Extraterritorial Consumer Protection: Jurisdictional Challenges in Global Digital Markets

-By Parag Parijat Nath

Abstract

The rise of international digital markets has created both opportunities and challenges for the redefined consumers and this has led to consumers being vulnerable regarding privacy, redressal mechanism and regulatory inconsistencies. This article examines the jurisdictional complexities in enforcing consumer protection laws against foreign firms while highlighting the “effect” and “targeting” principle and EU’s GDPR and DSA. The loopholes have been discussed and solutions have been provided. The hinderances like sovereignty concerns, the “no-assets” and procedural barriers have been discussed and solution like multilateral cooperation, mandatory asset presence for foreign firms, and the establishment of affordable Online Dispute Resolution (ODR) systems have been provided. Thus, strengthening global rules and regulations is essential to ensure consumer protection.

Introduction

There has been a shift from buying good offline to getting things at your doorsteps within 10 minutes. These changes have been mainly due to the changing consumer behavior, digital payment services, increase in omnichannel models, focus more on emerging market and the increased household income. This has led to consumer having unprecedented choice of products and hence significant vulnerabilities. The growth of online digital places like Amazon, Alibaba, Google etc. has led to has led to immense economic opportunities both inside and outside territory. Cross-border e-commerce helps in industrialization due to new avenues for business to thrive, establish their brands across international borders and increase cross-border trade. The diversity in linguistic culture, legal, payment and logistic system leads to variety of challenges and risks which include transaction security, consumer protection, unfair trade agreements. OECD survey notes issues like product safety, deceptive advertising, and lack of effective redressal mechanism from online consumers (OECD,2020). This leads to invasion of privacy and leak of data and hence leaving consumers uncertain about their data and if it is monitored by foreign policies or not.

Legal Basis for Extraterritorial Jurisdiction

In order to counter these vulnerabilities, nations have started applying the Principle of Extraterritorial Jurisdiction i.e. time when the state extends its legal power outside territorial boundaries by maintaining jurisdiction over its citizen when they are overseas and are punished regardless of where they commit it. The “effect doctrine” and “targeting principle” are legal doctrines that underpin this approach.

The Effect Doctrine is an antitrust law that permits a court of law to declare jurisdiction over actions committed outside U.S. if the conduct undergoes considerable effects on US commence. In the case of “United States v. Aluminum Co. of America (Alcoa)”; Alcoa was accused of using anti-competitive pricing and was the court held that they controlled the market without any ill intent and established unlawful monopoly. In respect to consumer protection it means that if a foreign companies product had caused damage to a citizen then the country laws of the citizen will be applied even if there is physical presence of the company.

The Targeting Principle is an approach where advertisements that are explicitly sponsored market communications based on the data provided by consumer or by the publisher (provider of digital service or content). In the joined case of both “Pammer v. Reederei Karl Schlüter GmbH & Co. KG” and “Hotel Alpenhof GesmbH v. Heller” the issue was whether the consumer could a sue a business in their home county although they booked services online. It was held that the yes, a business targeting consumers in other EU countries can be sued in consumer’s home country and the intention of trader to establish commercial relationship with consumer should also be established.

 Landmark Regulations and Their Extraterritorial Reach

There are many groundbreaking legislations mostly from the European Union.

The General Data Protection Regulation (GDPR): – GDPR was established by European Union which is a kind of rulebook that tell companies how they should handle the personal details of a consumer. It allows free flow of data across member state making it extraterritorial primarily due to Article 3. This broad extraterritorial application is often associated by “Brussels Effect” (Section 2) which advices that the EU has vast market and regulation which makes global business adopt their standards worldwide.

The Digital Service Act (DSA): – It is an EU regulation to govern digital services and operates at places where users and markets of EU are affected. Under the Article 1(2) of the DMA, the 

inspires business models to adhere to EU standards or similar standards.

The Enforcement Conundrum: Sovereignty, Comity, and Practical Hurdles

The true test of consumer protection framework lies in its enforceability and this path of converting any judgment to tangible relief is affected by obstacles caused by fundamental principles of international law.

