“Let’s first imagine where the retail sector would stand without the Services Directive” suggested Géraldine Fages (European Commission, DG GROW), who is working on the upcoming Commission’s best practices to facilitate retail establishment and operation.
Taking stock of the progress so far
The Services Directive, adopted already a decade ago, has allowed the retail sector to profit from a clear regulatory framework. Otherwise the sector would rely solely on the direct implementation of the European Union Treaty’s provisions for the freedom of establishment and the European Court of Justice case law.
The Directive led to significant improvements, such as the obligation for Member States to simplify their legislation on retail and to report to the Commission about it. It also established a complete ban on economic needs tests and on competitors’ involvement in issuing new retail permits.
Yet Ms Fages believes that there is room for improvement, as retailers still face unjustified or non-proportional restrictions. To address this, the Commission is working closely with the Member States to support them in learning from each other’s best practices and to reform their legislation.
Member States are committed to reform, she said, but there is a glitch. The European Court of Justice is soon to decide on a question referred by the Netherlands (C31/16) on whether retail falls into the scope of the Services Directive. Removing retail from its scope would be a “big blow for the services sector at large” according to Ms Fages. Next stop: Luxembourg, on 14 February 2017, when the ECJ holds a hearing on the case. Meanwhile, the Commission intends to continue talks with the Member States in view of the upcoming best practices – a move welcomed by the rest of the panel.
We need a cultural shift
Although the enforcement efforts of the Commission are helpful, “there are still many empty shops” and the challenges brought by the digitalisation of retail or the ageing population are not always addressed, according to Ilya Bruggeman (EuroCommerce). The authorisation procedures for retail are still complex and often information is not sufficiently accessible by retailers coming from other Member States. The Points of Single Contact, meant to facilitate establishment in another Member State, often do not comply with the requirements set by the Services Directive.
Moreover, Member States rarely notify to the Commission the legislation applicable to retail. Therefore, EuroCommerce has great expectations from the upcoming Commission’s proposal for the review of the notification procedure. “If EU countries don’t change behaviour, we will have the same discussion in 10 years,” concluded Mr Bruggeman.
Mr Bruggeman expressed his concern on the current trend to resort to restrictions favouring local products or local players, despite the fact that similar restrictions were being abolished in the past years. The Commission should put pressure at the highest political level of Member States to enforce the Services Directive, in order to improve the Single Market for retail.
The Services Directive is not perfect but “as near a perfect regulatory tool as we can get” in this complex area said Simone Mancini (IKEA Group). Europe – IKEA Group’s biggest market – should not wait for a radical regulatory change before taking enforcement and implementation action.
What we need is a cultural shift in the way policymakers in Member States evaluate which restrictions are proportionate. They should consider the macro-trends that are affecting retail’s reality: massive urbanisation, multichannel retail, but also the stronger environmental concerns of Europeans. Policymakers and stakeholders should not focus solely on improving the legislative framework, but should streamline efforts throughout the EU in enforcing the current framework more efficiently and in taking account of today’s needs.
Intelligent cities attract consumers but face a complex regulatory environment
“When the Services Directive was adopted, we thought we were saved, but this was not the case in practice,” said retail estate developer Peter Wilhelm (ICSC Europe). The Commission should discuss the implementation challenges directly with regional and local governments, as urban planning is their competence. Sometimes local politicians take planning decisions that are in obvious contradiction with the Directive, simply because they are unaware of it.
Local politicians and stakeholders should change mind-set. Experience shows that understanding of shopping centres is outdated (they are no longer simply the out of town shopping mall) and that large retailers play an important role in attracting visitors to a shopping area , who will in turn visit both large and smaller shops, explained Mr Wilhelm. Larger stores do not harm the smaller ones, quite the opposite: “the more shops, the better”, as they will attract more consumers. Cities that recognise the importance of diversity of the retail mix and role of large stores in driving footfall are seeing vibrant retail areas and city centres.
Dirk Oestringer (city of Sindelfingen, Germany), brought the perspective of local politicians who are called on to implement the Services Directive in a complex regulatory framework of national and regional planning laws. Sindelfingen had authorised a large retailer to expand their outlet, but the Stuttgart Region, where Sindelfingen belongs, opposed this decision. The retailer’s expansion request is now in the hands of the highest administrative court, but this process is taking years. Mr Oestringer highlighted that it is not just retailers that fall victim to national and/or regional rules that are inconsistent with the principle of freedom of establishment – local communities are also prevented from making the decisions on retail that they want.
Retailers face rigid rules in a fast changing environment, shaken up by ecommerce and digitalisation in general, concluded Ms Fages. Both policymakers and retailers need to understand the value of the EU’s Single Market, otherwise, the Directive’s enforcement will be facing difficulties at all levels: national, regional and local.