US PERSPECTIVES ON CONSUMER PROTECTION IN THE GLOBAL ELECTRONIC MARKETPLACE - COMMENT, P994312
COMMENTS OF THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
1. What current protections exist for consumers engaged in electronic commerce with foreign businesses?
This question presumably refers to the US perspective of current protections for consumers. The workshop will no doubt hear from other parties regarding this US perspective. To assist the workshop in achieving a more international perspective on this issue, outlined below is the Australian perspective on current protections that exist for consumers engaged in electronic commerce with foreign businesses.
The current Australian regulatory framework for consumer protection in electronic commerce is comprised of federal and state/territory consumer protection legislation and some self-regulatory initiatives.
The agencies responsible for the enforcement of consumer protection laws in Australia are the ACCC (at the federal level), and the consumer protection bureaux or offices of fair trading in each of the States and Territories.
Among other legislation, the ACCC administers the primary piece of consumer protection legislation in Australia - the Trade Practices Act 1974 (the "TPA"). The objective of the Act, as set out in the legislation, is to enhance the welfare of Australians through the promotion of competition and fair trading and providing for consumer protection. Part V of the Act is particularly important in providing a consumer protection framework. It contains a range of provisions aimed at protecting consumers and corporations that qualify as consumers.
A general statement of the application of the Trade Practices Act is that what is a breach "off" the Internet remains a breach "on" the Internet. Indeed, matters generally of a minor nature such as pyramid selling schemes become far more serious when perpetrated on the Internet, as the operators are able to directly access millions of consumers worldwide. Previously these approaches were limited by the cost of post and stationery.
At the international level, many consumer protection enforcement agencies internationally have similar legislation in place to regulate market conduct. This legislation applies in the particular country to protect that country's consumers.
Inadequate protection of consumers only arises where a consumer transacts with a foreign business because of the problems with enforcing the relevant national legislation across borders. For that reason, a number of new enforcement strategies (as described later) need to be explored in order that consumers should enjoy at least the equivalent level of protection in online transactions as they do in other forms of commerce, a level of protection required by the Draft OECD Guidelines on Consumer Protection for Electronic Commerce(1). (2)
2. To what extent do existing laws, conventions, treaties, or practices provide effective protection for consumers engaged in electronic commerce with foreign businesses? To what extent do they need to be modified?
Traditionally, the ACCC has aimed to undertake enforcement action against breaches of the TPA and to maintain a strict enforcement presence. However, there can be practical difficulties in applying the Act to Internet commerce transactions, including difficulties in identifying the perpetrators of the alleged breach (or the party that ultimately received funds). Additionally, the perpetrators often reside in other countries, and those countries may or may not cooperate with Australian regulatory agencies or have the facilities or legislative structure to take suitable action.
The Draft OECD Guidelines on Consumer Protection for Electronic Commerce state that governments, businesses, consumers, and their representatives should work together to ensure that equivalent protection for electronic consumer transactions is applied by reviewing and adapting laws and practices, if necessary, to address the special circumstances of electronic commerce. This will encourage enforcement agencies like the ACCC to look toward new strategies for the enforcement of consumer protection laws in the global electronic marketplace, including:
The Australia - United States Joint Statement on Electronic Commerce highlights the necessity for business and consumer confidence in transactions conducted electronically, which can be achieved by (among other things) addressing consumer protection issues:
D. Consumer Protection: Consumers should receive effective protection in the online environment which can be promoted through enforcement of existing consumer protection laws, modification of these laws as necessary to accommodate the unique characteristics of the online market, consumer education, and industry supported mechanisms to empower consumers, and resolve consumer complaints and concerns.
4. To the extent that existing laws, conventions, treaties, or practices need to be modified to provide effective protection for consumers engaged in electronic commerce with foreign businesses: How would such modifications affect the development of the global electronic marketplace as a whole?
The primary action needed at present to provide effective protection for consumers engaged in electronic commerce with foreign businesses is the finalisation of the OECD Guidelines on Consumer Protection in Electronic Commerce, and the implementation of those Guidelines by Member governments.
The Guidelines address such consumer protection issues as:
The Draft Guidelines also provide for international government cooperation, which is essential to the success of the global electronic marketplace.
The finalisation and adoption of these provisions by the OECD Member countries is essential if consumers engaging in global electronic transactions are to be provided with effective protection. It is equally as important that OECD Member countries effectively implement the Guidelines. As set out in section 39 of the Draft Guidelines, this will require Member countries to:
In Australia, government, industry and consumer representatives have been consulted about the development of the Guidelines on an ongoing basis. Without exception, all of these groups are supportive of the finalisation of the Guidelines. Once finalised, the Guidelines will be unique in representing globally harmonised standards of consumer protection for electronic commerce. Not only will the Guidelines help to achieve consumer confidence in electronic commerce, which will be crucial to establishing mass acceptance of this form of commerce, but as globally harmonised consumer protection standards, the Guidelines will reduce the need for global traders to conform with varying national standards for consumer protection, avoid exposing consumers to different levels of consumer protection in different countries, and help to overcome the difficulty with enforcing divergent consumer protection standards across borders.
