Ecommerce in Czech Republic

The Czech Republic is a leading country regarding e-commerce and its importance to the Czech economy is steadily growing. The number of e-shops per citizen is the highest in Europe. As was the case in many countries, the COVID-19 pandemic caused a significant boost in e-commerce. In the first half of 2020, the turnover of the e-commerce sector increased by nearly one-third. In some cases, the monthly turnover of the e-commerce sector increased by as much as 40% as a result of the pandemic.

In 2020, e-commerce accounted for around 13.5% of total retail turnover. The total turnover of e-commerce reached CZK 196bn (approx. EUR 7.5bn) the same year, which represented a 26% increased on 2019.While electronics is still the predominant commodity of e-commerce (mainly mobile phones), people also purchased groceries, pharmacy products and clothing online. The sale of groceries and clothing via e-commerce platforms increased by 8% and 19% respectively in the last year.

Currently, there are more than 40,000 e-shops in the Czech Republic and the number is rising. Some economists believe that there will be more than 50,000 e-shops within two years.

A foreign company is not required to establish a local presence to conduct an e-commerce business in the Czech Republic. Products and services can be sold from abroad. However, foreign entities wishing to sell their goods and services online in the Czech Republic may undertake such activity through a subsidiary or local branch. 

To operate an online or brick-and-mortar business in the Czech Republic, an entity needs a trade licence granted by Trade Licensing Office (the “TLO”). In most cases, a simple notification to the TLO is all that is required to obtain a licence; no other licence/permit is required to operate an e-commerce business.

 Note that there are specific product categories which require special authorisation to be sold by a business. However, such special authorisations are product-specific and apply to all sales channels.

To create a working e-shop, the business will need to set up a website, payment system and logistics network.

• Domain name: The domain name serves as an address for the e-commerce business. A wide choice of domain extensions are available, both nationally (.cz) and internationally. International domain extensions are more suitable for cross-border activity (such as .eu or .com). It is also possible to offer goods via online marketplaces.
• Hosting services: Sourcing hosting services is a more complex process as there are various options. Hosting services may be acquired as cloud servers, shared webhosting, virtual private servers and dedicated servers. 
• IT-related services: A smooth ordering process is important in creating a positive customer experience. To achieve this, the e-commerce business must ensure an appropriate level of IT services.
• Creative services: Sourcing creative services is needed to set up a website, including both design and technical aspects of various applications and functionalities, such as invoicing, accounting, marketing tools and customer relationship management. 
• Logistics: Logistics is the backbone of a successful e-commerce business. The logistics process includes product sourcing, stock (inventory) management, order management, packaging and delivery, as well as management of (and in some cases collection) product returns.
  E-commerce logistics may also be outsourced to a third-party logistics provider. A new alternative to the traditional logistics chain is “dropshipping”. In this model, the e-commerce entity forwards customer orders to a third-party company, which fulfils the orders by shipping the items directly to the customer on behalf of the e-commerce entity. 
  In the Czech Republic, the most widely used option is the Czech Post Office (Česká pošta), whose customers deem to be reliable. Other logistic providers include PPL, DHL and Zásilkovna.cz.
• Payments: Cash on delivery remains a popular payment method in the Czech Republic. However, a wide array of electronic and non-cash payments are also available to e-commerce businesses. These include payments by various types of credit and debit cards, quick online transfers, electronic wallets, mobile money, and alternative currency payment processors. 

There are significant differences between tailoring a website to accommodate consumers (B2C) and professionals (other businesses; B2B). There are several statutory protections in place to protect consumers which impose obligations businesses must meet in their dealings with consumers that do not apply to B2B transactions. Such obligations include the obligation to inform customers of the product and their rights as consumers, which is usually covered by the Terms and Conditions of the business.

If a company decides to target its business to professionals only, Czech consumer protection rules do not apply. Both parties to the transaction have greater commercial freedom on the basis that the law presumes professionals have, or should have, greater knowledge of trading rules than consumers. If a business is dedicated to professionals only, care should be taken to ensure that the online store is not accessible to consumers.

Generally, there is a significant level of freedom regarding the content and layout of a website which is limited only by the creativity of the site’s creator. However, there are certain mandatory obligations imposed by law on e-commerce websites. These mandatory obligations differ depending on whether a website is directed towards consumers or businesses

^{If the table is not displaying correctly, please close the comparison mode.}

According to Civil Code of the Czech Republic, any contracts concluded between a business and a consumer must be in Czech. This requirement also applies to a business’s T&Cs and any other information that a business is obliged to communicate to customers. Non-mandatory information provided to customers does not need to be in Czech, although such information must not be misleading. 

