 0.9 0.9 0.7 0.5 0.8 0.8 0.3 1.1 0.9 1.1 0.8 0.7 1.1 0.7 0.8 0.5 0.8 0.4 0.5 0.6 0.6 0.7 0.6 1.7 1.5 1.5 1.6 1.5 1.4 1.5 1.5 1.5 1.6 1.5 1.1 1.1 1.3 1.3 1.1 1.1 1.2 1.3 1.1 1.3 1.3 1.2 1.3 1.1 1.1 1 1 0.8 0

Source: Survey Q15: To what extent are the following restrictions a burden for your business? Note: Average over all responses to each sub-question of Q15, by country, excluding “don’t know” answers; a large burden is rated 3, a medium burden 2, somewhat a burden 1, and no

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burden at all 0. The maximum mean of responses, for the greatest perceived burden, is 3 (for an overall maximum of 30 if answers were all 3 for all 10 sub-questions) and the minimum is 0. Means of answers for each sub-question are stacked to illustrate the perception of cumulative burden. Cyprus, Greece, Italy and Austria have the highest perception of cumulative burden, while Bulgaria and Denmark have the lowest.

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Figure 28 To what extent are the following restrictions a burden for your business? - by country, sub-sample of online or mostly online retailers

Restrictions on cross-border sales imposed by manufacturers or suppliers

Requirement to set up a local website for cross-border sales

Complying with different tax requirements when selling cross-border, including VAT

Complying with data protection regulation

Providing the specified information that must be made available to the customer before they complete their purchase in a range of languages

Providing the specified information that must be made available to the customer before they complete their purchase

Complying with product labelling requirements from different countries

30.0 Complying with technical product requirements from different countries

Complying with consumer rights regulations from different countries (including guarantees, returns, refunds and dispute settlement)

Complying with consumer rights regulations in your country (including guarantees, returns, refunds and dispute settlement) 27.0

3.0

24.0

2.0

21.0 1.0 3.0 1.0

18.0 3.0 1.6 3.0

1.9 1.5 1.0 15.0 3.0 1.8 3.0 1.3 1.3 2.0 1.0 2 2.2 1.3 1.0 0.7 1.5 1.3 2.0 0.9 1.0 0.7 1 12.0 1.0 3.0 1.7 2.3 0.7 3.0 1.0 1.1 1.5 1.5 1.9 2.0 1.4 2.0 1.0 1.5 1.8 1.0 2.0 1.6 1.2 1.0 1.0 1.0 1.0 1.3 0.3 1.4 2.5 1.3 2.0 1.8 2.5 9.0 1.0 1.7 0.8 1.2 0.6 1.0 0.0 1.3 3.0 1.8 0.5 2.1 1.3 2.0 2.0 2.0 1.5 0.5 0.0 1.1 1.2 1.0 2.0 1.0 1.5 2.3 1.3 1.6 1.0 1.5 1.5 1.0 2.0 0.0 1.2 2 0.4 0.3 1.7 1.0 0.7 1.0 0.8 1.6 1.0 1.4 0.5 1.3 1.2 0.5 1.1 0.5 6.0 1.6 2.0 1.3 0.8 1.5 0.7 1.4 1.8 0.9 0.8 1.0 0.4 3.0 1.0 1.7 3.0 1.0 2.0 1.5 1.8 0.7 0.9 1.1 1.5 0.3 1.5 1.4 0.8 2.0 0.0 0.7 1.3 0.4 0.8 0.9 0.5 1.0 0.8 1.0 1.0 1.3 1.0 0.6 0.5 0.4 0.6 1.6 1.6 1.3 1.1 0.5 1.7 0.6 1.3 0.8 1.0 0.4 2.0 0.8 1.1 1.5 2.0 1.5 1.7 1.5 0.4 1.0 1.0 0.6 1.0 1.0 1.9 0.6 3.0 0.3 0.8 1.0 2.0 2.0 2.0 0.0 0.0 1.1 2 2.3 0.6 0.3 0.5 0.5 1.5 1.4 0.5 0.4 1.0 0.5 0.6 1.0 1.4 0.0 1.3 0.6 0.4 1.2 1.0 0.5 0.7 0.5 0.6 1.3 1.0 0.8 1.5 2.0 0.0 0.0 0.4 1.0 0.8 2.3 1.3 0.7 0.5 0.4 1.0 0.0 1.0 1.3 1.0 0.2 1.0 0.8 2.0 2.0 2.0 2.0 2.4 2.0 2.0 2.1 1.8 1.7 1.7 1.7 0.8 1.5 1.0 1.3 1.3 1.3 1.3 1.0 1.0 1.0 1.2 0.9 0.7 0.5 0.8 0.7 0.5 0.0

Source: Survey Q15: To what extent are the following restrictions a burden for your business? Note: Average over all responses by online businesses to each sub-question of Q15, by country, excluding “don’t know” answers; a large burden is rated 3, a medium burden 2, somewhat a burden 1, and no burden at all 0. The maximum mean of responses, for the greatest perceived burden, is 3 (for an overall maximum of 30 if answers were all 3 for all 10 sub-questions) and the minimum is 0. Means of answers for each sub-question are stacked to illustrate the perception of cumulative burden.

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In general, the perception of these burdens is higher for “online or mostly online” businesses than for the overall population of respondents. This is particularly noticeable for Greece and Ireland. The result is surprising because online businesses are perceived as less affected by regulations and restrictions than their bricks and mortar counterparts.

Figure 29 To what extent are the following restrictions a burden for your business? - by firm size

Restrictions on cross-border sales imposed by 0.8 0.9 manufacturers or suppliers

10 0.7 0.8 Requirement to set up a local website for cross-border sales 0.7

1.2 1.2 0.7 Complying with different tax requirements when selling cross-border, including VAT

8 1 1.3 1.4 Complying with data protection regulation

1.1

1.1 1.1 Providing the specified information that must be made available to the customer before they complete their 6 purchase in a range of languages 1

Providing the specified information that must be made 1.3 1.4 available to the customer before they complete their purchase 1.1

Complying with product labelling requirements from 4 1.1 different countries 1.2 1

Complying with technical product requirements from 1.1 different countries 0.9 1

2 Complying with consumer rights regulations from 0.9 0.9 0.8 different countries (including guarantees, returns, refunds and dispute settlement)

Complying with consumer rights regulations in your 1.3 1.4 1.4 country (including guarantees, returns, refunds and dispute settlement)

0 micro small medium

Source: Survey Q15: To what extent are the following restrictions a burden for your business? Note: Average overall responses to each sub-question of Q15, excluding “don’t know” answers; a large burden is rated 3, a medium burden 2, somewhat a burden 1, and no burden at all 0. The maximum mean of responses, for the greatest perceived burden, is 3 (for an overall maximum of 30 if answers were all 3 for all 10 sub-questions) and the minimum is 0. Means of answers for each sub-question are stacked to illustrate the perception of cumulative burden.

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The differences across firm size are quite small but they are statistically significant at the 95% confidence level.401

6.4 Assessment of regulatory burdens by online retailers

A series of sub-questions to online retailers investigated the extent to which different aspects of retail regulations and restrictions were considered a burden by businesses:

. Q16a. Complying with consumer rights regulations in your (and other countries). o Impact on decision to develop online sales o Impact on the level of investment in technology o Impact on employment (e.g. of digitally-skilled, legal or administrative staff) o Impact on your decisions regarding cross-border expansion (in the case of differing rules in different countries) o Impact on turnover o Impact on the prices at which you sell o Impact on revenues and profits . Q16b. Complying with technical product requirements from different countries / Complying with product labelling requirements from different countries o Impact on the decision to develop online sales o Impact on the level of investment on technology o Impact on employment (e.g. of digitally-skilled, legal or administrative staff) o Impact on your decisions on cross-border expansion (in the case of differing rules in different countries) o Impact on turnover o Impact on the prices at which you sell o Impact on revenues and profits o Impact on the range of products which you sell o Impact on the organisation of your supply chain/ on the efficiency of the supply chain . Q16c. Providing the specified information that must be made available to the customer before they complete their purchase o Impact on decision to develop online sales o Impact on employment (e.g. of digitally-skilled, legal or administrative staff) o Impact on your decisions regarding cross-border expansion (in the case of differing rules in different countries) o Impact on turnover o Impact on the prices at which you sell o Impact on revenues and profits o Impact on the range of products which you sell . Q16d. Complying with data protection regulations o Impact on decision to develop online sales o Impact on employment (e.g. of digitally-skilled, legal or administrative staff) o Impact on your decisions on cross-border expansion (in the case of differing rules in different countries) o Impact on the level of investment in technology o Impact on the collection and use of data

401 Chi-square test statistics for the difference between the total number of respondents who selected high or medium burden versus low or no burden in micro versus medium sized firms is 11.86.

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o Impact on innovation . Q16e. Complying with different tax requirements when selling cross-border, including VAT o Impact on decision to develop online sales o Impact on employment (e.g. of digitally-skilled, legal or administrative staff) o Impact on your decisions regarding cross-border expansion (in the case of differing rules in different countries) o Impact on the prices at which you sell o Impact on revenues and profits . Q16f. Requirement to set up a local website for cross-border sales o Impact on decision to develop online sales o Impact on your decisions regarding cross-border expansion (in the case of differing rules in different countries) o Impact on the range of products which you sell o Impact on the prices at which you sell . Q16g. Restrictions on cross-border sales imposed by manufacturers or suppliers o Impact on your decisions regarding cross-border expansion (in the case of differing rules in different countries) o Impact on the range of products which you sell o Impact on the prices at which you sell o Impact on the organisation of your supply chain/ on the efficiency of the supply chain o Impact on the level of investment in technology

The figures below take the ratio of respondents that considered each of these either a large or a medium burden, relative to all responses excluding “don’t know”. The results are stacked for each sub-question and graphed against the corresponding maximum (one for each impact, if all respondents select high or medium impact, summed over the number of impacts in each sub-question).

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Figure 30 Rating of burden levels by online retailers – consumer rights regulations

7.0 Impact on revenues and profits

Impact on the prices at which you sell

Impact on turnover

Impact on your decisions regarding cross-border expansion (in the case of differing rules in different countries) 6.0 Impact on employment (e.g. of digitally-skilled, legal or administrative staff)

Impact on the level of investment in technology

Impact on decision to develop online sales 0.8

5.0 0.7 0.9

0.8 0.9 0.8 0.7 0.6 0.6 0.7 0.5 4.0 0.5 0.8 0.7 0.8 0.6 0.7 0.9 0.5 0.5 0.8 0.5 0.8 0.6 0.7 0.6 0.8 0.4 0.4 0.5 0.5 0.4 0.6 0.6 0.7 0.9 0.3 3.0 0.6 0.7 0.5 0.5 0.8 0.6 0.5 0.4 0.4 0.7 0.4 0.4 0.5 0.5 0.5 0.4 0.6 0.4 0.6 0.4 0.6 0.7 0.5 0.3 0.5 0.4 0.5 0.7 0.4 0.6 0.4 0.4 0.9 0.4 0.4 0.4 0.5 0.7 0.5 0.5 0.9 0.4 2.0 0.6 0.7 0.8 0.3 0.7 0.5 0.4 0.4 0.6 0.3 0.5 0.7 0.4 0.3 0.7 0.6 0.6 0.0 0.3 0.4 0.7 0.9 0.3 0.5 0.4 0.2 0.6 0.7 0.4 0.2 0.8 0.4 0.3 0.3 0.6 0.7 0.4 0.9 0.3 0.5 0.2 0.8 0.4 0.8 0.8 0.9 0.8 0.4 0.2 0.5 0.4 0.1 0.8 0.3 0.4 0.4 0.7 1.0 0.6 0.7 0.4 0.2 0.6 0.5 0.3 0.5 0.5 0.6 0.5 0.3 0.5 0.6 0.2 0.3 0.7 0.3 0.5 0.3 0.5 0.4 0.4 0.3 0.3 0.2 0.9 0.2 0.4 0.6 0.3 0.8 0.9 0.9 0.3 0.8 0.9 0.2 0.7 0.3 0.6 0.6 0.7 0.7 0.5 0.5 0.5 0.6 0.6 0.1 0.5 0.4 0.4 0.4 0.4 0.4 0.4 0.3 0.2 0.2 0.3 0.3 0.2 0.0 0.1

Source: Survey Q16a Note: Number of respondents who selected high or medium impact relative to all responses (excluding “don’t know”); the maximum is 1 if all respondents consider that the impact is either high or medium. The left axis therefore shows a maximum of 7.

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Figure 31 Rating of burden levels by online retailers – complying with technical product requirements

Impact on the organisation of your supply chain/ on the efficiency of the supply chain

Impact on the range of products which you sell

9.0 Impact on revenues and profits

Impact on the prices at which you sell

Impact on turnover

Impact on your decisions on cross-border expansion (in the case of differing rules in different countries) 8.0 Impact on employment (e.g. of digitally-skilled, legal or administrative staff)

Impact on the level of investment in technology

Impact on the decision to develop online sales

7.0 0.7

0.7 6.0 0.7

0.9 0.6 0.5 0.7 0.8 0.6 5.0 0.4 0.5 0.9 0.6 0.6 0.1 0.6 0.4 0.5 0.8 0.8 0.5 0.6 0.6 0.4 0.7 0.7 0.6 0.8 0.6 0.6 0.6 0.5 4.0 0.6 0.5 0.4 0.6 0.6 0.9 0.8 0.3 0.6 0.3 0.4 0.7 0.8 0.6 0.6 0.5 0.6 0.6 0.6 0.5 0.3 0.1 0.4 0.2 0.5 0.2 0.2 0.6 0.7 0.5 0.7 0.5 0.4 3.0 0.5 0.6 0.1 0.8 0.6 0.5 0.5 0.4 0.5 0.7 0.5 0.9 0.6 0.3 0.8 0.6 0.4 0.3 0.5 0.7 0.5 0.3 0.6 0.4 0.6 0.4 0.5 0.3 0.6 0.7 0.3 0.3 0.7 0.6 0.3 0.1 0.5 0.6 0.6 0.8 0.5 0.3 0.5 0.4 0.2 0.8 2.0 0.5 0.4 0.6 0.9 0.4 0.4 0.4 0.6 0.6 0.2 0.2 0.5 0.2 0.5 0.7 0.3 0.4 0.3 0.6 0.7 0.3 0.1 0.4 0.4 0.1 0.3 0.7 0.4 0.1 0.6 0.7 0.1 0.5 0.6 0.7 0.3 0.1 0.5 0.5 0.6 0.6 0.4 0.6 0.3 0.4 0.3 0.1 0.3 0.2 0.7 0.4 0.4 0.2 0.4 0.1 0.8 0.4 0.4 0.2 0.2 1.0 0.6 0.1 0.3 0.8 0.3 0.4 0.3 0.2 0.3 0.3 0.6 0.3 0.6 0.6 0.6 0.1 0.7 0.3 0.3 0.5 0.6 0.2 0.5 0.0 0.5 0.5 0.2 0.6 0.4 0.5 0.4 0.2 0.3 0.6 0.7 0.3 0.2 0.3 0.4 0.2 0.2 0.3 0.5 0.1 0.8 0.2 0.1 0.2 0.2 0.7 0.1 0.1 0.8 0.7 0.6 0.1 0.7 0.3 0.5 0.1 0.5 0.1 0.6 0.5 0.5 0.6 0.6 0.6 0.6 0.1 0.6 0.5 0.3 0.2 0.4 0.4 0.3 0.1 0.1 0.2 0.3 0.3 0.3 0.2 0.0 0.1 0.1 0.2

Source: Survey Q16b

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Note: Number of respondents who selected high or medium impact relative to all responses (excluding “don’t know”); the maximum is 1 if all respondents consider that the impact is either high or medium. The left axis therefore shows a maximum of 9. Figure 32 Rating of burden levels by online retailers – providing specified information to customers

7.0 Impact on the range of products which you sell

Impact on revenues and profits

Impact on the prices at which you sell

Impact on turnover 6.0 Impact on your decisions regarding cross-border expansion (in the case of differing rules in different countries)

Impact on employment (e.g. of digitally-skilled, legal or administrative staff)

Impact on decision to develop online sales

5.0 0.7 0.7

0.8 0.7 4.0 0.5 0.5 0.5 0.4 0.6 0.7 0.5 0.7 0.7 0.8 0.5 0.5 0.2 0.3 0.7 3.0 0.6 0.6 0.5 0.5 0.8 0.4 0.4 0.4 0.5 0.3 0.5 0.1 0.4 0.6 0.6 0.8 0.4 0.2 0.4 0.4 0.3 0.7 0.5 0.5 0.5 0.3 0.4 0.4 0.4 0.4 0.4 0.3 0.5 0.5 0.6 0.4 0.8 0.6 0.5 2.0 0.5 0.8 0.4 0.4 0.3 0.7 0.4 0.6 0.5 0.4 0.4 0.6 0.5 0.6 0.4 0.6 0.4 0.3 0.1 0.3 0.3 0.5 0.6 0.4 0.3 0.4 0.5 0.5 0.4 0.4 0.3 0.4 0.5 0.3 0.5 0.3 0.5 0.5 0.6 0.3 0.4 0.4 0.2 0.8 0.5 0.6 0.4 0.4 0.3 0.4 0.2 0.7 0.9 0.2 0.3 0.3 0.3 0.4 0.5 1.0 0.6 0.2 0.6 0.5 0.4 0.5 0.3 0.4 0.1 0.3 0.1 0.4 0.6 0.5 0.7 0.5 0.1 0.5 0.3 0.4 0.2 0.5 0.4 0.2 0.1 0.4 0.4 0.3 0.1 0.6 0.2 0.3 0.3 0.2 0.1 0.1 0.1 0.3 0.1 0.9 0.1 0.7 0.8 0.3 0.8 0.2 0.7 0.2 0.1 0.7 0.1 0.6 0.7 0.7 0.6 0.5 0.5 0.5 0.1 0.5 0.5 0.1 0.5 0.5 0.6 0.5 0.1 0.5 0.1 0.4 0.4 0.3 0.1 0.1 0.1 0.2 0.3 0.2 0.3 0.1 0.0 0.1 0.1

Source: Survey Q16c Note: Number of respondents who selected high or medium impact relative to all responses (excluding “don’t know”); the maximum is 1 if all respondents consider that the impact is either high or medium. The left axis therefore shows a maximum of 7.