The foundational barrier that a court of one county cannot unilaterally seize products present in another’s territory but a litigant must initiate a legal proceeding in the foreign jurisdiction and ask foreign courts to pass their judgment based on their own countries laws and enforce exiting awards and not re-litigate the original dispute under the original court’s proceedings. The foreign countries laws should be enforced when the parties want to enforce a court judgement in a different county. When the arbitration involves State government or its entity then they have “sovereign immunity” i.e. they cannot be sued or have their products seized by foreign court without their appropriate consent. The 2019 Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters aims to create uniform and universal rules but the adoption has not been yet universal as only 33 counties have only ratified it which leaves gaps in its enforcement.

The ‘no-assets’ problem means that a situation during bankruptcy where the debtor has no assets that could be liquidated to repay the creditors and digital companies may use this as a loophole leaving behind nothing for the local courts to seize. The procedural complexity and cost of cross-border litigation are often prohibited and involves hiring foreign lawyers and high costs. Hague Service Convention must serve legal notice and provide assistance by simplifying the procedures. Thus, creating barriers for the small-value claims and finally freeing foreign merchants from accountability. A viable solution would be to maintain an attachable asset associated with the companies as a precondition of market access.

Conclusion
The globalization of digital market has given consumer endless choice but still there is no adequate legal remedies available to them. There are some partial solutions like the EU’s GDPR, the “effect” and “targeting” principle; which have tried to bridge the gap between the judicial and the consumer. These solutions are often undermined by subsequent challenges like enforcement issues, profound difference between legal rights available and its actual application. The national sovereignty, the “no-assets” problem of digital firms and high litigation costs are some foundational barriers which give foreign companies a jurisdictional advantage leaving consumer with no meaningful resource. Therefore, a shift should be made from unilateral assertions to a robust multilateral cooperation. There must be innovation in redressal mechanism like attachable assets for companies, a low-cost Online Dispute Resolution (ODR) system. Ultimately, by building a strong international architecture we can ensure the consumer rights becomes borderless and the digital markets prosper within rules and regulation, finally transforming the promise of protection to enforceable global reality.

References

1.      Books

·        Born, G. B. (2021). International Commercial Arbitration (3rd ed.). Kluwer Law International.

2.      Journal Article

·        Drewes, H., & Kirk, A. (2024). Extraterritorial effects of the Digital Markets Act: The “elusive long arm” of European digital regulation. World Competition, 47(4), 473–494. https://doi.org/10.54648/WOCO2024028

·        Soni, H. (2025). Global e-commerce market: Trends, opportunities, and future outlook growth factors driving the global e-commerce industry. International Journal of E-Commerce Studies, 6(1), 25-42.

·        Gstrein, O. J., & Zwitter, A. (2021). Extraterritorial application of the GDPR: Promoting European values or power? Internet Policy Review, 10(3). https://doi.org/10.14763/2021.3.1576

·        OECD. (2020). Consumer policy responses to COVID-19. OECD Publishing. https://doi.org/10.1787/c0a11a03-en

·        Prayuti, Y. (2023). Restrictions on cross-border trade in e-commerce as a form of consumer protection. Journal of Indonesian Law & Policy Review, 5(1), 144–156. https://doi.org/10.56371/jirpl.v5i1.177

·        Zard, L., & Sears, A. M. (2023). Targeted advertising and consumer protection law in the European Union. Vanderbilt Journal of Transnational Law, 56, 799–856.

3.      Cases

·        Joined Cases C‑585/08 & C‑144/09, Pammer v. Reederei Karl Schlüter GmbH & Co. KG & Hotel Alpenhof GesmbH v. Heller, EU:C:2010:740 (Dec. 7, 2010)

·        United States v. Aluminum Co. of America, 148 F.2d 416 (2d Cir. 1945).

4.      Legislation/ Regulations

·        General Data Protection Regulation, Regulation (EU) 2016/679 (2016). Official Journal of the European Union, L 119/1.

5.      Online Sources/Websites

·        Global NAPs. (n.d.). Extraterritorial jurisdiction. Retrieved June 14, 2025, from https://globalnaps.org/issue/extraterritorial-jurisdiction/

6.      International Convention

·        Hague Conference on Private International Law. (2019). Convention of 2 July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters.

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