In B2B relations, this obligation does not apply and websites and contracts addressed to professionals do not need to be in Czech.

In the Czech Republic, there are restrictions which may impact product selection including certain restrictions provided under EU law. For example, in accordance with a 2018 decision of the Court of Justice of the European Union, it is forbidden to sell luxury clothes via online market places such as e-Bay.

In addition, there are also product-specific restrictions under Czech law which in some cases require the seller to obtain the relevant authorisation to sell certain products. A list of products which require such authorisations is set out in the Trade Act. 

Under Czech law, the same rules governing product returns and defective goods apply to both traditional and online sales. Under these laws, the consumer has a right to withdraw from the contract without stating a reason within 14 days from concluding the contract.

Generally, marketing messages can only be sent to consumers with their prior consent. However, there are exceptions to this rule. Marketing messages may be sent to consumers without prior consent if: a) the consumer volunteered his/her email address (or phone number) to the business, and b) the marketing communication is related to goods or services previously provided to that consumer.

Regarding non-consensual marketing messages, the consumer must have the ability to opt-out (e.g., through a hyperlink) without any difficulties.

Competition law in the Czech Republic, as a Member State of EU, is heavily regulated by legislation. Most of the applicable EU legislation is based on a framework from 2010. Since then, the e-commerce sector has experienced rapid growth and as such the European Commission decided to re-evaluate the framework. In 2017, the European Commission published the results of an e-commerce survey, which identified two main business practices which may in some cases breach competition law.

The first such business practice relates to price restrictions imposed by suppliers on distributors. Generally, suppliers are able to provide recommendations or set maximum prices for their products, although it is forbidden for suppliers to set fixed or minimum prices. The second such practice relates to restrictions on cross-border sales. Markets for certain products may be different in various EU member states and as such some products may be sold for higher prices in some states than in others. To sell for higher prices, companies are known to use geo-blocking measures which prevent customers from specific states accessing their websites and thereby forcing them to buy the product in a different market for a higher price.

The European Commission also considers reselling products via internet marketplaces (such as e-Bay or Aukro.cz) problematic

The operation of an e-store itself does not fall under the regulations governing financial services. However, it is becoming more common to accept payments through online payment gates rather than accepting cash on delivery, which is regulated. Online payments are predominately governed by Directive (EU) 2015/2366 (Payment Services Directive 2) and all payment processing must be carried out in accordance with this directive.

In the Czech Republic, legal enforcement regarding e-commerce is carried out by multiple authorities. The Czech Trade Inspection Authority performs an important role by monitoring and inspecting businesses and individuals that: (i) supply or sell goods on the Czech market; (ii) provide services or similar activities on the Czech market; (iii) provide consumer credit; or (iv) operate marketplaces in the Czech Republic.

The Office for the Protection of Competition is another important authority, which monitors compliance with competition law. Other authorities include the Trade Licensing Office, which issues licences to sell specific products, and the Office for Personal Data Protection, which monitors compliance with data protection laws

Consumer rights may be enforced individually before a civil court. Unlike several other European countries, it is not yet possible to file class actions in the Czech Republic, although there have been several attempts to introduce this form of action, so it may be possible to do so in the coming years.

Court proceedings are, however, a last resort and thus out-of-court settlement is preferable. Such settlements are called Alternative Dispute Resolutions (ADRs) and take place before the Czech Trade Inspection Authority (CTIA) with the aim of the parties reaching a consensus. The CTIA cannot make binding decisions and or force parties to negotiate. Only disputes between consumers and vendors can be resolved this way, and only consumers are able to initiate such proceedings.

The legal regulation of the e-commerce sector in the Czech Republic derives mostly from EU legislation. Apart from the aforementioned initiatives of the European Commission that focus on competition law, the following initiatives may have some relevance to e-commerce businesses in the Czech Republic:

• Omnibus Directive: In 2018, the EC adopted an initiative called New Deal for Consumers, which aimed to modernise EU consumer law. As a result of this initiative, the Omnibus Directive came into force in early 2020. The Omnibus Directive focuses on increasing penalties for breaches of consumer law, broadening the obligation to inform consumers about products being purchased, restrictions regarding “dual quality” products, and strengthening consumers’ individual rights. Member States should implement the directive by November 2021. The Czech legislature is already working on implementing some of the rules set out in the Omnibus Directive;
• Digital Services Act and Digital Markets Act: these are EU initiatives that will provide, in particular, new rules concerning online platforms. Work on these acts is still ongoing.