7. What efforts to examine consumer protection in the global electronic marketplace are already underway by private or public entities at the international, national, state or local levels? What is the status of such efforts?
There are a number of agencies and fora currently studying consumer protection issues surrounding the development of the global electronic marketplace.
Australian efforts include:
Internationally the following efforts relate to consumer protection in electronic commerce:
Conflicts of Law
3. When a consumer engages in electronic commerce with a foreign business, which laws govern the transaction?
Different countries have different consumer protection legislation. The problem of which country's legislation applies can be solved only by applying choice of law rules. It is not always clear which law applies in a particular cross-border transaction. The relevant law could be, for example, the law of the consumer's location, the law of the trader's location, the law of the place from which the goods were supplied, or the law of the location of the trader's Internet service provider.
The question of which law applies will of course determine the extent of any legislative consumer protection that applies to the transactions. It is highly likely that 'regulatory havens' from comprehensive consumer laws will emerge. It will be relatively easy for unethical traders to establish their businesses so that the law applying to any consumer contract is the law of a jurisdiction that has few, if any, consumer protections.
Therefore, there is a risk for instance that Australian consumer protection legislation will not apply to some cross-border transactions involving Australian consumers. The fact that a global trader may not be subject to domestic rules on fair trading, such as truth in advertising and product standards, can mean that Australian consumers are exposed to unregulated trading in substandard goods and services.
The Draft OECD Guidelines provide a good option for addressing choice of law problems that create cross-border enforcement difficulties. They state that:
3. When a consumer engages in electronic commerce with a foreign business, which court system or systems may adjudicate disputes arising from the transaction?
In order for a court to recognise a legal right, it must first establish jurisdiction to hear the matter. There is a question of whether the court in the consumer's location has jurisdiction to hear a matter if the trader has no physical presence in the location. Often, powers to commence proceedings against a defendant are linked to the ability to physically serve the documents on the defendant within the court's jurisdiction. This may be impossible if the defendant is a global trader situated abroad.
Therefore, in many cases an Australian court will not have the jurisdiction to hear a matter arising from a global electronic transaction.
The resolution of cross-border disputes also emphasise the complexity of dealing with a number of jurisdictions. In some cases the fact situation may give rise to claims that more than one jurisdiction is competent to hear the issue. Then, if a consumer initiates action in one jurisdiction, and then a trader begins proceedings in their own jurisdiction, there is the potential for conflicting judgments.
The development of international agreements can help to address the problem of jurisdiction. A number of international bodies are presently considering models for multilateral conventions on civil procedure, including a mutual recognition scheme which sets out the circumstances in which national courts of contracting states can exercise jurisdiction over defendants in other contracting states.
The Annex to the Draft OECD Guidelines (discussed above) provides a good option for addressing jurisdictional difficulties.
4. If a consumer were to obtain a judgment against a foreign business, under what circumstances would that judgment be recognised by a court system in another country?
Enforcement outside Australia of remedies ordered by an Australian court is subject to constraints. Complex rules also govern whether judgments of foreign courts can be enforced in a country, or whether a completely new set of proceedings should commence.
Even if a court does have jurisdiction to hear a matter, enforcement of any resulting judgment outside the country will encounter difficulties. In some cases, there may be reciprocal extradition or enforcement arrangements with other jurisdictions; however, these may not always be appropriate or applicable to consumer law matters.
A consumer attempting to enforce an Australian right in a jurisdiction outside of Australia may only be able to obtain relief in accordance with that jurisdiction's rules and/or legislation. Therefore, a foreign court might provide a remedy which differs from that obtainable if the action was solely within Australia.
Further, while an Australian court may grant either an interim or permanent injunction, the law of the foreign jurisdiction might not recognise the order.
In recognition of the fact that judgments of Australian courts are generally not enforceable outside Australia, there are some mechanisms in Australian law to encourage international cooperation in enforcement proceedings, including letters of request seeking assistance from competent courts in foreign jurisdictions and reciprocal recognition of judgments.
This process of cooperation in enforcement of foreign judgments could be facilitated by participating nations giving international warranties to that effect.
Most countries, including Australia, have some treaty arrangements with other countries for the reciprocal enforcement of judgments or orders. It would perhaps be beneficial if such reciprocal enforcement agreements applied to judgments of inferior courts, where most private consumer claims are brought.
An internationally agreed mutual recognition scheme can also set out the conditions in which judgments in one contracting state will be recognised in other contracting states.
3. To what extent do existing US federal and state laws need to be reconciled with each other and with laws in other countries to provide effective protection for consumers engaged in electronic commerce with foreign businesses?
See comments under 12(f).
In Australia there has been some work done at the state and federal levels to address issues surrounding electronic contracts.