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Figure 33 Rating of burden levels by online retailers – complying with data protection regulations

6.0 Impact on innovation

Impact on the collection and use of data

Impact on the level of investment in technology

5.0 Impact on your decisions on cross-border expansion (in the case of differing rules in different countries)

Impact on employment (e.g. of digitally-skilled, legal or administrative staff)

Impact on decision to develop online sales

4.0

0.6 0.9 0.6 0.4 0.6 0.6 0.5 0.7 3.0 0.6 0.8 0.6 0.5 0.7 0.6 0.7 0.6 0.7 0.6 0.8 0.6 0.6 0.6 0.5 0.3 0.4 0.6 0.7 0.7 0.0 0.8 0.7 0.7 0.6 0.6 0.6 0.5 0.4 0.4 0.5 0.6 0.6 0.5 0.6 2.0 0.5 0.7 0.0 0.2 0.7 0.5 0.4 0.3 0.3 0.4 0.3 0.5 0.5 0.4 0.5 0.6 0.6 0.6 0.7 0.5 0.6 0.5 0.1 0.5 0.7 0.6 0.4 0.3 0.5 0.4 0.4 0.3 0.4 0.5 0.7 0.5 0.4 0.8 0.3 0.8 0.3 0.5 0.3 0.3 0.3 1.0 0.4 0.1 0.6 0.3 0.6 0.3 0.6 0.7 0.1 0.2 0.4 0.2 0.5 0.3 0.2 0.4 0.0 0.3 0.5 0.2 0.5 0.0 0.6 0.1 0.5 0.3 0.2 0.3 0.3 0.5 0.5 0.5 0.2 0.4 0.2 0.2 0.1 0.6 0.4 0.3 0.2 0.2 0.9 0.1 0.1 0.8 0.1 0.8 0.8 0.2 0.6 0.3 0.7 0.7 0.6 0.1 0.6 0.6 0.5 0.5 0.5 0.5 0.5 0.1 0.5 0.2 0.4 0.4 0.4 0.0 0.4 0.4 0.4 0.4 0.3 0.3 0.3 0.1 0.1 0.2 0.0 0.0 0.0 0.1

Source: Survey Q16d Note: Number of respondents who selected high or medium impact relative to all responses (excluding “don’t know”); the maximum is 1 if all respondents consider that the impact is either high or medium. The left axis therefore shows a maximum of 6.

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Figure 34 Rating of burden levels by online retailers - complying with different tax requirements

5.0

Impact on revenues and profits

Impact on the prices at which you sell

Impact on your decisions regarding cross-border expansion (in the case of differing rules in different countries)

Impact on employment (e.g. of digitally-skilled, legal or administrative staff)

4.0 Impact on decision to develop online sales

0.9 0.9

3.0 0.7 0.4 0.6 0.6 0.6 0.7 0.8 0.4 0.8 0.3 0.4 0.5 0.6 0.7 0.5 0.2 0.5 0.6 0.7 0.5 2.0 0.5 0.5 0.4 0.8 0.6 0.8 0.4 0.5 0.5 0.5 0.7 0.6 0.8 0.3 0.4 0.5 0.4 0.5 0.7 0.7 0.6 0.5 0.5 0.4 0.3 0.6 0.6 0.5 0.5 0.5 0.4 0.7 0.3 0.0 0.3 0.9 0.5 0.4 0.3 0.4 0.2 0.4 0.3 0.8 0.6 1.0 0.3 0.5 0.1 0.5 0.3 0.4 0.6 0.6 0.6 0.5 0.2 0.5 0.5 0.3 0.4 0.5 0.2 0.2 0.6 0.3 0.4 0.3 0.4 0.3 0.4 0.5 0.2 0.1 0.2 0.4 0.2 0.3 0.4 0.2 0.3 0.0 0.2 0.2 0.8 0.1 0.7 0.2 0.7 0.7 0.1 0.6 0.6 0.6 0.7 0.6 0.6 0.7 0.6 0.5 0.5 0.6 0.6 0.5 0.6 0.2 0.1 0.4 0.5 0.3 0.0 0.4 0.3 0.3 0.0 0.3 0.2 0.2 0.2 0.2 0.0

Source: Survey Q16e

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Note: Number of respondents who selected high or medium impact relative to all responses (excluding “don’t know”); the maximum is 1 if all respondents consider that the impact is either high or medium. The left axis therefore shows a maximum of 5. Figure 35 Rating of burden levels by online retailers – requirement to set up a local website

4.0

Impact on the prices at which you sell

Impact on the range of products which you sell

Impact on your decisions regarding cross-border expansion (in the case of differing rules in different countries)

Impact on decision to develop online sales

3.0

0.8

0.7

0.5

0.6 0.7 2.0 0.4 0.5 0.8 0.6 0.5 0.4 0.4 0.5 0.5 0.5 0.5 0.4 0.5 0.6 0.3 0.4 0.5 0.3 0.4 0.3 0.7 0.8 0.8 0.4 0.4 0.2 0.6 1.0 0.6 0.6 0.6 0.4 0.6 0.3 0.5 0.4 0.2 0.2 0.3 0.4 0.3 0.3 0.2 0.3 0.2 0.1 0.5 0.1 0.4 0.1 0.4 0.1 0.1 0.1 0.1 0.2 0.3 0.4 0.4 0.1 0.5 0.1 0.3 0.1 0.3 0.3 0.3 0.4 0.3 0.8 0.3 0.2 0.4 0.2 0.8 0.8 0.1 0.8 0.1 0.6 0.6 0.7 0.6 0.3 0.7 0.5 0.1 0.5 0.5 0.1 0.4 0.2 0.4 0.3 0.4 0.3 0.1 0.3 0.3 0.4 0.3 0.3 0.3 0.1 0.2 0.2 0.2 0.2 0.1 0.1 0.0 0.0

Source: Survey Q16f Note: Number of respondents who selected high or medium impact relative to all responses (excluding “don’t know”); the maximum is 1 if all respondents consider that the impact is either high or medium. The left axis therefore shows a maximum of 4.

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Figure 36 Rating of burden levels by online retailers – restrictions on cross- border sales imposed by manufacturers or suppliers

5.0

Impact on the level of investment in technology

Impact on the organisation of your supply chain/ on the efficiency of the supply chain

Impact on the prices at which you sell

Impact on the range of products which you sell 4.0 Impact on your decisions regarding cross-border expansion (in the case of differing rules in different countries)

0.7 3.0 0.9 0.7 0.5

0.3 0.1 0.6

0.5 0.1 0.5 0.6 0.5 0.8 0.4 0.5 0.8 0.5 0.2 2.0 0.5 0.3 0.4 0.6 0.4 0.5 0.5 0.4 0.5 0.3 0.6 0.8 0.4 0.4 0.7 0.7 0.6 0.4 0.6 0.4 0.6 0.5 0.4 0.6 0.4 0.5 0.5 0.2 0.8 0.5 0.4 0.6 0.4 0.4 0.4 0.0 1.0 0.3 0.3 0.2 0.4 0.2 0.2 0.4 0.7 0.6 0.2 0.6 0.5 0.6 0.6 0.4 0.2 0.3 0.5 0.5 0.1 0.2 0.3 0.5 0.3 0.1 0.3 0.3 0.1 0.4 0.5 0.3 0.1 0.4 0.2 0.2 0.1 0.4 0.5 0.1 0.2 0.1 0.4 0.2 0.1 0.3 0.1 0.5 0.2 0.3 0.3 0.2 0.1 0.2 0.2 0.8 0.2 0.2 0.7 0.2 0.6 0.6 0.2 0.6 0.6 0.6 0.6 0.6 0.4 0.1 0.1 0.2 0.5 0.5 0.4 0.4 0.3 0.4 0.1 0.3 0.3 0.3 0.2 0.3 0.3 0.3 0.2 0.2 0.2 0.2 0.1 0.1 0.0

Source: Survey Q16g

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Note: Number of respondents who selected high or medium impact relative to all responses (excluding “don’t know”); the maximum for each type of impact is 1 if all respondents consider that the impact is either high or medium. The left axis therefore shows a maximum of 5.

It is generally the case, across all of the considered burdens for online retailers, that UK respondents perceive comparatively low levels. Other countries often found at the low end of the graphs include the Netherlands and Bulgaria. The countries at the higher end are Austria, France, Hungary, Latvia, Poland and Spain.

In terms of categories of restrictions and associated impacts, those relating to consumer rights regulations and technical product requirements often receive high burden ratings. At the other end, the two with relatively low burden ratings are: requirements to set up a local website and restrictions on cross-border sales imposed by manufacturers and suppliers.

6.5 Enforcement

Among a sample of 1450 respondents it is not necessarily to be expected that a sufficiently representative subsample would have been subject to particular enforcement actions such as inspections or fines. However, this survey presented an opportunity to gauge the sentiment of respondents in relation to the burdens associated with enforcement actions.

Question 17 proposes five statements and asks respondents the extent to which they agree with the statement:

. Inspections are too frequent . Inspections are disproportionately likely to find compliance shortcomings . Fines are disproportionately heavy . Fines are frequently incurred for minimal compliance shortcomings . The costs to seek redress for enforcement errors are too great for many businesses

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Figure 37 Level of agreement with negative statements about enforcement, overall – number of respondents 600

400

200

0 Inspections are too Inspections are Fines are Fines are The costs to seek frequent disproportionately disproportionately frequently incurred redress for likely to find heavy for minimal enforcement compliance compliance errors are too shortcomings shortcomings great for many businesses

Fully agree Somewhat agree Somewhat disagree Fully disagree Don't know

Source: Survey Q17

The strongest level of agreement with these negative statements about enforcement were in respect of costs of redress and frequency and proportionality of fines. A minority of respondents find inspections too frequent and about half of respondents consider that they are disproportionately likely to find enforcement shortcomings.

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Figure 38 Level of agreement with negative statements about enforcement, by country

4.5

The costs to seek redress for 4 enforcement errors are too great for many businesses

3.5

Fines are frequently incurred for minimal compliance shortcomings 3

2.5 Fines are disproportionately heavy

Inspections are disproportionately 1.5 likely to find compliance shortcomings

Inspections are too frequent 0.5

Source: Survey Q17 Note: Number of respondents who selected fully agree or agree relative to all responses (excluding “don’t know”); the maximum for each sub-question is 1 (if all respondents either agree or fully agree). The left axis therefore shows a maximum of 5.

The views about enforcement vary considerably across countries. Overall agreement with negative statements about enforcement is quite high for a large number of countries. The exceptions are Finland, Germany, Sweden and the UK.

In relation to inspections and fines associated with particular types of regulations, respondents were asked to select which one or two are the most applicable for their business. The following eight choices were given:

. Unfair trading practices legislation . Food safety laws . Other product safety laws . Labour market regulations (e.g. working time, posting of workers) . Environmental and energy laws . VAT . Health and safety in the workplace . Consumer protection laws (e.g. consumer rights and liability)

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As the figure below illustrates, VAT and consumer protection regulations were the most commonly selected. Unfair trading practices, other product safety laws and environment and energy laws, were the least often selected.

Figure 39 Views on categories of regulations most associated with inspections and fines

500

400

300

200

100

0 Unfair trading Food safety Other product Labour market Environmental VAT Health and Consumer practices laws safety laws regulations and energy safety in the protection legislation (e.g. working laws workplace laws (e.g. time, posting consumer of workers) rights and liability)

Source: Survey Q18 Note: Respondents were asked to select which one or two are the most applicable for their business

The survey also asked about the number of inspections in the most recent one year period. These responses are reported by country, by firm size and by NACE subsector.

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Figure 40 Average number of inspections per firm in the last year, by country 6.8 7 6.7

6 5.6 5.6

5 4.2 4 3.7 3.2 3.2 3.3 2.9 3.0 2.9 3.0 2.9 3.0 3 2.7 2.7 2.1 1.8 1.8 2 1.7 1.3 1.4 1.3 1.4 1.0 0.9 1 0.8 0.6

Source: Survey Q19

There are huge differences in the number of inspections faced by retailers across the EU countries, with inspections almost ten times more frequent in some countries than in others. The Czech Republic and Slovenia are at the high end of the distribution, followed by Romania and Slovakia. Inspections are least numerous in the UK, France, Netherlands and Luxembourg.

Figure 41 Average number of inspections per firm in the last year, by firm size 9 8.8

3.7 3 1.8

0 micro small medium

Source: Survey Q19

The number of inspections is generally greater the larger the firm size. However, it is interesting to note that even the smallest firms in our sample are subject to an average of almost two inspections per year. This may pose a greater challenge than the 8.8 average inspections faced by the larger retailers.

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Figure 42 Average number of inspections per firm in the last year, by NACE subsector

5 4.9 4.3

3 2.8 2.5

1.9 1.9 2 1.6 1.5

0 Non-specified Retail sale in non- Retail sale of food, Retail sale of Retail sale of other Retail sale of cultural Retail sale of other Online retailers specialised stores beverages and information and household and recreation goods goods in specialised tobacco in communication equipment in in specialised stores stores specialised stores equipment in specialised stores specialised stores Source: Survey Q19

The average number of inspections was greater in three sub-sectors: Retail sale in non-specialised stores; Retail sale of food, beverages and tobacco in specialised stores. . Online retailers faced on average the least inspections.

Respondents were also asked to report whether they had ever been given a fine as a result of an inspection. The table below reports the percentage of respondents that reported having received at least one such fine.

Table 33 Percentage of respondents that received fines, per country, per firm size

micro small medium Austria 14% 50% 17% Belgium 35% 51% 83% Bulgaria 17% 50% 100% Croatia 39% 40% 67% Cyprus 0% 23% 25% Czech Republic 35% 82% 57% Denmark 9% 13% Estonia 16% 20% 25% Finland 3% 0% 0% France 0% 0% 100% Germany 0% 24% 0% Greece 36% 23% 22% Hungary 20% 25% 100% Ireland 0% 6% 13% Italy 15% 48% 43% Latvia 36% 63% 33%

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Lithuania 56% 36% 33% Luxembourg 6% 0% 0% Malta 11% 0% 0% Netherlands 0% 30% 0% Poland 31% 71% 67% Portugal 27% 56% Romania 50% 84% 100% Slovakia 53% 56% 100% Slovenia 32% 57% 63% Spain 10% 23% 45% Sweden 15% 0% 0% United Kingdom 0% 14% 0% Norway 9% 17% 25% Source: Survey Q20. Note: Given that the number of fined companies was very small, some of the averages in this table are based on only one observation. All of those that are based on only one observation have not been highlighted

In terms of the likelihood of receiving fines, it seems that larger retailers are more susceptible. The results should however be viewed with a certain amount of caution because the number of respondents is low in many instances.

The table below provides an estimate of the average amount of fines paid per year as a percentage of respective turnover, for firms that have paid a fine. To do this, only the firms that reported a fine and only their respective turnovers were used.

