July 1, 1999
To the Secretary:
Dell Computer Corporation welcomes the opportunity to submit supplemental comments in this proceeding examining U.S. Perspectives on Consumer Protection in the Global Electronic Marketplace, 63 Fed. Reg. 69289 (December 16, 1998). Dell appreciated the Commission's invitation to participate in the June 8-9, 1999 workshop. The Commission has initiated a useful dialogue among industry, government, and consumer group representatives.
Dell is the world's leading direct computer systems company and is the leading computer systems vendor to U.S. small and medium businesses. Ranked No. 78 among the Fortune 500 companies and No. 363 in the Fortune Global 500, Dell currently sells more than $18 million in products each day over the Internet. Dell's online sales now account for approximately 30 percent of its annual sales, which were $19.9 billion for the past four quarters. One of the company's strategic goals is to do at least 50 percent of its business online by the end of the year 2000.
At Dell, we are fully committed to the development of a global electronic marketplace that offers safety, transparency, and legal certainty for consumers and online businesses. E-commerce is changing the economy of the United States. As The Washington Post reports, e-commerce generated approximately $301 billion in U.S. revenue in 1998; Forrester Research Inc. has estimated that U.S. consumers spent $8 billion buying on the Internet in 1998. The Washington Post, "Internet's E-conomy Gets Real," June 20, 1999, at A1. Most of the participants in the June 8-9 workshop agreed that consumer confidence is critical to the future global success of e-commerce. Many noted that the Internet empowers consumers in a way unlike that of any other medium. The Internet provides consumers with easy access to vast amounts of information and facilitates rapid comparison shopping on a global scale.
The competitive pressures present on the Internet create strong incentives for Dell and other online merchants to become trusted resources for consumers, lest they find themselves developing a negative online reputation. In this fast-changing environment, online merchants have every reason to do all they can to inform consumers and ensure that the consumer has a positive experience and so returns. With competitors only a click away (and global publication of negative comments faster, easier, and cheaper than it has ever been before), vendors want to make sure that their customers are comfortable and happy.
In the context of this quickly-evolving global marketplace of information and choice, the FTC should be wary of rushing to agree that new domestic or international rules should be applied to merchants. The online industry is still very new. Overbroad or rigid regulations will not only stifle its growth, but may also risk not addressing the problems they were meant to meet.
Dell will focus its comments on two questions raised during the portion of the June 8 workshop dealing with core protections for consumers and online disclosures: (1) Do the characteristics of e-commerce warrant consumer protections or fair business practices different from those available in traditional commerce?; and (2) What fair business practices and consumer protections, other than disclosures, are necessary to build and maintain consumer confidence in conducting international electronic commerce?
I. Do the characteristics of e-commerce warrant consumer protections or fair business practices different from those available in traditional commerce?
E-commerce should not be discriminated against merely because it presents a new field for regulation. Only if there is something "different" about e-commerce that makes necessary additional or new regulatory mandates should action be taken. Dell believes that no such meaningful differences exist justifying additional or unique regulations.
The only helpful answer to the question posed by the Commission is "it depends." E-commerce consumers can, of course, have convenient access to a wealth of information. The merchant itself can provide a large amount of information about its products and services. Consumers can easily turn to third-party sources that provide additional information, including product reviews, advice and guidance concerning how to purchase a particular good or service (e.g., information about the types of available mortgages and tips concerning how to obtain the best rate), and reputational information concerning a particular merchant. Consumers can shop at their own pace on the Internet, without salespeople pressuring them to make a decision. The Internet provides consumers with access to up-to-date, easily searchable information about companies' performance history, and the ability to communicate their own experiences widely to others, making it even more difficult for unscrupulous companies and individuals to stay in business for very long. Third party consumer protection organizations, such as BBB Online, also provide another important and useful resource. All of this information can be close at hand and easily accessible. These characteristics of e-commerce make the imposition of additional "consumer protections or fair business practices" (beyond those present in the paper-based world) unnecessary.
On the other hand, consumers cannot touch the products they are buying over the Internet or see the brick-and-mortar outlines of the stores they are dealing with. For this reason, tools that are not common in the paper-based world (including filtering software and private third-party seal programs) need to be available that can help consumers find reliable merchants that provide the protections and policies that a particular consumer desires. As these tools become more widespread, merchants will be pressured to adopt more consumer-protective policies so that they are not automatically excluded by these various types of screening tools. This result will benefit all consumers whether or not they use the tools.