At the federal level, in December 1998 the National Office for the Information Economy released A Strategic Framework for the Information Economy.(14) The Strategic Framework document identifies ten strategic priorities for the information economy. They are:
At the state level, the Victorian Department of State Development, through its specialised agency Multimedia Victoria, has been developing legislative proposals for data protection and electronic commerce since early 1997. In June 1998 Multimedia Victoria released discussion papers entitled "Promoting Electronic Business: Electronic Commerce Framework Bill" and "Information Privacy in Victoria: Data Protection Bill". Exposure Drafts of these Bills were released in December 1998 for comment.(15)
11. To what extent do existing laws, conventions, treaties, or practices governing contracts provide effective protection for consumers engaged in electronic commerce with foreign businesses? To what extent do they need to be modified?
In its Discussion Paper on the Electronic Commerce Framework Bill, Multimedia Victoria outlines some of the legal obstacles to electronic commerce:
The main legal obstacle to electronic commerce is the common requirement for a person's signature. The law often requires a signature for a number of purposes. These include:
In order for there to be certainty as to the legal effect of electronic transactions, it is important that an electronic process exists which can fulfil the purposes of a signature requirement to an appropriate degree.
It is clear that there are many purposes and varying consequences attached to a signature in law. Any definition of "electronic signature" which aims to create equivalence must be accurate, and contain all the necessary elements to achieve legal effect.
Strategic Priority (5) of Strategic Framework is to "Develop a legal and regulatory framework to facilitate electronic commerce". Among the proposed actions to achieve this strategic priority is the following:
At the international level, on 17 November 1998 the European Commission put forward a proposal for a Directive to establish a coherent legal framework for the development of electronic commerce within the Single Market.(16)
On the basis that it must be possible for contracts to be concluded on-line unrestricted by inappropriate rules (such as a requirement to be drawn up on paper), the EC proposal would oblige Member States to adjust their national legislation to remove any prohibitions or restrictions on the use of electronic media for concluding contracts. It would also ensure legal security by clarifying in certain cases the moment of conclusion of the contract, while fully respecting contractual freedom. These provisions would complement the proposal for a Directive on electronic signatures (IP/98/423).
To eliminate existing legal uncertainties and to avoid divergent approaches at Member State level, the proposal would also establish an exemption from liability for intermediaries, such as on-line service providers, where they play a passive role as a "mere conduit" of information from third parties and limit service providers' liability for other "intermediary" activities such as the storage of information.(17)
6. Given that electronic communications do not allow for traditional written signatures, under what circumstances should electronic signatures (or other technological means for a party to express intent to be bound) be legally recognised and binding?
The Victorian Electronic Commerce Framework Bill includes specific provisions related to electronic signatures. For instance, section 3 (Definitions) includes the definition of "electronic signature" as:
Section 5 entitled "Signature" states:
Section 6 of the Bill, entitled "Writing" includes the provisions that:
Basically, where a person's signature is required by law, an electronic signature may be applied instead. This creates a "rule of convenience", which is no way intended to qualify or restrict the right of parties to use traditional paper-based means of doing business.
The Australia - US Joint Statement on Electronic Commerce also supports the removal of paper-based obstacles to electronic transactions by adopting relevant provisions from the UNCITRAL Model Law on Electronic Commerce, and the taking of a non-discriminatory approach to electronic signatures and authentication methods from other countries.
3. How should the burden of proof and risk of loss be allocated with respect to potentially fraudulent use of electronic signatures?
Multimedia Victoria considers issues surrounding potentially fraudulent use of electronic signatures in its Discussion Paper on the Electronic Commerce Framework Bill. In that Discussion Paper, Multimedia Victoria states :
As with proof of a manual signature in court, the onus is on the signer to allege that the signature was applied involuntarily or fraudulently, or that there are other good reasons why they should not be held to it. General rules of contract presume that independent parties signing a commercial agreement intend to be legally bound by it, though this may be modified by consumer protection laws or more general considerations of justice in the circumstances of the particular transaction.
Perhaps the real problem with a non-specific definition of electronic signature is that there is no definitive statement of what constitutes a reliable standard of authentication for the commercial purposes required. Because of the flexibility required in order to allow new electronic signature technologies to develop, it is considered an obsolescent and impractical approach to legislate specific standards of authentication. It is seen that recognition and approval of industry codes of practice on a regularly reviewed basis can provide an adequate means of facilitating proof in court and for raising public confidence and awareness.
It is also open for contracting parties to set agreed standards of authentication, whether by reference to particular software, certification authorities or technical specifications. However, it would be unsatisfactory for government and statutory authorities to be required to accept a wide range of authenticating processes, simply because such methods ostensibly fall within the basic definition. Government agencies will simply not possess the technology to determine the reliability of many authenticating technologies currently available.
Further to this, higher levels of security can be demanded from manual signatures via requirements for swearing or affirming a statement before a third party (often accredited, such as a notary or solicitor). Other formal security measures to achieve certainty of legal effect and admissible evidence are attestation, certification, or other independent corroboration. Assurance is underscored by deterrence mechanisms, such as penalties for perjury, fraud, abuse, contempt and numerous particularised statutory offences.