Table 34 Average amount of fines paid per year by firms that received fines, per country, per firm size, as a percentage of turnover

average per micro small medium country Austria 0.10% 0.01% 0.08% 0.05% Belgium 0.08% 0.01% 0.01% 0.01% Bulgaria 4.58% 0.05% 0.00% 0.02% Croatia 0.74% 0.45% 0.00% 0.07% Cyprus 0.06% 0.02% 0.04% Czech Republic 0.05% 0.01% 0.00% 0.00% Denmark 0.25% 0.15% 0.20% Estonia 1.53% 0.01% 0.24% Finland 0.18% 0.18% France 0.09% 0.09% Germany 0.01% 0.01% Greece 0.41% 0.17% 0.00% 0.06% Hungary 0.04% 0.01% 0.01% 0.01% Ireland 0.01% 0.02% 0.01% Italy 0.06% 0.03% 0.01% 0.02% Latvia 0.71% 0.06% 0.04% Lithuania 0.37% 0.01% 0.00% 0.01%

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Luxembourg Malta 0.05% 0.05% Netherlands 0.03% 0.03% Poland 0.22% 0.01% 0.00% 0.01% Portugal 0.24% 0.07% 0.11% Romania 0.47% 0.05% 0.01% 0.05% Slovakia 0.15% 0.01% 0.02% 0.02% Slovenia 0.29% 0.04% 0.00% 0.02% Spain 2.38% 0.09% 0.35% 0.35% Sweden 0.66% 0.66% United Kingdom 1.08% 1.08% Norway 0.62% 0.00% 0.01% 0.02%

average per firm size 0.30% 0.04% 0.05% 0.06% Source: Survey Q21. Note: Given that the number of fined companies was very small, some of the averages in this table are based on only one observation. All of those that are based on only one observation have not been highlighted

As a percentage of turnover, fines were relatively higher for the smaller firms. Some of the figures may be impacted by an underlying very small number of respondents. Small retailers in Bulgaria, Estonia and Spain seem to pay the highest level of fines. At the country level, fines were higher in Sweden and Spain.

6.6 Estimate of the monetary value of the burdens

One part of the questionnaire focused on monetisable burdens. These were split between administrative burdens such as information obligations, and compliance expenditure such as equipment, systems and software.

For administrative burdens, the questionnaire asked about both externally sourced and in-house delivery of services. For external provision, the questions ask for the specific monetary outlay. Questions about in-house administrative tasks were asked in terms of full-time equivalent days (FTE). FTE days were, in turn, valued at the average daily cost of persons employed in the retail sector in each country.

The relevant questions of the survey for this part of the analysis are given below.

. Q3a. Does your company incur administrative burdens to comply with relevant regulations and restrictions, including information obligations (provision of information to your competent administration)? o (if yes) Q3b. Do you use external support services to help you fulfil these requirements? . (if yes) Q3c. How much do you spend on average, per month, on these external support services? (money wise) . Q4. On average, how many “full-time equivalent” days are spent each month, on: Learning about and updating existing knowledge on regulations and restrictions relevant to your business

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. Q4. On average, how many “full-time equivalent” days are spent each month, on: Collecting information and reporting to authorities . Q4. On average, how many “full-time equivalent” days are spent each month, on: Other compliance-related administrative duties . Q6. What share of these activities/expenditure do you estimate would have been made even in the absence of the regulations? The data used to translate FTE days into a euro value is described below.

Figure 43 Personnel costs per person employed, retail trade except motor vehicles, by country, per day, €

160

120

Source: Eurostat Annual detailed enterprise statistics for trade (NACE Rev. 2 G) [sbs_na_dt_r2]; personnel costs divided by number of persons employed Note: Per day personnel costs estimated as yearly cost divided by 240

In order to make monetary values comparable across countries, a PPP index was used.

In order to compare the monetary value of burdens with respective firm turnover, data on turnover by country and by firm size were used. This data, also from Eurostat, is described below.

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Figure 44 Turnover per person employed, by country, by size of firm, € thousand 400

300

200

100

micro (0-9 employees) small (10-49 employees) medium (50-249 employees)

Source: Eurostat Distributive trades by employment size class (NACE Rev. 2, G) [sbs_sc_dt_r2]

The turnover for each respondent was estimated on the basis of the data for turnover per employed person, using the firm-level information on the number of persons employed from the survey.

. the cost of externally sourced administrative services; . the labour cost of full time equivalent days spent internally in such tasks; and . the extent to which these tasks would be performed even in the absence of regulatory requirements (because only the costs associated with those tasks which would not be performed in the absence of regulation can be considered “additional” and therefore a burden associated with relevant regulations and restrictions).

The costs in euros are measured by taking the average over all completed responses, including respondents who indicate zero costs for certain categories. These euro values are divided by the respective firm estimated turnover.

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Figure 45 Administrative burdens – in percentage of estimated turnover, by country

6.0%

4.0%

2.0%

0.0%

admin burdens (% of estimated turnover) additionality of admin burdens (% of estimated turnover)

Source: Survey Q3, Q4 and Q6

There is a high degree of cross-country variability of administrative burdens as a percentage of turnover. These burdens are estimated to be highest in Bulgaria, Portugal, Romania and Sweden. They are comparatively low in Belgium, Denmark, Ireland, Luxembourg, and Malta.

Most respondents recognised the fact that some of these burdens were related to tasks that would have been undertaken in one form or another even in the absence of regulatory requirements and restrictions. Over the whole sample, administrative burdens that are judged to be truly additional (to tasks that would be performed as normal business practice)402, make up just over 2/3 of the total burdens.

These costs make up a significant percentage of turnover in a number of countries, even taking only the part of these costs that are considered additional to otherwise normal business practice. In particular, additional administrative burdens are on average more than 2% of annual turnover in all of the following: Austria, Bulgaria, France, Italy, Poland, Portugal, Romania, Slovakia and Sweden.

402 We use the terms “additional” and “additionality” to take account of the fact that some of the tasks and costs incurred when complying with regulations and restrictions may be tasks and costs that would be part of firms’ business practices anyway. For example, a retailer may choose to close on Sundays even if no regulation requires it. Similarly, a business may update its accounting software every two years and only part of that investment can be seen as an “additional” cost due to compliance with regulations.

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Figure 46 Administrative burdens – average yearly amounts per firm, by size of firm, PPP adjusted €

20,000 17,663

15,000 10,311 10,914 10,000 7,567 5,032 5,000 3,257

0 micro small medium

admin burdens additionality of admin burdens

Source: Survey Q3, Q4 and Q6

Figure 47 Administrative burdens – in percentage of estimated turnover, by size of firm

4.0% 3.56%

3.0% 2.27% 2.0%

1.0% 0.36% 0.26% 0.10% 0.06% 0.0% micro small medium

admin burdens (% of estimated turnover) additionality of admin burdens (% of estimated turnover)

Source: Survey Q3, Q4 and Q6

The analysis by firm size shows that there are large differences in the absolute level of administrative costs, with medium sized firms incurring about three times the level of costs of the micro firms. As a percentage of turnover, the picture is quite different though: administrative costs are close to 4% of turnover for micro firms while they are 0.1% for medium size firms. This is a very significant difference in the regulatory compliance burden, implying that the burden is felt disproportionately by the smallest firms.

It is worth noting that although respondents were asked to state the hourly labour costs of employees involved in the various compliance-related tasks, the responses to these questions were not used in the calculations above. These responses showed a very high variability across firms and they were judged to be unreliable. However, it is important to note that the burden estimates that would have resulted under that

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Regulatory burdens related to equipment and systems were estimated as the sum of two components – one-time costs incurred over a 3-year period and ongoing costs incurred on a yearly basis. The estimates take as a starting point the following survey questions:403

. Q7. In order to comply with the legislation did you have to spend on equipment, systems, software development, and materials? . (if yes) Q8. What was the total amount of all one-time expenditure associated with these costs over the last 3 years? . (if yes) Q9. What is the amount of ongoing expenditure associated with these costs? Please estimate a yearly equivalent. . (if yes) Q10. What percentage of this expenditure do you estimate would have been made even in the absence of the regulations? (one-time and ongoing).

Overall, these burdens are estimated by respondents to add up to just under 40% of the level of administrative burdens.

403 The one-time costs are asked over a period of 3 years while the ongoing costs are asked in yearly terms. To add up both types of cost, the one-time costs are divided by three to yield an estimate of the average yearly level of the regulatory compliance costs associated with equipment, systems, software development, and materials.

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Figure 48 Costs of equipment and systems for compliance – in percentage of estimated turnover, by country 6.0%

4.5%

3.0%

1.5%

0.0%

burdens related to equipment and systems (% of estimated turnover) additionality of burdens related to equipment and systems (% of estimated turnover)

Source: Survey Q7-Q10

As a percentage of estimated turnover, equipment and system costs are higher in Portugal and Latvia. They make up less than 0.5% of turnover in thirteen countries: Belgium, Czech Republic, Denmark, Estonia, Finland, Germany, Hungary, Ireland, Luxembourg, Malta, Netherlands, Slovenia and the UK.

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Figure 49 Costs of equipment and systems for compliance – average yearly amounts per firm, by size of firm, PPP adjusted € 8,000 7,253 5,660 6,000 3,962 4,000 3,468 2,003 2,000 1,348

0 micro small medium

burdens related to equipments and systems additionality of burdens related to equipments and systems

Source: Survey Q7-Q10

Figure 50 Costs of equipment and systems for compliance – in percentage of estimated turnover, by size of firm

2.0% 1.49% 1.5% 0.98% 1.0%

0.5% 0.23% 0.14% 0.05% 0.03% 0.0% micro small medium burdens related to equipment and systems (% of estimated turnover)

additionality of burdens related to equipment and systems (% of estimated turnover)

Source: Survey Q7-Q10

When considering equipment and systems compliance costs by firm size, it can be noted that, again, costs in absolute levels are higher for the bigger firms but costs as a percentage of turnover are much higher for the smallest firms. Although these burdens represent a lower percentage of turnover when compared to administrative burdens, the difference between the burdens for micro firms and medium sized firms is just as marked, at an average of 1.5% of turnover for micro firms but only 0.05% for medium sized firms.

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Figure 51 Total estimated monetary burdens as a percentage of turnover, by NACE code

6.0%

4.0%

2.0%

0.0% Retail sale in non- Retail sale of food, Retail sale of Retail sale of other Retail sale of cultural Retail sale of other Retail sale - online specialised stores beverages and tobacco information and household equipment and recreation goods goods in specialised in specialised stores communication in specialised stores in specialised stores stores equipment in specialised stores

admin + equip and systems burdens (% of estimated turnover)

additionality of admin + equip and systems burdens (% of estimated turnover)

Source: Survey Q3 to Q10

The differences in regulatory burdens, as a percentage of turnover, across NACE subsectors are relatively small. They are somewhat higher than average in ‘retail of cultural and recreational goods and services’ and for ‘retail of information and communication equipment’.

An estimate of total monetary burdens of compliance with regulations can be reached by combining the estimates per country and the estimates per firm size of the additionality of burdens as a percentage of turnover and applying these estimates to the population of firms.

The figure overleaf reports on the estimates of these burdens on a per country basis.

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Figure 52 Total additional monetary burdens as a percentage of turnover, by country

7.0%

6.0% 6.0%

5.0%

4.0% 3.9% 4.0% 3.6% 3.5% 3.5% 3.0% 3.0% 2.8% 3.0% 2.7% 2.6% 2.5% 2.2% 2.3% 1.8% 2.0% 1.6% 1.6% 1.6% 1.4%1.5% 1.3% 1.3% 1.2% 0.9% 1.0% 0.8% 0.7% 1.0% 0.6% 0.4%

0.0%

Source: Survey Q3 to Q10

Overall, burdens as a percentage of turnover are estimated to be highest in Portugal, Poland, Latvia, Romania, France and Austria - at or above 3.5% of turnover. These overall burdens are lowest in Luxembourg, Ireland, Malta, Denmark and Belgium, all of which are below 1%.

As the figure below illustrates, burdens as a percentage of turnover vary significantly across firm sizes. It is important to note, however, that the estimates for medium and large firms rely on a very small number of observations. The latter, in particular, is based on only 10 observations.404 The estimates of burdens which rely on these values should therefore be interpreted with care.

404 These 10 observations have a standard deviation of 0.07797 percent points

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Figure 53 Total additional monetary burdens as a percentage of turnover, by firm size

3.50% 3.247%

3.00%

2.50%

2.00%

1.50%

1.00%

0.50% 0.373% 0.097% 0.072% 0.00% micro - 942 obs small - 339 obs medium - 107 obs large - 10 obs

Source: Survey Q3 to Q10

Large firms have not been explicitly included in the analysis so far since it has been considered that the number of large firm respondents was too small to be treated separately for most of the questions of the survey. As such, they have been aggregated with medium sized firms for all the responses presented above.

However, it is important to attempt to make an estimate of the monetary burden as a percentage of turnover for the large firms, because if large firms are excluded from the total burden estimate, it is likely that the estimate would suffer from a downward bias. If, on the other hand, large firms are included but the percentage burden applied to them is that which was estimated for the medium sized firms (or for the overall population of firms), then it is likely that this would overestimate the total burden since it has been shown by the data that burdens as a percentage of turnover tend to go down as turnover increases.

As a result, the calculations below use the limited data from large firm respondents to attempt to estimate their total monetary burden as a percentage of turnover.

The first column in the table below relies on country-level survey data from micro firm respondents to estimate their respective regulatory burdens as a percentage of turnover. It then uses the aggregate burdens expressed as a percentage of turnover for the different firm sizes in order to estimate percentage burdens for small, medium and large firms in each country.

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Table 35 Estimated monetary burdens of administrative compliance tasks and equipment and systems for compliance, per country, per firm size, as a percentage of turnover

Country micro small medium large Austria 4.498% 0.517% 0.134% 0.099% Belgium 1.819% 0.209% 0.054% 0.040% Bulgaria 3.479% 0.400% 0.104% 0.077% Croatia 5.524% 0.635% 0.165% 0.122% Cyprus 2.824% 0.325% 0.084% 0.062% Czech Republic 3.532% 0.406% 0.106% 0.078% Denmark 0.864% 0.099% 0.026% 0.019% Estonia 2.027% 0.233% 0.061% 0.045% Finland 2.131% 0.245% 0.064% 0.047% France 3.910% 0.449% 0.117% 0.086% Germany 1.410% 0.162% 0.042% 0.031% Greece 4.503% 0.518% 0.135% 0.099% Hungary 2.460% 0.283% 0.074% 0.054% Ireland 0.885% 0.102% 0.026% 0.020% Italy 4.947% 0.569% 0.148% 0.109% Latvia 6.150% 0.707% 0.184% 0.136% Lithuania 2.753% 0.316% 0.082% 0.061% Luxembourg 0.473% 0.054% 0.014% 0.010% Malta 1.003% 0.115% 0.030% 0.022% Netherlands 1.564% 0.180% 0.047% 0.034% Poland 4.767% 0.548% 0.142% 0.105% Portugal 7.157% 0.823% 0.214% 0.158% Romania 5.264% 0.605% 0.157% 0.116% Slovakia 3.806% 0.437% 0.114% 0.084% Slovenia 1.860% 0.214% 0.056% 0.041% Spain 3.339% 0.384% 0.100% 0.074% Sweden 3.258% 0.374% 0.097% 0.072% United Kingdom 1.629% 0.187% 0.049% 0.036% Norway 1.849% 0.213% 0.055% 0.041% Source: Q3-Q10 Note: The first column corresponds to the survey mean of additional total burdens as a percentage of turnover for micro firms only. The three further columns use the percentage of burdens across firm sizes estimated for the overall sample of respondents.

These percentages are then multiplied by total firm turnover in each respective firm size country cell. This leads to an estimate of absolute monetary burden in each country and for each category of firm size.

