Recent Developments in German Internet Law

November 1, 2000

Contract Law: New Distant Selling Act in force

With effect from 1 July 2000, the new German Fernabsatzgesetz (DistanceSelling Act) has come into force. The Act now provides a legal framework forsales by means of catalogue shopping, Internet, telephone or fax. Therefore, theDistance Selling Act, based on an EEC directive, will probably gain highinfluence on B2C-Commerce (business to consumer commerce). See below for adetailed consideration of the DSA.

Criminal Law: Chief Executive of CompuServe Germany acquitted

In a remarkable and prominent decision, the Chief Executive of CompuServeGermany was acquitted of the indictment of distributing ‘child pornographicmaterial’. A Munich appeal court stated that the accused could not be heldliable under criminal law for Internet pages containing child pornographymaterial which users were able to retrieve via the US-based CompuServe server.At the first trial, a Munich magistrate court had inflicted a two-year prisonsentence on probation on the Manager. In the following period, this judgment hadbeen sharply criticised by almost the entire cyber community. The acquittal onappeal is a positive signal especially for Internet providers. It now seems tobe established that, under Sec. 5 of the German Tele Services Act, a serviceprovider cannot be held liable for any contents other than its own. Therefore,the law does not expressly demand that a service provider has to check hisserver for illegal contents.

Data Protection Law: Data protection regulations revisited

In June 1999, the German Federal Government issued a report evaluating theeffects of the new German data protection rules on Internet business. Back in1997, Germany had implemented strict data protection regulations for Internetservices, notwithstanding facing heavy criticism by both the Internet economyand academics who blamed the government for ‘over-regulating’ the net. Thekey result of the actual evaluation was the realisation that it proved to bepractically impossible for those running an e-commerce business to comply withall data protection rules because of their complex structure. Nevertheless, alegislative simplification of the data protection system is said to be unlikely.On the contrary, the report suggests imposing fines on providers which do notcomply with the rules in order to further the implementation of data protectionon the net.

Competition Law: Use of a generic name as a domain name

In a recent judgement by a Hamburg court, it was held that in Germany it islegally feasible to use a generic name as a domain name. In the aforementioneddecision, the London-based company uses its company name also forits domain, notwithstanding the fact that, in German language, ‘Lastminute’is regarded as a generic name for any journeys booked within a short time beforedeparture. A German competitor therefore sued under the GermanUnfair Competition Act. Although the court conceded that a consumer couldprincipally be misled as far as he might consider as the onlyexisting supplier of last minute travel, the court nevertheless pointed out thatthe average Internet user who is searching for a cheap last minute offer willdefinitely come across several suppliers and is thus not forced to rely offers solely. Furthermore, the court emphasised the role ofdomain names as an instrument of marketing. Applying the ‘first come, firstserved’-principle, a company is, under German law, allowed to register ageneric name as a domain in order to gain a substantial marketing lead over itscompetitors. With the judgment not being final, it remains to be seen whetherthe Hamburg Court of Appeal will uphold the decision.

European Law: Implementation of the E-Commerce Directive in Germany underdiscussion

After the EEC Directive on the regulation of e-commerce had passed theEuropean Parliament in May 2000. it became obvious that the implementation ofthe directive would lead to major changes in German law. Especially under threatare two competition regulations, the Rabattgesetz (Discount Act) and theZugabeverordnung (Free Gift Act) – two legislative relics from the 1930s. Theyare threatened by the legal requirements of transnational electronic commerce.Whereas some experts prefer a complete abolition of the aforementioned Acts,others maintain that the implementation of the E-Commerce Directive could beachieved simply by amending German competition rules. As, however,implementation has to take place within a period of 18 months, time seems to berunning out for these ancient Acts. If they are, in fact, abolished, thegranting of bonuses and discounts towards customers will become easier underGerman law.

European Law: Digital Signature Act to be amended

Back in 1997, Germany enacted a then unique Act providing the regulatoryinfrastructure for the safety of online signatures. The Act is designed forproviders of cryptographic services which enable their customers to use thepossibility of digital signature in electronic business. The 1999 EEC directiveon digital signatures now introduces a specific duty of insurance on part ofproviders of cryptographic services, following a discussion about theirliability when failing to guarantee safe cryptographic methods. Germany,therefore, will have to amend its Digital Signature Act within the next year.Apart from that, it is currently proposed that, in procedural law, electronicinvoices certified by a digital signature should now be recognised for thepurpose of input VAT recovery. If this amendment is introduced, digitally signedelectronic invoices will certainly be accepted from 2001 for input VAT recoverypurposes. Finally, German tax authorities might obtain the right to audit Germanbusinesses through direct access to their accounting records.

Dr Oliver Zander can be contacted at