4. What are the minimum protections that should be available to consumers in the global electronic marketplace?
The same minimum protections available to consumers transacting in the domestic sphere should be available to consumers in the global electronic marketplace. For example, as a minimum, a consumer purchasing olive oil from a Tuscan store over the Internet should be afforded the same protection that they would enjoy if they purchase the same bottle from their local supermarket. In particular, they should be confident that:
With the exception of the last point, which relates to privacy issues, these are the rights afforded Australian consumers under the Trade Practices Act 1974 and other Australian State-based fair trading legislation. Their importance is underpinned by the fact that they are also included in federal and state legislation in most OECD and many other countries.
It therefore makes sense that these sorts of protections form the basis of the OECD's Draft Guidelines on Consumer Protection in the context of Electronic Commerce.
In Australia, the Trade Practices Act 1974 includes fair trading provisions such as a prohibition on misleading and deceptive conduct by corporations(18). Each of the States and Territories of Australia also have fair trading legislation in place which prohibits (among other things) misleading and deceptive conduct by non-incorporated bodies.
These provisions mean that Australian businesses are legally required to provide information to consumers so that they can make fair and informed decisions.
Often industry sectors develop codes of conduct which include information disclosure provisions reflecting and often exceeding this legal requirement. For instance, the Australian telecommunications industry recently developed a Customer Information on Prices, Terms and Conditions Code of Conduct, which provides information disclosure requirements for advertising and selling in the telecommunications industry.
Compliance by an industry participant with such a code of conduct will often ensure compliance with the information disclosure requirements of the Trade Practices Act, and will therefore represent a market-based approach to compliance with black-letter law.
The Draft OECD Guidelines outline in greater detail what is essential online information for consumers. Section 19 of the Annex to the Guidelines states that:
Clear, complete and current information about the identity and the physical location of businesses engaged in electronic commerce, and about the products and/or services they offer, should be provided to consumers.
The Draft Guidelines go on to provide that:
Regarding Internet businesses, the Draft Guidelines also state that:
Other information disclosure requirements that the Draft Guidelines include are:
The finalisation of the Guidelines, with these provisions included, will encourage better disclosure of information to consumers by online businesses.
In Australia consumers are encouraged to complain about practices of foreign businesses to the Australian Competition and Consumer Commission where such practices may constitute a breach of the Trade Practices Act 1974 (TPA). In the same way that the Commission investigates potential TPA breaches domestically, it also attempts to investigate potential breaches by foreign business transacting with Australian consumers.
In some cases successful enforcement action by the ACCC against foreign businesses has been possible through the cooperation of fair trading enforcement agencies located in the particular country. Alternatively, the Commission has used networks like the International Marketing Supervision Network (IMSN) in order to alert the relevant enforcement agency about the business complained about so that they may consider investigating the business for potential breach of their own legislation.
However, in yet other cases, enforcement action has been thwarted by legal and practical difficulties.
The Commission believes that, particularly due to the increase in cross-border consumer-business transactions possible by the expansion of the global electronic marketplace, consumers should be able to complain about foreign businesses in the same way that they can complain about domestic businesses. They should also have some degree of confidence that they will be able to obtain an adequate remedy against the business, to compensate them for any loss.
Effective and efficient cooperation between enforcement agencies is the key to enabling this to occur. This sort of cooperation can be achieved via improved formal and informal cooperative agreements between enforcement agencies.
In Australia there are no statutory "cooling-of periods" available to consumers under the Trade Practices Act. Although a number of industries have developed codes of conduct which contain cooling-off provisions, it would be difficult to apply these provisions to foreign businesses, especially as many of these codes are voluntary.
Given the special nature of global electronic transactions, the availability of cooling-off periods for consumers is entirely appropriate. This would go some way to counteracting a consumer's initial reluctance to deal with an unknown trader, and therefore improve consumer confidence in the global electronic marketplace.
One proviso in order for any cooling-off period to be applied to global electronic transactions - they must be enforceable. One way to ensure this is to introduce the notion of the cooling-off period via self or co-regulation. If an industry participant volunteers to be bound by a cooling-off provision, they are much more likely to comply with that provision, or be able to be forced to comply should that be necessary. Encouragement for industry participants to volunteer to be bound by cooling-off provisions can be provided by the fact that they can use compliance as a positive marketing point - i.e. consumers are more likely to deal with them because of the availability of the cooling-off period.
See comments under 12(b).
Unable to comment.
The emergence of the global electronic marketplace brings with it a number of benefits for consumers and traders. However, operating in the global marketplace also requires businesses to become accountable to different regulatory regimes and conform to varying national standards for consumer protection. The global nature of the Internet makes it extremely difficult for law-abiding suppliers to comply with consumer protection laws that vary significantly between jurisdictions. This is particularly true in the case of electronic commerce, where traders often do not know and can not control the location of their customers. Moreover, the global marketplace exposes consumers to very different levels of consumer protection.
The need for traders to comply with a range of different regulations for products and services (particularly those that impose standards higher than the international norm) may represent a significant non-tariff barrier to international trade by imposing high compliance costs and administrative formalities. It may also hinder law enforcement against cross-border fraud, create uncertainty about the legal standards that apply to transactions and invite forum shopping by unethical businesses.