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Table 36 Estimated monetary burdens of administrative compliance tasks and equipment and systems for compliance, per country, per firm size, € millions

Country micro small medium large Austria 615.7 64.0 7.3 30.1 Belgium 564.7 41.4 3.5 13.3 Bulgaria 132.7 12.7 2.5 2.4 Croatia 94.4 9.3 3.0 8.9 Cyprus 60.7 3.4 0.7 0.8 Czech Republic 306.4 20.0 4.7 13.5 Denmark 68.0 8.1 1.0 4.2 Estonia 16.9 2.4 1.3 Finland 140.1 20.7 2.0 9.4 France 5,020.6 299.9 76.0 159.2 Germany 1,163.1 188.8 26.8 82.5 Greece 1,345.8 25.7 3.0 8.6 Hungary 206.8 15.2 2.6 5.0 Ireland 80.2 9.3 1.4 2.8 Italy 6,720.2 276.8 36.2 106.8 Latvia 57.4 8.0 2.5 4.5 Lithuania 33.3 4.0 1.1 3.4 Luxembourg 7.0 0.6 0.0 Malta 11.4 0.8 0.1 0.0 Netherlands 369.2 33.0 6.3 16.8 Poland 1,626.1 79.2 15.4 47.6 Portugal 1,030.9 68.4 8.6 27.2 Romania 318.0 37.4 11.4 16.8 Slovakia 242.5 12.2 2.1 5.7 Slovenia 22.4 2.0 1.2 3.2 Spain 2,564.4 87.1 11.4 71.1 Sweden 458.0 45.9 11.7 25.3 United Kingdom 950.4 73.9 13.6 122.5 Norway 163.4 32.1 3.2 10.1 24,227.3 1,450.1 256.2 792.9 Source: Q3-Q10, aggregate firm turnover data from Eurostat Note: 1) For micro enterprises, the percentage of additionality of burdens over turnover was estimated directly from survey responses. For small, medium and large firms, the number of responses per country were often too few for a reliable estimate. Instead, the estimates presented in the table rely on an estimate of the ratio of burdens of micro firms relative to small, medium and large firms, where these ratios are estimated using the full sample of respondents. These ratios are calculated from the sample means presented earlier. 2) There was no information in Eurostat on firm turnover, in any of the previous 3 years, for medium sized firms in Estonia and for large firms in Luxembourg.

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It is important to consider the magnitude of the margin of error for these estimates. This calculation takes into account the sample size, the size of the population it seeks to represent, the sample mean and the standard deviation of the sample mean.405

Figure 54 Confidence intervals for total monetary burdens of administrative compliance tasks and equipment and systems for compliance, per country, per firm size, totals in € million micro small medium large all 95% CI lower 21,042.4 1,149.7 150.7 247.0 22,589.7 point estimate 24,227.3 1,450.1 256.2 792.9 26,726.5 95% CI higher 27,412.2 1,750.5 361.8 1,338.8 30,863.3 Source: Survey Q3-Q10, Eurostat, LE calculations

According to these estimates, the total estimated monetary burden of compliance tasks across all EU retail firms is estimated at just above EUR 26 billion, with a 95% confidence interval ranging between EUR 22.6 and EUR 30.9 billion. This amount falls disproportionately on micro firms which shoulder an estimated total burden of between EUR 21 and EUR 27.4 billion.

405 The distribution of the sample averages is assumed normal and therefore the 95% confidence interval for the population mean is given by the sample mean plus or minus two standard errors. The standard errors are calculated as the standard deviation of the sample divided by the square root of the sample size. This was done for the overall sample of responses that contained information to calculate the additional burdens imposed by administrative tasks and equipment, systems and software, as a percentage of turnover. There were 1,398 observations over which the sample average was 2.207% with a standard error of 0.07045.

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Annex 1 Review of the literature on measuring burden of restrictions

The purpose of this literature review is to provide a basis for developing a methodology for measuring the impact of operational restrictions on retail companies. Our inspection of the literature indicated that studies investigating the cost of operational restrictions in the retail sector are scarce, and potentially useful methods would not be captured by considering the retail sector literature alone. For this reason, some of the included studies assess impacts rather than just costs and some consider impacts additional to only direct impacts on regulated businesses. This was deemed appropriate since the frameworks and methods in those studies could prove applicable to the present study.

We start by reviewing various taxonomies of cost of regulation and next provide an overview of methods for assessing these costs. Then we turn to the literature focusing on operational restrictions in the retail sector, examining each category of restrictions identified in previous tasks. We review studies on EU Member States wherever possible.

A1.1 Frameworks for analysing the burden of regulation

Regulation imposes a complex and varied range of impacts on businesses, consumers and markets. An initial challenge of this literature review is to capture the wide differences in terminology and taxonomy which can be found throughout the literature. Regulatory impacts can be classified in different ways according to particular criteria, such as incidence, type of burden, and time frame of effects, to name just a few. Some classifications consider only costs of regulation and only those that affect the regulated businesses, while others consider wider impacts and allow for both costs and benefits to be considered.

While this project will focus primarily on burdens on businesses, it is of interest to consider the approaches that others have taken to a broader assessment of regulatory impacts and investigate the extent to which these techniques might be applicable to assessing the regulatory impacts of operational restrictions in the retail sector. This part of the literature review will therefore consider broader classifications of regulatory impacts while focusing more closely on those that provide a clear path to implementation in the context of retail restrictions. The OECD’s 2014 regulatory compliance cost assessment guidance handbook proposes a detailed classification of costs, as illustrated in the figure below. Here “regulatory costs” encompass all of the costs attributable to the adoption of a regulatory requirement, whether direct or indirect in nature and whether borne by business, consumers, or government.

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Figure 55 Typology of regulatory costs

Source: OECD (2014), OECD Regulatory Compliance Cost Assessment Guidance, OECD Publishing. http://dx.doi.org/10.1787/9789264209657-en

Under this framework, compliance costs are defined as those costs incurred by regulated entities in undertaking actions necessary to comply with the regulatory requirements. In this taxonomy, they include also the costs to government of regulatory administration and enforcement.

Compliance costs can be further divided into administrative burdens, substantive compliance costs and administration and enforcement costs.

Administrative burdens are the costs of complying with information obligations stemming from government regulation, while substantive compliance costs are the incremental costs of complying with a regulation, other than administrative costs. They include: implementation costs, direct labour costs, overheads, equipment costs, materials costs and the costs of external services.

Administration and enforcement costs are those incurred by the government in administering and enforcing the regulatory requirements. Here, they can be considered to fall into the category of compliance costs since they are directly related to the achievement of the underlying regulatory objective and are an unavoidable part of the cost of regulation. They include the costs of publicising the existence of new regulations, developing and implementing new licensing or registration systems, assessing and approving applications, inspecting, auditing, processing renewals, and implementing sanctions.

Outside the definition of compliance costs, the following are considered: financial costs, indirect costs, opportunity costs and macroeconomic costs.

The financial cost of regulation is the cost of capital deployed in meeting regulatory compliance obligations. For example, if new equipment has to be purchased, the purchase price is considered a compliance cost, while the cost of financing the purchase – whether from debt or equity – would be a financial cost.

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Indirect costs are incidental to the main purpose of regulation and often affect third parties. They are likely to arise as a result of behavioural changes prompted by the first round impacts of regulation.

Opportunity costs are the costs incurred due to the need to divert expenditure to regulatory compliance and away from potentially more productive uses. For example, a company may be unable to undertake a planned expansion of productive capacity because it is required to retrofit emissions control equipment to its existing facilities in order to comply with new regulatory standards. The opportunity cost is the difference between the return to the business (if any) from its regulatory expenditure and the best available alternative of those resources (i.e. that with the highest expected return). Thus, opportunity costs are determined by the business’s return on capital, whereas financial costs are determined by its cost of capital.

Macroeconomic costs refer to impacts on key macroeconomic variables such as GDP and employment caused by regulatory requirements. Few specific regulatory measures will have discernible macroeconomic costs. However, they may constitute a highly significant cost item in some cases.

An alternative framework for classification of regulatory impacts was included in OECD’s 2008 Introductory Handbook for Undertaking Regulatory Impact Analysis. It categorises costs with respect to the incidence of the regulation in question, as summarised below.

Table 37 Regulatory cost categories in terms of incidence

Impacts Examples of costs Administrative and financial costs: what the regulation requires and how to comply (may include purchase of external advice); licence fees or other charges imposed by the regulation; reporting/record-keeping requirements imposed by the regulation; cost of e.g. internal inspections, audit fees, to ensure compliance is being achieved Direct impact on businesses Operational costs: higher input costs due to regulatory impacts on the costs of materials; higher production costs due to changes to production, transport or marketing processes required by the regulation

Costs of lost sales due to restricted access to markets

Competition distortions: are all businesses affected in the same way? Impact on businesses’ Competitiveness impacts market position Effects on incentives to invest/ to expand/ enter/ exit market

Increased prices

Impact on the Reduced range of products available market Delays in the introduction of new products (e.g. due to the need for producers to meet regulated product testing requirements)

Other Costs of reduced competition – e.g. by favouring existing producers and making entry to a market more difficult (leads to both efficiency losses and

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transfers from producers to consumers due to higher prices)

Distributional costs – e.g. if some of the above costs are disproportionately borne by the poor, or some other vulnerable group

Restrictions on innovation & the ability to develop and market new products and services

Source: OECD, 2008, Introductory Handbook for Undertaking Regulatory Impact Analysis (RIA) https://www.oecd.org/gov/regulatory-policy/44789472.pdf

The UK’s Department for Business Innovation and Skills (BIS)406 distinguishes between “administrative burdens” and “policy costs”. Administrative burdens include costs associated with administrative requirements, such as record keeping and reporting, while policy costs include all the other costs related to complying with regulation. BIS also distinguishes impacts in terms of their form: transition one-off costs related to the implementation of the measure (e.g. equipment, staff training), recurring costs for businesses in meeting the regulatory requirements (e.g. additional staff time, inspections), and economic transfers (e.g. charges or fees).

Some authors argue for a broader conceptualisation of the impacts of regulation. For example, Renda et al. (2013) adopt a more general terminology, considering both costs and benefits. They distinguish between direct and indirect impacts and provide a detailed subdivision that facilitates mapping the impacts (Figure 1). Regulatory impacts can be divided into costs and benefits and each of these into direct and indirect impacts. Direct costs of regulation constitute the subcategory in which the present study is most interested. These direct compliance costs – such as charges, costs of installing new equipment and administrative burdens – and so-called ‘hassle’ costs which reflect the way in which regulation and its enforcement is perceived by businesses. We describe the categories relating to cost of regulation in greater detail below:

406 Department for Business Innovation and Skills, 2013, Better Regulation Framework Manual Practical Guidance for UK Government Officials, BIS/13/1038; available from http://regulatoryreform.com/wp- content/uploads/2015/02/UK-better-regulation-framework-manual-guidance-for-officials-July-2013.pdf. The Department is now called the Department for Business, Energy and Industrial Strategy.

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Figure 56 A map of regulatory costs and benefits

Source: Renda et al (2013)

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Regulatory costs – Direct costs to businesses

Direct compliance costs

Direct charges are various fees and levies that the targeted business has to pay. They are usually easy to assess, since they are quantifiable by nature. What is sometimes more difficult is to estimate the proportion of targets actually paying the fee and who ultimately suffers the burden. The latter is a more complex question, as it involves determining how much of the regulatory cost is passed on to consumers or suppliers.

Substantive compliance costs are other less explicit costs, resulting from the businesses adjusting and adapting to a regulation. These are usually divided into one- off and recurring costs. One-off costs are, for example, the installation costs of new equipment or the training costs of employees required to conform to the new regulation. Recurring costs are, for example, cost for regular inspection of the equipment or for maintaining it according to the new standards.

Administrative burdens are costs resulting from administrative activities performed to comply with the information provision part of the regulation. For example, providing details about employees for tax monitoring purposes. Only additional administrative burdens attributable to the regulations under study should be taken into account. For example, the cost of providing food content labels on products should not be fully considered a compliance cost if companies would in any event use some form of food labelling in order to attract more customers.

Hassle costs

Hassle or irritation costs are more subjective and difficult to quantify. These include costs related to administrative delays, the opportunity costs of waiting time or time lost in dealing with overlapping or inconsistent legislation.

Regulatory costs – Indirect costs

This category refers to costs incurred in related markets or experienced by consumers or other stakeholders who are not the direct target of the regulation. Regulated businesses may, as a result of the regulation, change the price and/or availability and/or quality of their goods or services. Such changes ripple through the rest of the economy, causing changes that affect consumers in this and in other sectors.

Subcategories within these indirect costs include so-called “indirect compliance costs” (i.e. costs related to the fact that other stakeholders have to comply with legislation) and costs related to substitution effects, transaction costs and negative impacts on market functioning such as reduced competition, market access, innovation, employment or investment.

Regulatory costs – Enforcement costs

Finally, regulation can also entail significant enforcement costs, in terms of monitoring, enforcement and adjudication of business compliance with particular rules. As these are outside the scope of the present study, this literature review does not consider them further.

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For completeness, we also briefly refer to the definition of regulatory benefits, following Renda et al. (2013), since benefits are usually the very purpose of regulation. For most regulation, costs are normally easier to identify and quantify and their impact is more quickly felt. Benefits are often more difficult to measure and have longer term effects.

Benefits can be divided into direct and indirect benefits, either affecting only agents in the targeted market or affecting agents in other non-targeted markets. Direct benefits include citizen wellbeing or satisfaction and improved market efficiency. Citizen wellbeing is a benefit stemming from increased social welfare or individual utility. This includes a reduction in mortality and morbidity (e.g. stricter work safety regulation) and various environmental benefits, from broad impacts like reduced pollution to specific impacts such as noise reduction. Interaction of market forces sometimes does not lead to an efficient outcome. Such occurrences are called “market failures”. Failures can arise due to externalities, information asymmetries or weak competition. If regulation can remove such obstacles, then agents in the market benefit from improved market efficiency. Benefits can usually be framed as cost savings due to removal of the market failure. For example, controlling the price of medicines reduces health costs for consumers, or digitisation of administrative procedures can reduce administrative burdens. Indirect benefits include benefits from third party compliance with regulation and wider macroeconomic benefits.

A1.2 Methods for quantifying regulation costs faced by businesses

In this section we provide an overview of methods used for assessing and quantifying the cost of regulation faced by businesses. We focus first on so-called direct costs. The more widely referenced models include the Standard Cost Model, the Dutch Compliance Cost tool, and the German regulatory cost model for citizens. The OECD’s own method of assessing the regulatory burden is another alternative.

The Standard Cost Model for quantification of administrative burden

The methodology followed by the Standard Cost Model (SCM) produces standardised figures for the resources used by businesses in order to comply with specific laws and executive orders. In practice, the SCM tries to identify those parts of regulation that require businesses to make information available to authorities or third parties. These parts are called ‘information obligations’ and they are sometimes subdivided into smaller individual ‘data requirements’.

To fulfil the required information obligations, affected businesses normally have to carry out additional administrative activities. The costs of these additional activities may refer to time spent by employees performing the administrative activities, or from the outsourcing of those activities (e.g., fees for external experts, outsourcing costs, cost of acquisitions). Therefore, the administrative costs of regulation are defined as the costs of carrying out the various activities required.

In order to estimate the administrative burden of regulation, the SCM tool splits individual pieces of legislation into information obligations (IOs), and further breaks down information obligations into data requirements. Each data requirement is then expressed in terms of administrative activities: the cost of each administrative activity is then estimated with the following basic formula:407

Cost per administrative activity = Price x Time x Quantity (population x frequency)

407 http://ec.europa.eu/smart-regulation/refit/admin_burden/docs/enterprise/files/pilot-study_en.pdf.

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Where the price is a tariff for additional activities, divided into internal prices – e.g. hourly wage as a measure of the unit costs of additional activities demanded by information obligations – and external prices – e.g. unit costs (hourly rates) of outsourcing the activity; whereas only activities demanded by the information obligation are relevant. Time in the formula above means the number of time units (e.g. hours) needed to perform the required activity. Finally, quantity represents how often the activity has to be carried out per year (frequency) by the number of businesses affected (population).

Additional costs (e.g. necessary acquisitions) also have to be considered as elements of cost relevant to the administrative activity at hand.

Table 38 Examples of Information Obligations

1. Returns and reports: This relates to returning and reporting information, e.g. tax deducted from income at source. 2. Applications for permission for or exemption from…: This relates to all types of application for permission for or exemption from various activities, e.g. application for a licence to sell spirits. 3. Applications for authorisation: This relates to applications for authorisation to carry out certain activities, e.g. authorisation as a sewer contractor. 4. Notification of activities: This relates to businesses having to notify the authorities of specific activities, e.g. notification of the transportation of dangerous cargo. 5. Entry in a register: This relates to businesses having to be entered in a register or on a list, e.g. entry in the business register. 6. Carrying out inspections of…: This relates to the business itself carrying out inspections of machinery and equipment that can represent a risk to health or the environment, or monitoring the conditions for employees. Inspections are normally carried out by certified organisations, e.g. drawing up a workplace assessment. 7. Applications for subsidies or grants for…: This means the business applying for a subsidy or the like, e.g. a subsidy for job training. 8. Keeping commercial emergency plans and programmes updated, etc…: This relates to the business keeping those documents required by the authorities up to date. It would include manuals and emergency plans, for example. 9. Cooperating with audits/inspections of…: This relates to informing and assisting inspectors who carry out inspections of and auditing work for a business, or who visit a business in connection with enforcement of a regulation. 10. Statutory labelling for the sake of third parties: This means, among other things, labelling products or installations with consumer information, e.g. energy labelling of domestic appliances. 11. Providing statutory information for third parties: This relates to providing third parties with information (as distinct from labelling), e.g. a financial prospectus to accompany investment products. 12. Framing complaints and appeals: This relates to submitting complaints about and (possibly later) appealing against a decision made by the authorities. This information obligation should only be analysed if it is characteristic of a normally efficient business to complain about the area in question. Source: SCM Network, International Standard Cost Model Manual, p. 24.