Dell is a proud member of the BBBOnline seal program, and was the first recipient of a BBBOnline seal. Other private seal efforts are growing and were much in evidence at the June 8-9 workshop. These efforts include the AICPA "CPA WebTrust" program, the AOL "Certified Merchant" program, and the Electronic Retailing Association "Online Marketing Guidelines" program. There has clearly been a great deal of progress in this area, and BBBOnline, among others, is making a strong effort to recruit small and medium-sized businesses and has made membership widely available. More than 3,000 businesses have already been awarded the BBBOnline Reliability seal, which allows browsers to quickly check background information on a participant and to verify that the company has a satisfactory record with the BBB. More than 700 web sites have joined the TRUSTe program, which provides consumer assurance of the uses of their personally identifiable information, and TRUSTe expects that more than 1,500 sites will have joined the TRUSTe program by the end of December 1999. Dell applauds and is working with other industry members to assist these self-regulatory efforts.
Online dispute resolution is another tool that more businesses will want to use in the future. A vendor that can state (through a seal or other means) that it will comply with the decisions made through an online process (and that the process will be speedy and easy to follow) will have an advantage in global e-commerce. Like filtering software and private seal efforts, online dispute resolution will not have a direct analogue in the paper-based world but will benefit consumers.
The market incentives and screening tools described above will both encourage the growth of global e-commerce and protect consumers. It would be premature to go beyond these existing (and increasingly widespread) incentives and tools by treating the Internet as a static medium to which rules carved in stone can be applied. E-commerce is still a new industry that could easily stumble over specific, territorial, premature attempts at regulation.
FTC's prosecutorial authority under its existing legal mandate is considerable. (Indeed, one of the pieces of news at the June 8-9 workshop was that FTC has brought more than 80 actions concerning Internet commerce over the past year.) FTC should dedicate its existing, formidable resources to protecting consumers against bad actors (whether they are bad Internet actors or bad actors in other media) rather than looking for additional or new "consumer protections or fair business practices" to apply to e-commerce merchants.
II. What fair business practices and consumer protections, other than disclosures, are necessary to build and maintain consumer confidence in conducting international electronic commerce?
Dell believes that the answer to this question will be found in (and is already being revealed by) the marketplace. At this early stage in the development of electronic commerce, evolving, market-driven practices provide the best means for safeguarding online consumers. Online businesses have a compelling interest in ensuring the establishment of a stable, predictable and fair online commercial environment. Market comparisons, not law, provide the best vehicle for encouraging consumer confidence, particularly in a medium in which small businesses would be greatly burdened by the costs of strict requirements. (Indeed, even requiring all e-commerce vendors to post a phone number could be very destructive for small businesses with limited resources.) Dell believes that certainty as to (i) the security of online payment, (ii) the ability of a consumer to cancel transactions or return goods within stated parameters (e.g., through a "satisfaction guaranteed" mechanism), and (iii) the ability of a consumer to know how his/her private information is being treated will be central to building and maintaining consumer confidence in electronic commerce. All of these mechanisms are being provided by the private sector, and the framework of market-driven protections is being strengthened daily.
The FTC should exercise extreme caution in imposing or encouraging rigid new rules (either domestic or international) to protect consumers in cyberspace. Given the nascent state of e-commerce, any attempt to develop burdensome, technology-specific disclosure/consumer protection rules could stifle the continued growth of online commerce. The electronic marketplace is highly fluid and changeable; premature attempts to impose new rules or guidelines may have unforeseen negative consequences. Moreover, the FTC should be wary of the debilitating effect conflicting national regulations could have on the development of global electronic commerce. A patchwork of inconsistent regulations will only harm U.S. businesses and burden global electronic commerce.
It is very important that the FTC (both as a U.S. agency and as this country's representative in speaking to international consumer protection groups) recognize the possibility that contractual agreements may act as a form of consumer protection online. If reliance is placed on comparison and competition among sets of contract terms, sites will compete to offer the terms that most customers want (except for fraudulent sites -- which will not comply with regulations in any event). Vendors can provide choices of relevant provisions (duration of warranty protection, terms of online dispute resolution, "satisfaction guaranteed" statements), and consumers can actively choose the vendors with which they want to deal based on these terms. Browser technology can provide a great deal of feedback information to the consumer -- is the site offering secure transactions? which laws apply to transactions on the site? Indeed, browsers could allow the consumer to set "preferences" for transactions at the consumer's leisure, and could permit some automatic "negotiation." Online fraud watch and consumer help services can easily be one click away from websites. Browser technology can be used to help bring them even closer, so that a click on a button at the bottom of the screen can bring the viewer to ftc.gov or another designated information site.
The FTC's initiation of this dialogue on consumer protection is both useful and commendable. The next step is to continue the conversation with the active participation of industry. Dell would be happy to work with the FTC on facilitating the international growth of the types of market-driven technological protections sketched out above. Dell believes that the five key issues announced by the FTC at the close of the workshop (online businesses should not be treated differently from other, paper-based businesses; online consumers are entitled to consumer protection; disclosures are beneficial; core principles should be decided on; and international consensus is desirable) should be viewed through the framework of the thriving, international marketplace that is growing on the Internet today. It would be a mistake to require "core principles" and "best practices" that freeze existing technology in its place or, worse, cripple the ability of global e-commerce to grow.
Regina M. Keeney