All this suggests that basic consumer protection laws should be better harmonised on a global basis.
This issue is also included in the Australia-United States Joint Statement on Electronic Commerce, which includes the following policy principle:
8. To what extent is there a need for international dispute resolution procedures or tribunals for consumers engaged in electronic commerce with foreign businesses?
Besides the move towards companies setting up their own complaints handling systems, it is also proving essential in some industries for consumers to have additional access to an external complaints handling body for when company resolutions fail because, for example, the problem is a difficult one. An independent, industry-sponsored system would also be valuable where the number of complaints is high, where they are serious, and/or the distribution of complaints among members is wide.
In Australia, since 1990 various industry dispute resolution schemes have been set up to provide a cost-free, effective and relatively quick means of resolving complaints about the products or services provided by an industry. Customer dispute schemes of this type play a vital role as an alternative to expensive legal action for both consumers and industry. Examples of industries in which external dispute resolution schemes have been developed include:
The emergence of customer dispute schemes is also due in part to increasing recognition of the value of effective industry self-regulation. Such schemes enable industry to ascertain the problems faced by their customers and take steps to rectify them, negating the need for government intervention.
Independent dispute resolution mechanisms can also be created at the international level industries in the global marketplace. For instance:
It can be argued that international industry-based dispute resolution schemes are vital in developing the global electronic marketplace and providing access to justice for consumers that encounter difficulties.
An Australian government/industry/consumer working party has recently developed benchmarks for industry-based dispute resolution schemes to give consumers an avenue of appeal when their complaint is not remedied by a company.
Law Enforcement Agencies
3. What is the proper role for law enforcement agencies in providing effective protection for consumers engaged in global electronic commerce?
If the protection of consumers engaging in global electronic transactions is to be enhanced it is imperative that government enforcement agencies are able to enforce their consumer protection goals in the global electronic marketplace.
The cross-border nature of global electronic commerce means that agencies may need to reassess their enforcement and compliance strategies.
The types of outcomes that should be generated are to:
The strategies that national enforcement agencies employ to enforce consumer protection legislation domestically may serve as a good benchmark from which to begin examining enforcement best practice on the global scale.
What is essential, in order to develop a model for enforcement mechanisms (legislative tools and enforcement techniques) in the global electronic marketplace, is that agencies share details of new and successful enforcement techniques.
One forum that allows this sharing of information and expertise is the International Society of Consumer and Competition Officials (ISCCO).(19)
5. To what extent do private actions provide effective protection for consumers engaged in electronic commerce with foreign businesses?
The new global electronic marketplace effectively allows consumers in one country to buy goods which are advertised in another country, mailed from another, and paid for in yet another. This raises numerous complex issues about practical and legal barriers to obtaining redress.
The majority of global electronic transactions will be completed satisfactorily and without incident. However, it is necessary for the success of the global electronic marketplace that consumers who do encounter problems have access to remedies that are quick, effective, inexpensive and easily accessed.
It is unlikely that private actions will be a realistic option for consumers, because the legal remedies currently available for cross-border disputes will often not meet the criteria listed above due to the following difficulties:
Therefore, in terms of private consumer actions, the pursuance of legal remedies in the global electronic marketplace is likely to be restricted to class or representative actions involving product liability suits.
6. To what extent do existing laws, conventions, treaties, or practices with respect to the sharing of information among law enforcement agencies in different countries provide effective protection for consumers engaged in global electronic commerce? To what extent do they need to be modified?
The enforcement efforts of national government agencies will benefit from the continued sharing of expertise and information with their international counterparts. It is only by working together and utilising each other's expertise and local knowledge that government agencies from different jurisdictions will be able to begin addressing the problems of enforcing consumer rights in the global electronic marketplace. For instance, by making police records available to each other or by conducting routing investigation activities within their own borders.
Mechanisms for improving the sharing of information and expertise between agencies include international liaison and more formal memoranda of understanding and global cooperative networks. Memoranda of understanding between countries can outline how information can be shared between international government agencies.
As an example, on 26 June 1997 the Australian Federal Government signed a Joint Declaration on Relations between Australia and the European Union. The Joint Declaration includes as its objectives the exchange of information and the encouragement of cooperation on (among other things) aspects of policies such as those related to competition and consumer protection.
To alleviate concerns about confidentiality and privacy, memoranda of understanding could contain confidentiality clauses.
International networks among government agencies are another mechanism for sharing information and expertise. They could act as databases by which agencies could be alerted to specific traders and practices that have caused problems in other jurisdictions.
Preventative and alert systems could be developed on the basis of this shared information to ensure that problems experienced elsewhere are kept out of a country, or that country's consumers are at least given sufficient warnings about them.
The International Marketing Supervision Network (IMSN) performs a valuable role in the sharing of information internationally between enforcement agencies. For instance, the ACCC recently received a number of communications from fellow IMSN member agencies outlining cross-border scams (such as phoney lotteries and phoney investment opportunities) operating in their countries.