Table 39 Examples of Administrative activities

1. Familiarisation with the information obligation. The resource consumption of businesses in connection with familiarising themselves with the rules for a given information obligation. 2. Information retrieval. Retrieving the relevant figures and information needed to comply with a given information obligation.

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3. Assessment. Assessing which figures and information are necessary for the public authorities to accept the report. 4. Calculation. Performing the relevant calculations needed for the public authorities to accept the report. 5. Presentation of figures. Presenting the calculated figures in tables or the like. 6. Checking. Checking the calculated figures, e.g. by reconciliation with other data. 7. Correction. If the business’s own checks reveal errors in the calculations, corrections are made afterwards. 8. Description. Preparation of description, e.g. the directors’ report in the Danish Financial Statements Act. 9. Settlement/payment. Payment of tax, charges or the like. 10. Internal meetings. Meetings held internally between the various personnel groups involved in complying with the information obligation. 11. External meetings. Meetings held in cases where compliance with the information obligation requires meetings with an auditor, lawyer or the like. 12. Inspection by public authorities. Businesses must assist external inspectors when they carry out their inspection at the business. 13. Corrections following inspection by public authorities. If the external inspection identifies faults/defects, corrections are made afterwards. 14. Training, updating on statutory requirements. Relevant employees must be kept up to date with rules that change frequently (at least once a year). 15. Copying, distribution, filing, etc. In some cases, the report is copied, distributed and/or filed in order to comply with the information obligation. It may also be necessary to store the information obligation with a view to subsequent production in connection with an inspection. 16. Reporting/submitting information. In cases where compliance with an information obligation requires the submission of information on the business, the information must be sent to the relevant authority. Source: SCM Network, International Standard Cost Model Manual, pp. 25-26.

The SCM is thus a methodology for measuring the administrative cost of regulation for businesses but does not examine other dimensions of cost. In essence, it is a consistent way of breaking down the administrative activities required to comply with a regulation into a range of manageable, measurable components. It allows measurements of administrative burdens to be comparable across sectors or countries and over time. A schematic representation of the quantification method proposed by the Standard Cost Model is summarised below.

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Figure 57 Quantification steps in the Standard Cost Model

An illustrative example of administrative cost quantification for a regulation which involves an information requirement is provided below.

Table 40 Elements of administrative costs

Note: An example of quantifying personnel costs induced by an information obligation request which is due quarterly, broken down by individual activities; in the example, 26,000 firms are affected by this particular requirement. (6) sector specific or average depending on the qualification Source: Federal Statistics Office (Germany), 2012, “Guidelines on the identification and presentation of compliance costs in legislative proposals by the Federal Government” http://www.bundesregierung.de/Content/DE/_Anlagen/Buerokratieabbau/2013- 01-02-erfuellungsaufwand.pdf?__blob=publicationFile

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The European Commission’s recommended approach for ex ante and ex-post assessment of the administrative costs imposed by EU legislation is also based on the Standard Cost Model.408

Below we review the approaches adopted in a number of other countries.

The UK’s Department for Business Innovation and Skills (BIS)409 provides some suggestions on methodologies for quantification of impacts.

Table 41 Examples of techniques to monetise administrative burden and policy costs

Cost Technique Full Time Equivalent costs (FTE) should be used to estimate the costs of employees’ time to the employer and should include Labour costs employers’ pension contribution costs, national insurance contributions and allowances as well as basic salaries.410 Costs of new equipment or Formal/informal consultation with those likely to be affected new production processes might provide the best data. Collecting information and Use labour costs, plus the cost of new equipment required to do providing proof of compliance this. Estimate the fees plus administrative burdens. Enforcement Costs of getting licences authorities should be able to help with providing estimates. Costs of extra-legal, accountancy or other Consultation or colleagues’ experience might be informative. consultancy advice Enforcement activities may generate costs to both regulators and businesses. Such activities could include: inspections, fines Enforcement costs and information obligations. These impacts should be explored with the proposed regulator. Source: Department for Business Innovation and Skills, 2013, Better Regulation Framework Manual Practical Guidance for UK Government Officials, BIS/13/1038; available from http://regulatoryreform.com/wp-content/uploads/2015/02/UK-better-regulation-framework-manual- guidance-for-officials-July-2013.pdf

The Dutch Compliance Cost tool

This approach builds on the SCM tool but considers substantive compliance costs in addition to the purely administrative costs of regulation.

Substantive compliance costs are caused by substantive duties, i.e. all those statutory duties of business, regulations, standards, conduct regulations and other requirements

408 A description can be found at http://ec.europa.eu/smart-regulation/guidelines/tool_53_en.htm.

409 Department for Business Innovation and Skills, 2013, Better Regulation Framework Manual Practical Guidance for UK Government Officials, BIS/13/1038; available from http://regulatoryreform.com/wp- content/uploads/2015/02/UK-better-regulation-framework-manual-guidance-for-officials-July-2013.pdf

410 Statistical sources include the Annual Survey of Hours and Earnings, from the UK’s ONS, and for other countries’ labour costs from either national statistics offices or from Eurostat.

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. Capital costs (such as depreciation and repayment); . Personnel costs; . Energy costs; . Costs for raw materials and supplies; . Costs for outsourcing (e. g. for outsourced services); and . Other costs (such as insurance costs, building costs and costs for rehabilitation). Direct reimbursements, grants or other forms of subsidy on the part of the State are deducted from the calculated substantive costs.

Substantive compliance costs are further broken down into:

. Transition costs, also referred to as one-time costs, are costs incurred in modifying the production process, the means of production and/or modifying the products to statutory standards. . Structural costs, i.e. costs incurred in the continuous fulfilment of the statutory duty. Overhead costs for office supplies, furniture, PCs, office space, for example, are not calculated with a general mark-up on the individual costs.

The procedure followed in the Netherlands to identify substantive compliance costs can be divided into ten steps:

1. Identifying the enterprises which are affected by the relevant regulation (industry, size of the business, other relevant characteristics). 2. Identifying the type of statutory duty (focus is on substantive duties) and, if applicable, defining typical categories of enterprise. 3. Identifying the activities undertaken or investments made in the fulfilment of the substantive duty and the activities undertaken and investments made which could be saved if the statutory duty fell away (if applicable, subdivided according to typical categories of enterprises). 4. Interviewing of experts in order to identify, where applicable, the various activities undertaken or investments made in the fulfilment of the duty or various reactions to the falling away of the substantive duty (if applicable, subdivided according to typical categories of enterprise). 5. Defining the type of required cost and quantity parameters and determining the defined parameters with stakeholders (e.g. responsible administrative departments, relevant associations). 6. Selecting five norm addressees per typical category of enterprise or supplier (for investment measures). 7. Determining the cost and frequency parameters as well as any optimisation proposals with the aid of field work (determining the parameters for activities or investments which would be saved if the substantive duty would fall away). 8. Checking the plausibility of the results, where applicable. Continuation of field work and standardisation of the determined parameters (finding the median). 9. Verifying and, where necessary, modifying the preliminary results of the cost determination by specialists. 10. Documenting the results of the cost determination per substantive duty in report form (content of report: activities and relevant costs per category of enterprise, proportional business-as-usual costs or additional costs, any optimisation proposals).

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The German regulatory cost model for citizens

Compared to the Standard Cost Model described above, this particular German methodology introduces the possibility that regulated businesses can be affected differently and therefore the analysis of impacts should first group targeted businesses according to relevant differences and similarities. In addition, it also allows for combining various related obligations into a process, when appropriate, so that the full cost of the process can be measured.

OECD quantification method

The OECD proposes a quantification method in which estimation of cost is based on time taken to complete regulation-induced tasks.411 The components of this method are:

Cost category – as detailed as possible. For example, checking labels, reporting to government or enforcement agency, rental of equipment, etc. Time taken – an estimate of the time taken, in number of hours, should be made for each task. Hourly cost – taking into account hourly wage equivalent for the level of skill required to complete the task in question. Frequency (per year) – some tasks are recurrent while others not; this would be taken into account to calculate the yearly cost for one firm. Firms affected – some or all firms within a certain category will be affected by the regulation in question. Total cost – the final step estimates the total yearly cost for each category of regulatory cost. Ideally, the method outlined above will allow the research to compare the levels of cost imposed by different regulatory elements and the extent to which comparable firms in different MSs are diversely impacted by regulation.

Additionality

In interpreting the results of the application of the SCM and its variations, it is important to recognise that the SCM provides an estimate of overall administrative burdens from which it may be difficult to extricate the costs of some activities that a business would carry out regardless of regulatory requirements (business-as-usual costs). Yet it is important, as far as possible, to measure only those costs which are “additional” as a result of a given regulation.

In economics this concept is linked to the idea of causality. Ideally the assessment methodology should be designed with the aim of identifying costs (as well as other outcomes) which can be attributed, in a causal sense, to the regulation under study.

Proxy measures

In some cases, proxy measures such as “number of pages” of regulatory texts and “number of requirements” (e.g. a count of the number of “must” and “shall” words that appear in respective regulatory texts) are used instead of more sophisticated approaches to measure the burden of regulation.

411 OECD, 2008, “Introductory Handbook for Undertaking Regulatory Impact Analysis (RIA)”, Version 1.0 October

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The proxy measures, page count and number of requirements, are objective, easily understood and relatively low-cost to apply to any existing or proposed regulatory text. However, both methodologies have severe limitations and thus should be seriously considered only if actual cost measures are disproportionately costly to obtain.

Page count is influenced by irrelevant (non-regulatory) factors such as format and layout, and a simple page count gives no indication of the nature of the regulation.

The number of requirements in legislation, regulations, and codes and practices is considered a better proxy measure. Their use may increase policymakers’ awareness of the burden of regulation, by identifying requirements and establishing reduction targets. Nevertheless, this approach must be applied with awareness of its limitations. The major (and obvious) limitation is that a trivial requirement imposing a minimal cost on a small group is counted with the same weight as an onerous requirement imposing a major cost on a large number of people. For that reason, this measure should not be used by itself when comparing the burdens of different regulatory options.

Page and requirements counts do not provide a measure of the net economic effect of regulation in dollar terms. However, these proxy measures may be useful in providing a broad indication of the aggregate regulatory burden and can be developed in a reasonable time frame. They are also a low cost way to track progress in burden reduction over time, or in identifying differences in evolution of regulatory burden across jurisdictions.

A1.3 Public sector studies of the overall burden of regulation

United Kingdom412

Since 2007, yearly or every two years, the UK has surveyed businesses for their views on the extent of the burden imposed by regulation, both in aggregate and by main economic sector and specific regulatory area. The surveys covered both national and locally enforced regulation. Businesses were asked to answer most questions in relation to a specific area of regulation of which they had knowledge.

The responses are from businesses with at least one employee (i.e. sole traders are not included). The sample size in most years is around 2,000 completed responses.

The questions were not always consistent across the years and therefore we present only a subset of the results for which longer time series were available and some of the more recent surveys containing information specific to the retail sector.413

412 This section is based on data from a series of Business Perceptions surveys undertaken for the UK’s BIS and National Audit Office in the years 2007, 2008, 2009, 2010, 2012, 2014, and 2016. Reports for the surveys are available from several online sources, including: https://www.gov.uk/government/uploads/system/uploads/ attachment_data/file/314378/14-p145-business- survey-2014.pdf; https://www.nao.org.uk/wp-content/uploads/2012/06/Business_Perceptions_Survey_2012.pdf; http://mbsportal.bl.uk/taster/subjareas/smlbusentrep/beis/180314Business%20perception%20technical%20 report%2016.pdf 413 In these surveys, Retail and Distribution are included as a single category. Although we will use the term “retail” in this subsection, it should be understood that the responses include both retail and distribution.

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Figure 58 Evolution of businesses’ views on the burden of regulation - % who selected “Complying with regulation” as their business’s greatest challenge”

20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 2009 2010 2012 2014 2016

retail and distribution all sectors

Note: Question A7: “I am going to read out six challenges which may affect your business, which ONE would you say presents the greatest challenge”. Source: LE Europe analysis of UK government surveys of businesses for their views on the extent of the burden imposed by regulation

The year of 2014 stands out as a low point for businesses’ concern about regulation. At that point in time, this seemed to be following a trend initiated in 2009, but the trend was significantly reversed in the 2016 survey.

Figure 59 Views on the burden of regulation – Comparison between retail/distribution and all sectors

70% 2012 2014 2016 60%

50%

40%

30%

20%

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0% overall level of regulation in overall level of regulation in burdens resulting from burdens resulting from the UK is an obstacle to your the UK is an obstacle to your regulation will increase*** regulation will increase*** business's success** (retail business's success** (all (retail and distribution) (all sectors) and distribution) sectors)

Notes: **B3: “Do you agree or disagree that the overall level of regulation in the UK is an obstacle to your business’s success?” ***E1: “In the next 12 months do you think that the burdens resulting from regulation will decrease, stay the same or increase?” Source: LE Europe analysis of UK government surveys of businesses for their views on the extent of the burden imposed by regulation

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It is interesting to note from the results above, that for both the retail sector and overall, the perception that the level of regulation in the UK is an obstacle to business has decreased over the latest three survey dates. However, businesses are increasingly pessimistic about the prospect of future regulation.

Figure 60 Views on particular elements of compliance (retail/distribution) - % agreeing that selected activities are a burden when complying with regulation (all sectors) 80%

70%

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40%

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20%

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0% 2007 2008 2009 2010 2012 2014 2016

Preparing and reporting facts and figures for Government Completing paperwork, including filling out forms and keeping records Having to provide the same information more than once

Source: LE Europe analysis of UK government surveys of businesses for their views on the extent of the burden imposed by regulation

In relation to the perceptions of burdens associated with particular compliance tasks, the figure above reports an increase in 2016 after a mostly decreasing trend between 2007 and 2014.

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Figure 61 Agreement with statements related to clarity, fairness & ease - all sectors 80% 2007 2008 2009 2010 2012 2014 2016 70%

60%

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0% Generally it is clear what the Most regulation is fair and It is easy to comply with It is straightforward to purpose of regulation is proportionate regulations understand what you are required to do to comply with regulations

Source: LE Europe analysis of UK government surveys of businesses for their views on the extent of the burden imposed by regulation

Although a majority of respondents generally claim to understand the purpose of regulation, this has decreased over time to its lowest point in 2016 (the 2014 results seem to be outliers in this set of responses). Trends are less clear in the other parts of the responses. It is noticeable however that only about one third of respondents find regulation “easy to comply with”.

Figure 62 Which, if any, of the following areas of law do you find burdensome? Respondents from the retail and distribution sector, 2016 0% 10% 20% 30% 40% 50% 60% 70%

Employment Law

Health and Safety Law

Company Law

Consumer Protection

Environment Regulations

Planning Law

Food Safety

Licensing of alcohol, taxis, gambling,…

Pensions inc Auto Enrollment

Source: LE Europe analysis of UK Business Perceptions Survey, 2016

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This question did not ask about restrictions that are specific to the retail sector but instead generic areas of law that apply to all sectors. Of these, respondents in the retail sector showed greater concern with employment law and health and safety law.

Belgium

A similar series of studies is undertaken in Belgium, the latest of which is for 2014.414 These studies assess the costs incurred by businesses as a result of “administrative formalities” and the views of businesses on the quality of both regulation and the entities that administrate it are studied.

The study does not distinguish between the possible sources (regional, national or EU- level) of regulation. Regulation stemming from environmental, employment and taxation objectives are analysed.

Two categories of quantifiable costs are considered: the internal costs which correspond to hours spent by employees (or the self-employed) in completing the formal requirements of regulation (these are valued at the wage costs of corresponding labour) and the external costs which include external expenses incurred in complying with the administrative requirements.

According to the results of the 2014 study, the administrative costs for Belgian firms add up to EUR 5.52 million, or 1.38% of GDP. The greatest share of these costs fall on small firms. The corresponding costs for the self-employed are estimated at EUR 1.12 million and 0.28% of GDP. The majority of these fall on the service sector. The study does not provide disaggregated information at sector level.

The total of EUR 6.64 million in 2014 represents a 23% decrease from the level of EUR 8.57 million in 2000.

Relative to GDP, total administrative costs of regulation have significantly decreased, from 3.48% in 2000 to 1.66 % in 2014. In absolute terms, however, costs have been steadily rising.

Qualitative indicators are grouped under two headings: those related to the quality of regulation and those related to the quality of its administration. Questionnaires assess these, eliciting answers ranging over 4 levels, from “totally in agreement” to “totally in disagreement”, in addition to a “without opinion” option.

Questions on the regulations include:

. Information on the regulations is provided ahead of their adoption . Regulations (1) are easy to understand (2) have clear objectives (3) are adequately adapted to all situations (4) are coherent among themselves (5) are accompanied by adequate information

Questions on the administration of the regulations

. It is easy to know where/whom to address questions . It is easy to get in touch with responsible authorities . The administration gives precise answers . The replies are obtained within a reasonable time frame

414 Chantal Kegels and Dirk Verwerft « Les charges administratives en Belgique pour l’année 2014 », Bureau fédéral du Plan, Février 2016 ; this is the eighth such report, the first being for the year 2000.

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. The replies are the same regardless of who is consulted . The responses address the questions asked by business

The evolution of qualitative views can be considered positive, since fewer respondents in 2014 feel that the burden of regulation is increasing than in 2000.

Italy

The Italian government has made a wide range of estimates of administrative burdens on SMEs over the period 2008-12. This work has identified the most costly procedures, as well as tasks to be simplified. The measurements were carried out by a task force coordinated by the Office for Administrative Simplification of the Department of Public Functions, with the participation of business associations and the technical assistance of the Italian Statistics office (ISTAT). The Measurement of Administrative Burdens (MOA) involved 93 high impact procedures, covering nine regulatory areas. The estimated administrative costs for SMEs were EUR 30.98 billion in 2013. In terms of order of magnitude, while total value added by SMEs stood at EUR 459 billion in 2013. Thus, the burden of regulation can be expressed as 6.7% of Italian SME value added.415

Australia

Queensland Competition Authority, Office of Best Practice Regulation, 2013, Measuring and Reducing the Burden of Regulation

Table 42 A selection of EU studies which assess cumulative costs of regulation

Other Regulatory Burden Cost Estimates reference Country and Source year % of GDP Netherlands (SCMN n.d.) 2007 1.7 Denmark (OECD 2010c) 2008 1.9 UK (OECD 2010d) 2005 1.6 France (OECD 2010f) 2006-2008 3.1 Belgium (OECD 2010e) 2010 1.7 Canada (CFIB 2013) 2012 1.7 US (CFIB 2013) 2012 1.3 (Queensland Comp. Auth. Australia 2013) 2012 1.0 Note: Australia's figure is the average state-level estimate over three states: NSW, Victoria and Queensland Source: Queensland Competition Authority, 2013, “Measuring and Reducing the Burden of Regulation”, retrieved May 2017 from http://www.qca.org.au/getattachment/e2ea18a2-9751- 49a9-9d96-5a27906ee7af/Final-Report.aspx

415 Source for SME value-added figures: European Commission, 2014 SBA Fact Sheet, Italy, http://ec.europa.eu/DocsRoom/documents/16121/attachments/20/translations/en/renditions/native

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A1.4 Cost of regulation: implementation through business surveys

Fulfilling the objectives of the present study relies on assessing the costs of regulation for business through business surveys. This section looks more closely at experiences in the literature with this method for evaluating expenditure.

Surveys of businesses can provide quantifiable data, but also come with a number of problems. Firstly, respondents may have biases; for example, a firm may provide inflated estimates of costs, in the hope that politicians will consider removing the regulation. Secondly, they usually do not reveal the cost that the firm would have had anyway, with no regulation or, in other words, the additionality of the regulation. For example, an automobile company may choose to install stronger bumpers in response to consumer demand without a regulation forcing it to do so. Including the total cost of such bumpers would lead to overestimated regulatory impact. Thirdly, expenditure surveys cannot capture other effects, such as price effects that might lead to changes in market performance and profits of the firm.

An example of research that collected data about the compliance costs directly from businesses is a study by the European Network for SME Research (1995). The study was conducted in the Netherlands, where surveyed businesses reported how much time employees spent dealing with administrative tasks of different types, together with average labour costs and costs of external services used for dealing with the administrative tasks. The estimates were also aggregated to provide compliance cost estimates for the whole economy. The study found that 63% of the total costs of administrative procedures (ECU 16.5 billion) were routine business administration costs, while the remaining 37% were related to compliance with the legislation. Out of the compliance related costs, 41% resulted from activities that companies would carry out regardless of the legislation, while the remaining 59% comprise the true administrative burden (ECU 3.6 billion). Hence, about 20% of the administrative work was attributable – in terms of additionality – to complying with government regulation. The study used the MISTRAL framework416 in assessing the costs, very similar to the SCM framework used by the EC today (European Commission, n.d.).

Chittenden et al. (2000) report several examples of cost compliance assessments of regulation in the UK, where the government began calculating the administrative burden in 1985. They particularly focus on small businesses and whether they are disproportionally more affected by regulation. The Small Business Research Trust (SBRT) started a quarterly survey of small businesses in 1984, tracking the opinions of a number of small businesses concerning a range of regulatory burdens, among other things (Baldock, Blundel, & Dadd, 2014). For example, the latest such survey, which dates from 2008417, reports that single business owners working on their own without employees spend an average of 9.7 hours per month on government paperwork. Firms with between 15 and 24 employees spend just over five times as long (50.8 hours per month), but they are on average 18 times the size, meaning that the average time spent per employee falls sharply to 2.8 hours per person per month.

Most studies in the UK, however, focus on specific types of regulation – taxation, employment or environmental regulation. Sandford, Godwin, & Hardwick (1989) provide a relatively old, but comprehensive overview of the compliance and administrative costs of UK taxes. The study surveyed businesses and found that value

416 MISTRAL is the Dutch acronym for Measuring Instrument Administrative Burdens. This instrument focuses on administrative costs and is very similar to the Standard Cost Model already discussed. See, for example, EIM 2002 “A Model to Measure the Administrative burden of Businesses” https://core.ac.uk/download/pdf/7074640.pdf 417 Quarterly Survey of Small Business in Britain. 2008, Q1, http://www.open.ac.uk/business- school/sites/www.open.ac.uk.business-school/files/file/publications/download/2008_Q1.pdf

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A1.5 Examples of studies using the above methods

In the last few years there have been several studies to estimate the overall costs of EU legislation on particular sectors of the economy.

Table 43 Some EU studies which assess cumulative costs of regulation

. Kostengestuurde Aanpak Regeldruk, (SIRA consulting for the Netherlands) . Studies on the aluminium and steel industries (CEPS, 2013a and CEPS, 2013b, for the European Commission) 1. CEPS (2013a) Assessment of Cumulative Cost Impact for the Steel Industry. Final Report. Retrieved from: http://ec.europa.eu/enterprise/sectors/metals-minerals/files/steel-cum- cost-imp_en.pdf 2. CEPS (2013b) Assessment of Cumulative Cost Impact for the Steel and the Aluminium Industry. Final Report. Retrieved from: http://www.ceps.eu/system/files/final-report-aluminium_en.pdf

. Joint Research Centre (2014), Lukach, R., Marschinski, R., Bakhtieva, D., Mraz, M., Temurshoev, U., Eder, P., Delgado Sancho, L. (2015) EU Petroleum Refining Fitness Check: Impact of EU Legislation on Sectoral Economic Performance. European Commission; Joint Research Centre. doi: 10.2791/822372 . Study on the Chemical Industry (Technopolis, 2016, for the European Commission) 1. Technopolis Group (2016) Cumulative Cost Assessment for the EU Chemical Industry. Final Report . Study on the forest-based industries (Technopolis, 2016, for the European Commission) . Technopolis Group (2016) An assessment of the cumulative cost impact of specified EU legislation and policies on the EU forest-based industries. This sub-section reviews three such studies.

CEPS, 2013, “Assessment of Cumulative Cost Impact for the Aluminium Industry”

This Study contains an assessment of the cumulative costs of EU legislation on the European aluminium industry. The following types of regulatory costs are considered:

. Administrative costs: costs incurred by firms due to the legal obligation to provide information to public authorities and third parties, as measured with the EU Standard Cost Model; . Compliance costs: costs incurred by a firm as a direct consequence of the need to comply with a legal act; . Indirect costs: costs of regulation which have an impact on aluminium producers, not as direct addressees, but as counterparts of direct addressees.

Administrative costs are those costs incurred by firms to provide information to public authorities and third parties. They are generated by Information Obligations (IOs) included in the legislative acts. At the EU level, administrative costs are normally measured through the Standard Cost Model.

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The SCM methodology requires the identification of the annual cost of each IO. To do so, the time devoted to comply with the IO by a “normally efficient firm” is estimated; this value is then multiplied by the salary rate of the staff carrying out the IO; and by the number of yearly occurrences (frequency) of the IO. Once the cost per IO is identified, it is possible to calculate aggregate costs for the whole industry, by multiplying the cost per IO by the number of firms affected (the population).

Compliance costs include not only costs due to IOs, but also to Substantive Obligations (SOs) and Monetary Obligations (MOs). SOs are provisions which require the firm to take action to adapt its productive process to comply with the legal act. The most common example would be the installation of anti-pollution filters to comply with emission limits. MOs are provisions which require the firm to bear monetary costs, such as costs of allowances, fees, taxes and levies.

To quantify the yearly cost per occurrence for each SO and MO the following categories of costs are identified: i) Investment Costs; ii) Operating Costs; and iii) Financial Costs. The annual cost is then obtained by multiplying the cost per occurrence by its annual frequency and the aggregate costs for the whole industry by multiplying it by the number of firms affected (the population).

Indirect costs were defined as costs of regulation which have an impact on aluminium producers, not as direct addressees, but as counterparts of direct addressees. An example can be energy policies, whose addressees are electricity producers, important suppliers of the aluminium industry. This category of costs, defined in this way, is outside the scope of the present study.

The analysis was based on three different samples of aluminium plants and downstream operations. Each sample is used to make an estimate for the aggregate of the subpopulation it represents. The authors found it appropriate to subdivide the main sample of aluminium plants into those that have long term contracts for electricity and those that procure electricity from the market.

Estimated cumulative costs of EU regulations are presented in terms of cost per unit of output (EUR/tonne of aluminium), in order to provide an indication of the relative importance of the regulatory impact on the aluminium industry. This can be compared to key performance indicators, such as price-cost margin and earnings before interest, taxes, depreciation, and amortisation (EBITDA).

The authors include the costs of regulation upstream of the supply chain which affect aluminium plants through the higher costs of their inputs, particularly electricity. This aspect will not be pursued in the retail regulations case since the present study focuses on regulations that are directly imposed on the retail sector.

The assessment of cumulative costs can be performed by adopting a top-down or a bottom-up approach. In the former case, regulatory costs would be assessed for the whole sector by using aggregate data; in the latter, a set of “typical” facilities is chosen, for which the assessment is performed in depth. This study opts for a bottom- up approach. For the bottom-up approach it is crucial to define a representative sample of aluminium facilities. Costs of regulation for each typology of plant are then assessed in depth, and the results aggregated for the respective group.

Technopolis for the European Commission “Cumulative Cost Assessment for the EU Chemical Industry”, 2016

This study quantifies all costs (monetary obligations, capital expenditure, operating expenses and administrative burden) incurred by EU chemical companies with regard to the EU legislation most relevant to them.

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The methodology follows that of the study of cumulative cost assessment of aluminium and steel industries, as well as methods used by the European Commission and Member States such as the ‘Standard Cost Model’, or the ‘Cost-driven Approach to Regulatory burdens’ (CAR) developed for the Dutch Government.

Technopolis cumulative cost of most burdensome regulations in the forest- based industries, 2016418

The aim of this study is to identify the cumulative costs of the most financially burdensome EU legislation and policies that companies in the forest-based industries (F-BI) which are active in the EU28 have to comply with.

Centre for Strategy & Evaluation Services for the EC, 2015, “Cost of the Cumulative Effects of Compliance with EU Law for SMEs”

This study provides an outline of a set of methodological steps that can be applied to the assessment of the cumulative effects of compliance with EU law for a particular sector or group of firms.

Table 44 Methodological steps in an assessment of cumulative costs of regulation

1. Clearly Identify the subject matter and specific study scope, which could be a single piece of legislation, legislation present in a specific sector or subsector(s), a type of legislation (e.g. environmental), an activity (e.g. manufacturing), products or services. 2. Identify, list and map the legislation relevant to the specific study to identify the obligations. 3. Carry out a detailed sector or (sub-sector) analysis (as appropriate to the scope and objectives of the study). 4. Identify sources of additional costs arising from national/regional legislation. 5. Identify relevant enforcement regimes, modes of enforcement and related costs. 6. Select a sample of key ‘events,’ areas, activities or product groups, depending on the nature and scope of the study, where there are significant amounts of legislation to focus on. 7. Analyse the potential effects of legislation in relation to each of the chosen focus areas. 8. Distinguish between direct financial costs, compliance costs (including substantive, administrative and burden costs), and long-term structural costs. 9. Distinguish between initial-impact costs – adjustments when the legislation is introduced – and ongoing, routine costs. 10. Estimate cumulative costs and identify where these costs have additive impacts, diminishing marginal impact (DMI), and increasing marginal impact (IMI). 11. Identify compliance cost reduction potential. 12. If appropriate for the study, scale up the results as required. 13. Validate the results of the study through consultation with experts. Source: Centre for Strategy & Evaluation Services for the EC, 2015, “Cost of the Cumulative Effects of Compliance with EU Law for SMEs”

418 http://www.cepi.org/system/files/public/documents/pressreleases/competitivenessandtrade/2016/2016- 11-24%20%2011h30%20CCA%20FBI%20FINAL_Methodology.pdf

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A1.6 Competition impacts of regulation

In addition to direct impact on businesses, regulations can have a series of broader impacts on consumers and on the market. This section considers how competition impacts of regulation might be assessed. It is based on techniques that have been proposed in the context of ex ante assessments of policy proposals. However, the techniques are, in principle, applicable to ex-post assessment of competition impacts.

The OECD has developed a “Competition Checklist”, which is reproduced below. It is designed to function as a screening test for the impact of regulations on competition. It is based on three simple questions, which ask about the impact of the proposal on the number of firms in the market and their ability and incentives to compete. These are the major factors influencing the intensity of competition. Under each of the three questions is a list of commonly found regulatory restrictions that would have the particular anti-competitive impact.

Table 45 Checklist of the conduct of ex ante competition assessment of retail sector regulation and laws

A competition assessment should be conducted if the proposal has any of the following 3 effects: (1) Limits the number or range of suppliers This is likely to be the case if the proposal: - Grants exclusive rights for a supplier to provide goods or services - Establishes a licence, permit or authorisation process as a requirement of operation - Limits the ability of some types of suppliers to provide goods or services - Significantly raises cost of entry or exit by a supplier - Creates a geographical barrier to the ability of companies to supply goods or services, invest capital or supply labour (2) Limits the ability of suppliers to compete This is likely to be the case if the proposal: - Controls or substantially influences the prices for goods or services - Limits freedom of suppliers to advertise or market their goods or services - Sets standards for product quality that provide an advantage to some suppliers over others or that are above the level that many well-informed customers would choose - Significantly raises costs of production for some suppliers relative to others (especially by treating incumbents differently from new entrants) (3) Reduces the incentive of suppliers to compete vigorously This may be the case if the proposal: - Creates a self-regulatory or co-regulatory regime - Requires or encourages information on supplier outputs, prices, sales or costs to be published - Exempts the activity of a particular industry or group of suppliers from the operation of general competition law - Reduces mobility of customers between suppliers of goods or services by increasing the explicit or implicit costs of changing suppliers Source : OECD

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A1.7 Cost of regulation: methods for quantifying wider economic impacts

Most of the available retail-related literature, academic in particular, does not focus solely on the direct costs of regulation for businesses. Government institutions often need to assess broader costs, as well as benefits, to assess the impact of a policy. Academic studies mostly aim to capture wider impacts - measuring the effect on market efficiency, for example, or taking into account consumer reactions when estimating effects on the retail sector. To reach such goals, studies rely on different methods.