Another network which will provide ongoing sharing of information and ideas among consumer and competition officials is the International Society of Consumer and Competition Officials (ISCCO).(20)
The Draft OECD Guidelines on Consumer Protection in Electronic Commerce also allude to the importance of international government cooperation:
7. To what extent do existing laws, conventions, treaties, or practices with respect to the coordination of law enforcement activities between different countries provide effective protection for consumers engaged in global electronic commerce? To what extent do they need to be modified?
Problems with enforcing legislative rights in foreign jurisdictions can also begin to be addressed through international cooperation between agencies. Even where the activities of traders operating out of one country are not focused on that country's consumers, the country arguably has an ethical responsibility to help to protect consumers in other parts of the world. Furthermore, it makes sense in terms of the country's national interests, since the reputation of its legitimate businesses can be damaged by a few disreputable traders. A new mentality is needed; government agencies should not simply work to protect their own consumers, but should become part of an international effort to address issues on a global basis.
A good approach would be the cross-referral of complaints to relevant national enforcement agencies for action. A government agency could pursue and cooperate with enforcement actions against unethical traders set up in their own country but dealing with consumers elsewhere, for the simple reason that if their consumers were similarly affected by a trader operating out of another country they would no doubt want the authorities in that country to take action. The International Marketing Supervision Network (IMSN ) also performs the function of cross-referring complaints, to some extent.
As well as addressing unfair trading practices, joint law enforcement efforts can help to maximise limited resources. A recent example of a successful enforcement cooperation event has been the international Internet sweep days. In October 1997 and September 1998, more than 70 enforcement agencies from 30 countries identified over 1100 get-rich-quick schemes and 1500 miracle cure and health claim schemes on the Internet. The site operators were sent a compliance education email message and a month later more than a quarter of those sites had disappeared.
8. To what extent is there a need for international dispute resolution procedures or tribunals for law enforcement agencies seeking to protect consumers engaged in electronic commerce with foreign businesses?
The availability of international dispute resolution procedures or tribunals for law enforcement agencies seeking to protect consumers dealing with foreign traders would go some way to addressing difficulties with the enforcement of domestic fair trading laws across borders.
This sort of formal means of international cooperation between enforcement agencies is vital to the development of the global electronic marketplace, and is noted in the OECD Draft Guidelines for Consumer Protection in Electronic Commerce. The Annex to the Draft Guidelines state:
Consumer and Business Education
9. What steps have been, and should be, taken to educate consumers about the global electronic marketplace?
In addition to their strict enforcement role, a key consumer protection role of law enforcement agencies in the global electronic marketplace is the provision of cheap, objective, reliable information for consumers and business about their rights and obligations, as well as tips to avoid problems. To this end the existing education campaigns undertaken by enforcement agencies could be adapted for the global electronic marketplace. In some instances the ideal strategy would be for industry and government bodies to work cooperatively.
In Australia, State, Territory and Federal consumer affairs agencies have recognised this. The theme of the Ministerial Council on Consumer Affairs (MCCA) 1997 National Consumer Day was "Hints and advice for shopping via alternative means such as the Internet". And many more publications and projects are devoted to issues surrounding consumers and new technologies.
If government agencies maintain a reputation for impartially providing accurate and relevant information, consumers would grow to know they are a reliable source. The benefit to consumers would be greatly reduced information acquisition and processing costs. The type of information provided to consumers could include the following:
The importance of education and awareness is included in the Draft OECD Guidelines on Consumer Protection for Electronic Commerce. Its provisions include:
Government agencies would also benefit from using new technologies in disseminating consumer education messages. This issue is also noted in the Draft OECD Guidelines:
4. What steps have been, and should be, taken to educate business about consumer protection in the global electronic marketplace?
To achieve a harmonious global electronic marketplace it is important that industry members also are aware of their rights and responsibilities. Therefore, global electronic business education, in the form of compliance and information programs, is important.
Industry participants can benefit by being aware of their responsibilities to consumers before, during and after transactions are completed. More specifically, traders need to be informed of the various standards and/or codes applicable to their industry.
Educating the business sector is often a less arduous task than educating consumers in that it is made up of smaller, more identifiable, and easier to contact groups.
Compliance education has long been an important consumer protection strategy employed by the ACCC and other government enforcement agencies, and could be extended and adapted to the needs of the global electronic market community.
The importance of increasing business awareness of the consumer protection framework that applies to their online activities is also noted in the section 38d of the Draft OECD Guidelines.
5. How does the provision of effective protection for consumers in the global electronic marketplace benefit industry members?
As major beneficiaries of the emerging global electronic marketplace, the business sector has an interest in ensuring that adequate consumer protection mechanisms exist. As many ethical businesses recognise, there are also enormous benefits in providing protection mechanisms for global market consumers in terms of ensuring consumer confidence and maintaining a good reputation.
As is the case in domestic markets, a global trader that establishes a good consumer protection reputation (ie strong positive brand recognition) will benefit by having customers return and inducing others to do the same.