Burdens other than monetisable costs

Negative perceptions of the quality of regulation are important and can make their respective burden greater than would otherwise be required. Favourable perceptions would include aspects such as:

- the regulations are brought to your knowledge prior to their adoption, - they are easy to understand, - their objectives are clear, - they are sufficiently adapted to all situations, - they are brought to your attention in due time to comply, - they are coherent with each other, - they are accompanied by adequate and sufficient information.

Cost-benefit analysis

Even though we did not identify retail sector related studies, cost-benefit analysis is often found in the literature and regularly used by government institutions. In considering a policy, the proposing institution has to conduct what is usually called a regulatory impact assessment (RIA), a cost-benefit analysis that considers the balance of costs and benefits of a policy (Froud, Boden, Ogus, & Stubbs, 1998; Pearce, 1998). Importantly, it takes into account broader effects of regulation, looking into benefits for consumers, for example, not just the costs imposed on businesses. It is at the root of the evaluation and impact assessment system that the European Commission uses to prepare evidence for policy and political decision making (European Commission, 2017). Even though it is criticised because of the difficulties with identifying and quantifying impacts, it remains the best available technique for informing policy decisions (R. W. Hahn, 1998; Morrison, Winston, & Watson, 1999; Pearce, 1998).

An important lesson has been learned from experiences with this method, one that is present in most of the methods for assessing the cost of regulation. A challenge in estimating the impact is to specify what would happen in the absence of the regulation (Hahn & Hird, 1991). Constructing this “counterfactual” provides a crucial reference for estimating the difference in costs and benefits between the real and the hypothetical states of the world. Challenges are, however, abundant and analysts have to make a series of assumptions which may well yield a poor frame of reference for evaluating the impact of regulation.

Partial equilibrium models

Academic studies often aim to explicitly take into account how agents in the market will react to changes in costs and benefits which result in the final impact of regulation on some measure of interest. Partial equilibrium models are models often used for estimating such total costs of regulation. This group of models should be adopted when the impact of the proposed regulation is expected to be limited to a single sector, having mostly direct effects on participants in the market and small indirect effects.

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Partial equilibrium models are the starting point of any economics textbook, with the familiar price-quantity plots of supply and demand in the market. In such representation of the market, let us assume a perfect competition and that a new regulation increases firms’ production costs. Each unit is now more costly to produce and firms will respond by reducing the amount of goods produced. This appears as an upward shift of the supply curve, which results in higher prices and smaller quantities sold. The area below the demand curve and above the supply curve represents consumer and producer welfare and can be used to track the changes in welfare due to regulation. Moreover, the reduction in welfare is exactly the total amount of regulation cost. It is important to estimate accurately the slopes of the supply and demand curves. For example, not taking into account consumers’ price sensitivity can easily lead to overestimated compliance costs. Of course, in many cases, a regulated market is better described by monopolistic competition, oligopoly or monopoly, and the analysis can be made more realistic by adopting such assumptions.

Economy-wide models

In contrast to partial equilibrium models, economy-wide models assume spillovers. This group consists of macroeconomic models and general equilibrium models. While macroeconomic models do model whole economies and can produce forecasts of output changes across industries, they are usually not used to estimate regulatory impact. General equilibrium models, on the other hand, are better equipped to assess cases in which regulation has an effect in a number of markets, not just the targeted one. As such spillover effects grow, either in magnitude or number of markets affected, partial equilibrium estimates of costs and benefits will be less and less accurate. Examples of such situations would be regulation affecting electricity production, or environment protection regulations. Electricity serves as an input in many other sectors, while environment protection is likely to affect several industries.

General equilibrium models are able to simulate shifts in supply and demand resulting from regulation. They can also model links between markets and determine changes in prices and demand for various production factors. Finally, they can provide estimates of changes in overall demand, GDP and welfare. They typically require substantial amount of data and have to make many simplifying assumptions, such as, perfectly competitive markets. A good early example of general equilibrium analysis is a study by Hazilla & Kopp (1990), who evaluated the costs of clean air and water regulations in the US. The study finds large differences between the estimated cost and expenditure approaches used beforehand. They also point out that indirect effects can change over time, in their case, with indirect effects having outgrown the direct compliance costs. This is due to the fact that consumers substitute of leisure for direct consumption.

Researchers believe that general equilibrium models give a more realistic picture of the impact of regulation when indirect effects are substantial. Nevertheless, there are many difficulties in developing and applying these models. Hahn and Hird (1991), discuss many of these drawbacks, which mostly result from the fact that such models are very complex. They have many moving parts which makes them difficult to understand, and to evaluate the importance of assumptions and sensitivity to parameter values. It then becomes a difficult task to validate how realistic these models are as a representation of the situation.

Econometric models

In the empirical academic literature, econometric estimation is a dominant approach. In the context of regulatory impact assessment, an econometric model is generally developed, based on identifying to what extent changes in particular variables of interest can be attributed to the regulatory environment. Studied variables can include prices, investment, employment, innovation at either sectoral level or within the wider

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Econometric models estimate equations for the outcome variables of interest in terms of a range of explanatory factors, in addition to variables that measure regulation. The econometric approach seeks to identify the proportion of outcome change that can be attributed to the change in regulation. Careful consideration is usually needed to ensure that identifying assumptions are satisfied and causal interpretation can be obtained.

One example of an econometric approach to estimation of regulatory costs is provided by Crain and Crain (2010).419 The authors estimate the impact of regulation on GDP per capita using a measure of regulatory quality sourced from the OECD and data for 25 countries across seven years on GDP per capita and a series of control variables that are expected to be associated with GDP per capita fluctuations.

Cross-Country Regression Model. The cost of economic regulations is derived from regression analysis using a panel of OECD member countries, which includes the United States. The basic idea is to empirically estimate the impact of regulations on aggregate economic output, or GDP. The approach uses the Regulatory Quality Index as the main variable of interest, while controlling for other variables that affect national economic performance. The form of the regression model is specified in Equation 1.

(Eq. 1) GDP per Capita It = β(World Bank Index of Regulatory Quality) It + Φ (X) It + α i + ε It

The sample used to estimate Equation (1) consists of 25 OECD countries for which data on all of the relevant variables are available. The variable subscript i in Equation (1) denotes an observation in a particular country i (= 1, .., 25). The variable subscript t denotes an observation in a particular year, where t = 2002 through 2008.

The dependent variable, GDP per capita, is real GDP divided by population, denominated in constant U.S. dollars (source: World Bank, 2010). The main explanatory variable of interest in Equation (1) is the World Bank Regulatory Quality Index (source: World Bank, 2009). This Regulatory Quality Index is scaled to have values that range from -2.5 to 2.5. Note that increases correspond to improvements in regulatory quality - that is, reductions in the regulatory burden imposed on the operation of product and factor markets.

The model also includes several economic and demographic control variables, represented by the vector X in Equation (1). These control variables are drawn from the empirical literature that examines differences in economic levels across countries and over time. The set of controls included in X are: foreign trade as a share of GDP, country population, primary school enrolment as a share of the eligible population, and fixed broadband subscribers per 100 people (data source: World Bank, World Development Indicators, online database). The variables are entered into the regression model as natural logarithmic transformations.

The authors find a positive and significant coefficient in the World Bank Regulatory Quality Index, indicating that less stringent restrictions can be expected to enhance a country’s aggregate economic activity, as reflected by the level of its GDP per capita.

419 https://www.sba.gov/sites/default/files/The%20Impact%20of%20Regulatory%20Costs%20on%20Small %20Firms%20(Full).pdf.

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In this particular case, the estimated coefficient is 0.094. Since the Regulatory Quality Index value for the United States is equal to 1.579 in 2008, and the index is calibrated to range between -2.5 and 2.5, an extra 0.92 points would correspond to an increase in U.S. GDP per capita of 8.7 percent (= 0.094 x 0.92). The authors’ estimated cost of suboptimal economic regulation is thus USD 1.236 trillion (denominated in 2009 dollars).

Coffey, Bentley, Patrick A. McLaughlin, and Pietro Peretto, 2016, “The Cumulative Cost of Regulations”, MERCATUS Working Paper

The authors of this study contend that the impacts of regulation should not be assessed by looking at individual rules but instead at the overall effect of the build-up of regulations over time.

The study uses a panel of 22 US industries observed annually between 1997 and 2012. Regulation levels are measured, in each year and for each industry, using a text-based quantification approach. The model is an endogenous growth model, in which regulation is allowed to have cumulative effects on growth.

The authors estimate what the level of GDP growth would have been if regulation had remained at the levels observed in 1980. The results point to 0.8% lower annual growth as a result of regulation. This corresponds to an estimate that, under this counterfactual, the US economy would be 25% larger in 2012.

Additional examples of papers that follow an econometric approach are provided in the section on retail sector specific restrictions of this literature review.

A1.8 Literature on retail sector impacts of regulation

This subsection considers literature that deals with assessing the impacts of regulations in the specific context of the retail sector.

Despite the importance of the retail sector for the economy, there are few studies specifically examining the effects of retail operational restrictions. Most retail sector studies investigate market access regulations instead, e.g. studies about effects of zoning policies and special licences for opening large stores (Asensio, 2012; Bertrand & Kramarz, 2002; Iaria, 2014; Maican & Orth, 2015). Furthermore, operational restrictions studies are exclusively about wider economic impacts and to the best of our knowledge there are no studies estimating the compliance costs or administrative burden of operational restrictions specifically for the retail sector.

As such, this section summarises the relatively sparse literature investigating economic impacts of operational restrictions in the retail sector.

Restrictions on sales activities

Operational restrictions on sales activities include restrictions on opening hours and on distribution channel restrictions, where certain classes of products can be sold only in specific type of stores (e.g. government monopolies on selling alcohol), price control over certain products (e.g. drugs).

Restrictions on opening hours

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The largest body of research about restrictions on sales activities is on shop opening hours. Until the 1990s, most countries strictly regulated opening hours, mostly intending to create a common break day and prevent excessive work hours. As a side effect, opening hours restrictions also favoured small stores as they would have more difficulty expanding opening hours (Nooteboom, 1983). In the 1990s, many EU countries (e.g. Germany, Denmark, Greece, the Netherlands, the UK) started removing the opening hours constraints due to popular consumer demand for more flexible working hour arrangements (Pilat, 1997), and the trend continued afterwards (Koske et al., 2015).

Theoretically, the effects of opening hours deregulation are ambiguous. Deregulation can increase productivity which leads to lower employment levels, but if it results in price decreases it can increase the demand and hence employment (Blanchard & Giavazzi, 2003). Early literature on opening hours effects is mostly theoretical. Nooteboom (1983) developed a notion of threshold labour volume – the amount of labour needed, regardless of sales volume. In his model he assumes this amount increases with opening hours, and he found that critical firm size where the profits are positive increases as well, which leads to a decline in small shops. Thurik (1984) argued that deregulation can lead to variable labour decreases as productivity increases, due to smoothening of the peaks. Hence, negative threshold effects could be offset with this positive effect. Several modelling studies introduced travel costs and found they can affect the equilibrium (Clemenz, 1990, 1994). They show that deregulation decreases the search costs, which leads to sales increases in larger (farther) stores and decreases in smaller (closer) stores; prices should decrease for the same reason.

Of the more recent modelling based studies, it is worth mentioning a study by Shy & Stenbacka (2008). Their game theory model shows that firms do not have incentives to extend opening hours beyond the social optimum, arguing that there is no need for regulation of opening hours. Wenzel (2011) developed a similar model, but focused instead on how the effect of deregulating opening hours differs between small and large stores. The main result depends on how large the difference in efficiency is between the large and small retailer. If the difference is small, the small retailer may choose longer hours than the large retailer and reap larger gains. The opposite result emerges when the efficiency difference is large. Wenzel (2009) presents another model-based analysis, but now focusing on the effect on prices and employment. He starts by analysing the free competition case and his model shows that market failure arises, too many firms enter the market and opening hours are too short, contrary to the results reported by Shy & Stenbacka. Opening hours restrictions worsen the situation further. His model predicts that liberalisation of opening hours will lead to higher prices and employment in the long run, as well as longer opening hours. See study by Inderst & Irmen (2005) for another model-based study on price effects of opening hours deregulation.

In terms of empirical literature, Høj, Kato, & Pilat (1995) and Pilat (1997) report findings of several early empirical studies of the liberalisation of shop-opening hours in the EU. Swedish food retail liberalisation happened in 1972 and opening hours increased from 53 in 1970 to 63 in 1989 (Civil Department, n.d.). The economic effects were overall very positive – turnover rose by 5% and profits by 3.6%, employment rose by 1.5%, as did productivity, while prices decreased. There were structural changes, however, with large stores winning a large share of the market and small stores losing it. Early studies for France, Germany and the Netherlands predicted similar positive effects on output, employment and price levels for liberalisation efforts started in the mid-1990s.

Gradus (1996) examines the economic effects of extending shop opening hours in the Netherlands through a model-based analysis. His work is a good example of a partial

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Annex 1 | Review of the literature on measuring burden of restrictions equilibrium approach to studying economic effects of operational restrictions. He extends a partial equilibrium model developed by Bode, Koerts, & Thurik (1990) by implementing an opening hours variable and deriving a new optimal allocation of opening hours. The model is postulated at the firm level, but the effects can be scaled up to the whole market. Gradus borrows the coefficients estimated for Sweden and predicts the effects for Netherlands. Under some reasonable assumptions, he predicts that the effects of deregulation will be positive – sales will increase and prices decrease, while the employment effect may be somewhat ambiguous, but probably positive.

A study by Senftleben-König (2014) is a good example of an econometric approach to estimating economic impacts. This study investigates the effects of opening hours deregulation on retail employment in Germany, exploiting the regional variation in trading provisions amongst the German states to isolate the causal effect of deregulation. Based on this identification strategy, using the difference-in-difference estimation, the author shows that deregulation had a negative effect on retail employment, with considerable heterogeneity in terms of the type of employment as well as establishment size. Results are contrary to the findings of other such studies. For example, Bossler & Oberfichtner (2016) use the same identification strategy and almost the same data from the German market, but reach the opposite conclusion – employment rises by 4%. Paul (2015) used again almost the same data and identification strategy but a slightly different dependent variable. She finds that, on average, there is an increase in the employment probability (2.1%), but the effects are heterogeneous across different types of employees. Outside the EU, Skuterud (2005) finds evidence of modest employment gains for Canada, while Goos (2004) finds that deregulation increases employment by 4.4% to 6.4% for the US.

There are several studies examining price effects. Tanguay, Vallge, & Lanoie (1995) study the effect on prices as well, but using data from the liberalisation of opening hours in the retail market in Quebec, Canada. Their model predicts an increase in price levels, albeit only for large stores, and they find support for their prediction in the data. Reddy (2012) studied the case of Germany, based on the same shopping hours liberalisation in 2006 and 2007 as reported above. Again, using the variation in implementation across the states, the author reports significant fall in prices as a result of liberalisation, concluding that opening hours restrictions entail substantial economic losses. Although this is in contrast to the findings of Tanguay et al (1995), Reddy has a more credible identification strategy. A study of the Spanish market lends additional support to Reddy’s finding: Asensio (2012) examines effects of both zoning and opening hours regulation in Spain. He exploits the variation in deregulation implementation at a local level (García & Santos del Cerro, 2012; Hoffmaister, 2010), and finds beneficial effects, from lower prices to facilitated market entry.

A few studies investigated other economic outcomes. Jacobsen & Kooreman (2005) investigated consumer behaviour patterns by analysing time usage diaries before and after deregulation. They found that consumers change the timing of shopping and increase the total time spent shopping, but there is considerable heterogeneity in the effects across different groups of consumers. Bensnes & Strøm (2015) studied the effects on education choices in Norway following deregulation reform in 1985. They motivate their study by arguing that opportunity costs increase as employment possibilities increase. They find that the probability of graduating from high school decreases and future earnings suffer.

Some studies assess only qualitatively the impact of changes in opening hours. For example, Voithofer, P. et. al. (2003), evaluate the liberalisation of opening times in Vienna in 2003 through the “Wiener Öffnungszeitenverordnung 2003 (Nr. 35/2003)”. The study surveyed consumers, employees as well as shops themselves. It finds that:

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 Overall consumers are satisfied with the new regulation. About a quarter of consumers made use of the extended opening times, four months after the change in regulation. These tended to be younger consumers and those with a higher household income. Pensioners were more critical of the new regulation.  About ½ of retail employees were affected by the regulation (slightly more part- timers were affected than full-timers). Overall, employees view the new regulation negatively and around 2/3 had negative views towards further liberalisation.  Retailers were split: o Stand-alone shops (without branch shops) thought the new regulation was too liberal and around 80% did not change their opening times. o Retailers who had branch shops were also not happy with the new regulation. However, this was because they felt the new regulation was still too restrictive. Around 2/3 of these retailers changed their opening times in response to the new regulation. In particular, retailers in large shopping centres made use of the extended opening times.

Overall, the study expected that the regulation will lead to increased concentration in the retail industry, measured by the market share of large retailers, as larger retailers are more likely to adapt to longer opening times; are more likely to have shops in shopping centres; and were more likely to profit from longer opening times in terms of rising revenues.

Täger, U. (2000), in a study analysing the effects of the liberalisation of the opening times on the retail industry and on consumer behaviour in Germany, finds that:

 A quarter of shops make use of the liberalised opening times. This is especially true for larger shops and shops in central locations.  Overall, shops are now, on average, open for longer than before the change in regulations (around 58 hours per week).  Acceptance of the new opening times from consumers is rising. Younger consumers and those who work are more accepting towards the new opening times than older consumers and those who do not work.

Other restrictions – alcohol and pharmaceutical sales channels The best examples of distribution channel restrictions are sales of medical drugs and alcohol. For drugs, the literature is exclusively about price regulation in the pharmaceutical market and not about the economic effects of retailers being unable to sell medical drugs. For alcohol, there are studies examining the situation before and after alcohol was separated into its own sales channel. However, the studies mostly focus on the health benefits. For example, Miller, Snowden, Birckmayer, & Hendrie (2006) show the beneficial health effects of state-controlled alcohol sales in the US. They have conducted surveys with youth people who drink alcohol and used the census data on motor vehicle fatalities. Using regression analysis, they have found that monopolies reduce per capita alcohol consumption and decrease the alcohol-impaired driving death rate for people under the age of 21. Hahn et al. (2012) provide a literature review of experiences of alcohol sales privatisation in Scandinavian countries. The main conclusion is that privatisation leads to a big increase in alcohol consumption and an increase in per capita alcohol sales. For Scandinavian countries there is a lot more literature, again, mostly focusing on the health consequences of consumers (e.g. Holder et al., 2006; Norström, 2000; Poikolainen, 1980).

A rare study that investigated the wider economic impact of alcohol sales by state monopolies is a recent study by Siegel, DeJong, Albers, Naimi, & Jernigan (2013). The study examines the difference in prices between state‐operated and state-licenced

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Restrictions on promotional activities

Restrictions on promotional activities include regulation of sale of products with a discount (e.g. limits on timing and duration), regulation on advertising certain products (e.g. tobacco) or bans on sales below cost. All studies focus on economic impacts in general and do not measure the compliance costs of the restrictions. While there are theoretical studies rationalising discount sales, including in the retail sector (e.g. Courty & Li, 1999; Nocke & Peitz, 2007), we did not manage to identify studies examining effects of restrictions on discount sales.

Regarding promotional activities, most literature that can be found is on the economic effects of sales below cost. In the EU, below cost sale is banned in Belgium, France, Ireland, Luxembourg, Portugal, and Spain, and is restricted in Austria, Denmark, Germany, Greece, Italy, Sweden and Switzerland, while it is allowed in the Netherlands and the UK (Chen & Rey, 2012). In the UK, large retailers often use this practice. The UK Competition Commission investigated the groceries market in 2007 and reported that most retailers used below cost sales, mainly for essential products like milk, bread and bakery products that are regularly purchased, making up to 6% of their total sales (Dobson, 2009; The UK Competition Commission, 2007). There is general agreement that laws against below cost sales protect competitors rather than competition, and are likely to harm consumers (OECD, 2007). For example, through a model-based analysis Allain & Chambolle (2011) argue that such laws impose industry wide price floors, suppressing competition (both downstream and upstream), increase prices and lower consumer welfare. In an empirical analysis of the retail gasoline market, Anderson & Johnson (1999) find evidence that laws preventing sales below cost resulted in higher retail margins and market inefficiency. However, there is literature arguing the contrary, that banning below cost sales can have positive effects. For example, Chen & Rey (2012) argue that large stores have an incentive to adopt below cost sales practice to discriminate between multi-stop shoppers and one-stop shoppers, allowing them to attract consumers who would otherwise go to a smaller, more efficient retailer. According to their microeconomic model, banning below cost pricing can increase consumer surplus, small retailers’ profits, and social welfare.

There are also studies investigating operational restrictions in advertising, which focus on economic impacts again, rather than compliance costs. Advertising of medical drugs is sometimes constrained and there are early studies indicating that such regulation increases the costs for the consumers. For instance, in an empirical study, Cady (1976) used the data on state retail restrictions on advertising prices for prescription drugs and examined the effect on prices. He found that the effect is positive, with advertising restrictions increasing prices. More recently, a study by Ling, Berndt, & Kyle (2002) has shown that deregulation of direct-to-consumer marketing for prescription drugs in 1997 in the US market enhanced rivalry and facilitated competition.

Similar studies exist for restrictions on advertising activities for other products. For example, Milyo & Waldfogel (1999) use Rhode Island's decision (in the US) to eliminate the ban on alcohol price advertising to measure the effect of advertising on prices. They find positive effects on customer welfare as advertising stores cut only the prices of the products they advertise. Quinn, Lewis, Edwards, & McNeill (2011) evaluate the economic impact of introducing a ban on on-site advertising of tobacco. Using a survey of tobacco sales points, they found that the ban had no effect on sales and consumption of tobacco.

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Other operational restrictions

We collect all other types of restrictions into a single category because they have been rarely examined in the literature. This category includes restrictions such as retail specific taxes and fees or favouring national products.

There are a few studies on how food labelling regulations potentially impose compliance costs on retailers. A frequent aim of such regulation is to improve health and safety, conserve the environment or even support national producers. Even though regulation usually targets producers, retailers can be affected as well, as they often face fines if they sell improperly labelled products. Recently, governments have started using food labels to influence individual choices and achieve social objectives, such as helping consumers make healthier choices.420 From the compliance cost perspective, it is important to note that some food labelling seems to be provided voluntarily by firms in order to attract consumers, and as such, part of the cost would not be considered to be a compliance cost.

There are requirements about country-of-origin labelling, usually for meats, fruits and vegetables. These can have impacts similar to sourcing policies, although the mandate is weaker, requiring that consumers prefer domestic products over imported ones for national producers to benefit from the policy. If such preferences exist, country-of- origin labels will allow consumers to discriminate against imported goods. This would potentially lead to an increase in the prices of domestic products and market inefficiencies. A recent review article by Newman, Turri, Howlett, & Stokes, (2014) that summarises twenty years of country-of-origin food labelling research suggests that little generalisable knowledge about such food labelling policies exists.

A1.9 Broad measure of regulation impacting the retail sector

A1.9.1 The OECD’s index of retail sector regulation

The OECD regularly collects data to assess regulatory structures and policies in OECD countries (Koske, Wanner, Bitetti, & Barbiero, 2015). They construct indicators of product market regulation, including the retail sector.

According to the OECD’s product market regulation (PMR) index (Koske, Wanner, Bitetti, & Barbiero, 2015)421, the level of regulatory burden has decreased in the majority of Member States between 2008 and 2013. The best performing countries include Bulgaria, Latvia, Slovenia, and Sweden. Relatively more retail regulation is seen in Belgium and Luxembourg. The most significant improvements (deregulation) across the sample period can be observed in Austria, France, Greece, Italy, Portugal and Spain. It is also interesting to note the most significant exceptions to this decreasing trend in the Czech Republic, Hungary, Ireland and Luxembourg.

420 In a review article, Golan, Kuchler, Mitchell, Greene, & Jessup (2001) show that economic theory indicates that food labelling is best suited for problems with asymmetric information, rather than achieving social objectives.

421 The six components of the index are: Licences or permits needed to engage in commercial activity; Specific regulation of large outlets; Protection of existing firms; Regulation of shop opening hours; Price controls; and Promotions/discounts.

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Figure 63 OECD’s aggregate retail regulation indicator – evolution 1998- 2013 (6=highest level of regulation)

1998 2003 2008 2013

Note: All the values that appear as zero in this bar chart reflect missing data, not the lowest level of regulation. Source: OECD PMR index http://www.oecd.org/eco/growth/indicatorsofproductmarketregulationhomepage.htm#indicato rs

The figure below, from the same source, disaggregates the above indicator of retail restrictiveness into five individual indicators: Specific large store; Protect existing firms; Opening hours; Price controls; Promotions/Discounts. The values are for 2013. It can be seen that Luxembourg and Belgium lead the way in terms of prevalence of operational retail restrictions, while Latvia, Bulgaria and Slovenia have the least restrictive environment.

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Figure 64 OECD’s indicator of retail restrictions by type of restriction, 2013, (6=highest level of regulation)

Specific large store Protect existing firms Opening hours Price controls Promotions/Discounts

Note: The values that appear as zero in this bar chart reflect lowest level of regulation, not missing data; there were no missing observations for any of the variables above. Source: OECD PMR index http://www.oecd.org/eco/growth/indicatorsofproductmarketregulationhomepage.htm#indicato rs

This OECD set of indicators is of interest given that it specifically applies to the retail sector and also given that it covers some of the types of restrictions that are the object of the present study. On the other hand, the latest values are from 2013 and, as we see from other information sources, regulation levels have changed considerably in several EU countries.

The indices constructed by the World Economic Forum cover more recent years, but do not report separately on restrictions in the retail sector. We discuss these below.

A1.9.2 World Economic Forum cost of business indicators

The Global Competitiveness Index (GCI) was introduced by the World Economic Forum in 2004. Defining competitiveness as the set of institutions, policies and factors that determine the level of productivity of a country, GCI scores are calculated by drawing together country-level data covering 12 categories – the pillars of competitiveness – that collectively make up a comprehensive picture of a country’s competitiveness. The 12 pillars are: institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication, and innovation.

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Figure 65 WEF’s indicator of burden of government regulation (7=lowest burden);Burden evolution of government between regulation, 2006/7 1-7 (best), and World 2015/16 Economic Forum, 2006-2007 to 2015-2016 5

4.5

3.5

2.5

1.5

0.5

Note: Burden of government regulation: “In your country, how burdensome is it for businesses to comply with governmental administrative requirements (e.g., permits, regulations, reporting)? [1 = extremely burdensome; 7 = not burdensome at all]” Source: The Global Competitiveness Index Historical Dataset © 2005-2014 World Economic Forum

Finland and Estonia have in recent years received the highest relative score in terms of business perceptions of regulatory burdens, but their recent trend is negative and in 2015-2016 they have been overtaken by both Luxembourg and Ireland, as well to some extent Norway. At the opposite end, Italy is the worst performing of the EU countries in this indicator, with a negative trend. In addition to Italy, a number of other EU countries perform consistently well below the average for OECD high income countries: Belgium, Croatia, Czech Republic, France, Greece, Hungary, Poland and Slovakia.

We note that these WEF indicators are for the overall burden of regulation rather than being retail sector specific.

A1.10 Conclusions from the literature review

The first part of this literature review considered a range of studies and articles that offer variations on regulatory cost frameworks and cost definitions. Some of the studies look at direct impacts on businesses and some are even narrower and consider only administrative costs or even a subset of administrative costs.

The techniques for quantification of impacts used in these studies are often reliant on a combination of surveys and desk research.

Within literature that studies broader impacts on businesses, as well as on the markets in which they are imposed, the object of analysis is varied, including impacts on prices, GDP, or competition, to name just a few. Not all of these studies seek to quantify effects, and some rely on theoretical models that make predictions in terms of the relationships between the variables of interest.

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The techniques for quantification of impacts in these studies are quite different from the narrower regulatory cost frameworks encountered above: econometric approaches are preferred when the focus is on impacts on macroeconomic variables.

The literature which focuses most directly on the impacts of retail sector restrictions typically has a focus much wider than direct business impacts. Its focus is on economic impacts rather than compliance costs. Some of the theoretical models do not seek to quantify, but rather to analyse effects. Most studies that seek to quantify effects on, for example, prices, investment, and R&D, do so through econometric modelling.

It is possible, on the basis of the reviewed literature, to form a reasonably clear picture of what an adequate framework for analysis of direct regulatory costs to businesses should look like. The framework that we propose in the next part of this section takes the existing approaches in the literature as a starting point and applies them to the restrictions and structure of the retail sector.

A1.11 Review of literature references

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Anderson, R. W., & Johnson, R. N. (1999). Antitrust and Sales-Below-Cost Laws: The Case of Retail Gasoline. Review of Industrial Organization, 14(3), 189–204.

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Bensnes, S. S., & Strøm, B. (2015). Earning or learning? The impact of relaxing shop opening hours restrictions on youth employment, education and earnings (Working paper series No. 4/2015). Trondheim, Norway.

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Blanchard, O., & Giavazzi, F. (2003). Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets. The Quarterly Journal of Economics, 118(3), 879–907.

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Brekke, K. R., Holmas, T. H., & Straume, O. R. (2011). Reference pricing, competition, and pharmaceutical expenditures: Theory and evidence from a natural experiment. Journal of Public Economics, 95(7-8), 624–638.

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Golan, E., Kuchler, F., Mitchell, L., Greene, C., & Jessup, A. (2001). Economics of Food Labelling. Journal of Consumer Policy, 24(2), 117–184.

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Hahn, R. A., Middleton, J. C., Elder, R., Brewer, R., Fielding, J., Naimi, T. S., Toomey, T.L., Chattopadhyay, S., Lawrence, B., & Campbell, C. A. (2012). Effects of alcohol retail privatization on excessive alcohol consumption and related harms: A community guide systematic review. American Journal of Preventive Medicine, 42(4), 418–427.

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Inderst, R., & Irmen, A. (2005). Shopping hours and price competition. European Economic Review, 49(5), 1105–1124

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Jacobsen, J. P., & Kooreman, P. (2005). Timing constraints and the allocation of time: The effects of changing shopping hours regulations in The Netherlands. European Economic Review, 49(1), 9–27.

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Annex 2 Additional information on survey response sample

Table 46 Number of survey respondents by NACE code and Member State 47 471 472 473 474 475 476 477 479 Austria 10 7 4 7 5 5 16 2 Belgium 5 3 28 1 6 10 6 15 5 Bulgaria 9 4 11 5 2 7 21 Croatia 2 4 9 3 6 3 3 11 6 Cyprus 1 1 1 3 12 13 2 CzechRepublic 4 4 4 2 1 8 5 12 4 Denmark 8 5 2 1 3 4 29 Estonia 4 2 27 4 5 15 Finland 4 6 1 5 1 7 4 20 France 6 6 3 2 2 2 4 21 Germany 6 12 8 3 3 4 11 3 Greece 5 3 7 11 8 3 29 1 Hungary 20 6 2 5 5 5 12 2 Ireland 13 10 2 1 10 15 1 Italy 34 1 5 2 1 3 17 5 Latvia 1 4 3 4 3 4 5 1 Lithuania 6 12 4 1 1 4 4 Luxembourg 3 3 2 1 2 2 14 Malta 1 2 4 4 4 Netherlands 7 5 2 2 5 2 2 35 Poland 13 3 2 10 11 5 2 12 Portugal 4 9 4 6 8 5 8 6 Romania 11 5 7 30 6 11 1 Slovakia 7 5 2 6 3 17 21 Slovenia 10 4 2 8 2 24 Spain 9 12 9 4 8 8 13 Sweden 26 3 5 5 19 8 6 7 15 UnitedKingdom 12 3 1 2 3 8 5

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Annex 2 | Additional information on survey response sample

Table 47 Number of survey respondents by company size and Member State 1.micro 2.small 3.medium/large Large Austria 42 8 6 1 Belgium 34 39 6 Bulgaria 46 10 3 Croatia 23 15 9 Cyprus 16 13 4 CzechRepublic 26 11 7 Denmark 44 8 Estonia 38 15 4 Finland 33 10 5 1 France 40 5 1 Germany 32 17 1 Greece 36 22 9 1 Hungary 41 12 4 Ireland 26 18 8 Italy 34 27 7 Latvia 14 8 3 Lithuania 18 11 3 Luxembourg 18 8 1 Malta 9 3 3 Netherlands 49 10 1 Poland 48 7 3 1 Portugal 41 9 Romania 48 19 4 Slovakia 47 9 5 Slovenia 28 14 8 1 Spain 39 13 11 3 Sweden 68 15 11 1 UnitedKingdom 26 7 1

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Operational restrictions in the retail sector

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ET Cataloguenumber

[Catalogue number [Catalogue

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doi:number 10.2873/6677