This sort of reasoning has led Australian industry to support the development of the OECD Guidelines on Consumer Protection in Electronic Commerce.
6. How does the provision of effective protection for consumers in the global electronic marketplace present challenges to industry members?
Mass acceptance of this form of commerce hinges on the integrity of global traders; this is an important challenge for industry members. Many companies are realising that unethical business is bad business and are looking to promote ethics and provide consumer protection mechanisms in their operations.
Industry members can develop and implement effective strategies at the corporate and industry levels. In many cases industry participants will appreciate the benefits associated with consumer awareness and will incorporate good consumer protection and fair trading features into their corporate structures. Where this isn't the case enforcement agencies can encourage them.
7. To what extent do/will the benefits and challenges industry members experience with respect to consumer protection in the global electronic marketplace differ from those experienced in the traditional marketplace?
These benefits and challenges differ from those experienced in the traditional marketplace primarily because of the following key features that define global electronic transactions:
These features make up a new and unexplored, and in some cases frightening, marketplace, of which consumers are wary. In order to overcome the fear and uncertainty created by these features, industry members must be creative in their development of corporate and industry-level consumer protection initiatives to enhance consumer confidence.
5. To what extent do/will industry-led self-regulatory programs provide effective protection for consumers in the global electronic marketplace?
Customer service and internal consumer affairs practices at the company level are becoming increasingly important indicators of a competitive company and competition in a market. Poor consumer protection generally in any given industry sector can indicate less than genuine market rivalry, as do higher prices and poor quality products.
As markets become more competitive a convergence is occurring between business and consumer interests. Companies are looking at what concerns consumer affairs agencies for ideas to gain a competitive advantage over their rivals.
Many industry participants will recognise that global consumers have basic needs in relation to global market transactions (e.g. goods and services that are safe and represent value for money, choice, and adequate information on which to base choice). Industry participants may need to adopt strategies which are sensitive to these consumer needs. That is, consumer responsive mechanisms and a corporate culture which will improve innovation and commitment to consumer needs.
One concept that can be encouraged is that of the "quality trader", where a trader operates with certain consumer safeguards. Because many transactions will not involve person contact, consumers will want to deal with companies they can trust, that have a solid reputation, are responsive, and can provide remedies when things go wrong.
Any company wishing to remain competitive will need to have a strategy in place for continuous improvement, ie setting and meeting benchmarks in areas such as call centre operations, complaints handling and customer satisfaction which, as a minimum, met recognised best practice but, preferably, exceed them.
Many international transactions leave consumers with no domestic remedies, so the idea of a good corporate citizen which guarantees some basic consumer rights may fill the void. Only then will consumers feel confident to deal with these traders. To this extent it will be a market response to a market problem.
A global quality trader would give a guarantee that it has features such as:
In addition to at the corporate level, consumer protection programs must also be developed and maintained at the industry level in order for consumer confidence in the global electronic marketplace to be achieved. Unfortunately some individual operators may seek to "free ride" on the consumer confidence created by the initiatives of consumer focused traders, while not offering any consumer protection mechanisms themselves.
It if for this reason that some industry associations are well placed to oversee and encourage the adoption of industry-based consumer protection mechanisms, such as the creation of industry consumer issues committees or consumer certification programs. Where appropriate, industry members could develop and adhere to national or international self-regulatory regimes, or co-regulatory schemes in conjunction with government, that promote the enforcement of consumer protection goals. National enforcement agencies could support and assist the efforts.
As governments have been moving away from prescriptive "black letter" law to regulate markets they have increasingly turned to codes of conduct, particularly on an industry-specific basis. Codes of conduct are being used by a number of industries as a means of self-regulation or co-regulation with government. By identifying industry members that are bound by appropriate industry standards, codes represent a public statement of the industry's responsiveness to consumer needs and concerns.
Following are some of the advantages that codes of conduct offer over government regulation:
It is the Australian experience that black letter enforcement no longer works by itself. Instead, there is a role for both codes of conduct and standards in gaining fair trading outcomes, with the latter underwriting the former. The Australian approach was not to opt for the "list of vague/motherhood statements of good intent" type codes, but a co-regulatory approach, which has to meet a number of essential criteria, including those listed below.
In Australia, the Australian Internet Industry Association (IIA) is currently developing an Internet code of conduct. The code is aimed at a wide range of businesses involved in Internet commerce, including content providers, Internet service providers, programmers, vendors and web page developers.
At the international level, the OECD Draft Guidelines for Consumer Protection in Electronic Commerce currently under development could form the basis of an international electronic commerce code of conduct. Such a code could set enforceable international standards of consumer protection for electronic commerce, thereby providing a global strategy for a global medium.
Self-regulation is the optimal approach for the provision of consumer protection standards for the global electronic marketplace. However, it is difficult to have confidence that a self-regulatory mechanism will in itself be successful in achieving fair trading outcomes. That places the entire burden and responsibility of the development of, participation in, and compliance with self-regulatory schemes by the industry sector. This is especially difficult in the global electronic marketplace where it may be difficult to achieve broad industry participation. The novelty of this new medium also requires that consumer protection standards are developed and maintained from the outset. There is a very real danger that, "once burned", consumers contemplating electronic transactions will be "twice shy".
The ACCC considers a preferred approach to be co-regulation. This involves the development of self-regulatory standards backed up by government legislation. A good example of a co-regulatory scheme recently introduced into Australia is in the telecommunications industry.
Part 6 of the Telecommunications Act 1997 encourages telecommunications industry sectors to develop codes of conduct for the new deregulated telecommunications environment. These codes will set consumer protection, operational and network standards for the telecommunications industry in relation to non-content related services and goods.
The Commission regards the Part 6 co-regulatory regime as entirely appropriate for the development and maintenance of consumer protection standards for the Australian telecommunications industry, and the codes and complaints handling mechanisms developed through this regime have the potential to be hugely effective in achieving high consumer protection standards.
There are a number of reasons for the Commission's confidence in the Part 6 regime:
Development of the Global Electronic Marketplace
21. How much and how quickly will electronic commerce grow over the next five years?
A recent publication of the Delegation of the European Commission to Australia and New Zealand, EU Background, cited that the global electronic commerce market could be worth ECU 200bn by the year 2000. It is also states that 86mn people were connected to the Internet by the end of 1996 and by 2000 this number is expected to reach 250mn. EU Background goes on to say that within the European Union, more than 400,000 jobs related to the information society were created between 1995 and 1997, and that one in four new jobs is derived from these activities.
In addition to access and technological developments, including safer payment systems over the Internet, consumer confidence in electronic commerce will ensure its growth. Consumer confidence will only be achieved through the development and maintenance of efficient and effective measures for consumer protection.
In the same way that consumer confidence will ensure the growth of electronic commerce, a lack of consumer confidence will undoubtedly stunt that growth, meaning that electronic commerce will not reach its full potential. Consumer confidence, achieved through a guarantee of consumer protection, is essential to the success of the global electronic marketplace.
3. How will electronic commerce change over the next five years?
The ACCC is not qualified to comment on these issues, except to say that no matter what demographics or types of products the future holds, one thing is certain - businesses will increasingly deal with consumers from other countries. The fact that many of those businesses will be located in the United States calls for strong US leadership in the development and maintenance of global strategies for consumer protection in the global electronic marketplace.
3. To what extent do/will new marketing techniques made possible by technological developments affect consumer protection?
New marketing techniques in global electronic commerce do and will no doubt have significant consumer protection implications. It is the distance selling, and often international nature of Internet transactions that can raise certain consumer protection difficulties unique to cross-border transactions. For instance:
6. To what extent do/will technological developments enable consumers to protect themselves?
New technologies not only bring new challenges for consumer protection, but also bring new mechanisms for enforcing consumer rights. Current and future technological developments that will help consumers to protect themselves include:
New technologies can also help enforcement agencies to better enforce consumer protection laws for global electronic transactions by equipping enforcement staff with better means of addressing fraudulent and deceptive conduct. For instance, the International Internet Sweep Days use new technologies such as search engines, tracking devices and email to identify and address Internet scams.
6. What should be primary focus and scope of the Commission's initial public workshop on "U.S. Perspectives on Consumer Protection in the Global Electronic Marketplace?"
Based on the ACCC's previous work on the enforcement of consumer protection laws in a global marketplace, it is suggested that the primary focus of the FTC's workshop should be not only to identify potential consumer protection issues surrounding global electronic commerce, but to work together with agencies like the ACCC and forums like the OECD Consumer Policy Committee in the development of globally harmonised and cooperative strategies to address those issues.
7. Which interests should be represented at the Commission's initial public workshop on "U.S. Perspectives on Consumer Protection in the Global Electronic Marketplace?"
There are numerous stakeholders in the development of the global electronic marketplace, many of which can be involved in the development of consumer protection strategies to ensure its success. These parties include:
Because many of the strategies to address the consumer protection challenges raised by the emergence of the global electronic marketplace will require the government, industry and consumer sectors to combine their efforts, the FTC's initial public workshop will only benefit from their representation. Additionally, in any consumer protection model, while there is a need for market-based outcomes, it is the ACCC's experience over the last twenty-five years that unless all relevant interests (including business, government and consumer/end users) are represented in the development of consumer protection strategies, there is a high probability that they will fail.
1. Working Draft - Rev2.2, 16 December 1998.
2. Part Two General Principles, Section 18.
The Global Enforcement Challenge is available on the ACCC homepage under "Publications", "Reports and Discussion Papers".
Information about The Sydney Global Commerce Conference is available on the ACCC homepage at the bottom of the opening page.
8. A copy of the report is available at http://law.gov.au/aghome/advisory/eceg/ecegreport.html
IP notes are available on the EU's Rapid Database at www.europa.eu.int/rapid/start/welcome.html
17. EU Background, Delegation of the European Commission to Australia and New Zealand, December 1998, 4/98.
18. Trade Practices Act 1974, Commonwealth of Australia, section 52.