|March 26, 1999
Re: U.S. Perspectives on Consumer Protection in the Global Electronic Marketplace - Comment, P994312
On behalf of the 11,000 members of the Information Technology Association of America (ITAA), I would like to submit the following comments in response to the December 16, 1998 Federal Register Notice requesting public comment on the public workshop on US perspectives on Consumer Protection in the Global Electronic Marketplace.
Providing a safe environment for retail transactions on the Internet is an imperative for ITAA members. Our members are the companies who built the World Wide Web, who run its backbone, provide the hardware and bring it into the homes and offices of people around the world. Many of them sell their goods and services directly over the Web, and all of them are committed to providing their customers with an online environment that discourages fraud and other criminal behavior. To that end, many of them are using technology, self-regulatory codes and practices, consumer outreach and education to facilitate trust in e-commerce.
We are well aware that these approaches in some cases may have to be supplemented by governmental action. With this in mind, we urge the Federal Trade Commission to focus its current work and the spring 1999 Workshop on producing an inventory of existing consumer protection laws, treaties, self-regulatory initiatives, and technological advances that are relevant to the online environment. We caution against any precipitous action to harmonize consumer protection laws internationally.
The Information Technology Association of America (ITAA) is the leading U.S. trade association representing the computer software and services industry. Its more than 11,000 direct and affiliate member companies provide Internet access, on-line services, Internet software, Intranet development products, telecommunications services, business software, software programming services, information systems integration services, and information processing services.
International Linkages and Principles
Beyond its work on domestic issues, ITAA is also a member of the World Information Technology and Services Alliance (WITSA), a consortium of 35 information technology associations from around the world. As the global voice of the information technology industry, WITSA is dedicated to advocating policies that advance the industry's growth and to facilitating international trade and investment in information technology products and services. WITSA is also the publisher of Digital Planet: The Global Information Economy, the first major study of global spending on information technology and its economic impact in 50 economies. For more information on WITSA, I refer you to its web site at www.witsa.org.
Through WITSA, ITAA also participates in the Alliance for Global Business (AGB), a group of five leading international trade associations that represent IT users as well as service providers and vendors, created to provide business leadership on information society issues and electronic commerce. The AGB produced a Global Business Action Plan for electronic commerce which was released at the October 1998 OECD Electronic Commerce Ministerial. The plan outlines some fundamental principles for electronic commerce, including:
These guiding principles are the framework for our comments on global consumer protection and the proposed Spring 1999 FTC workshop.
Impact of Electronic Commerce
In 1996 there were under 40 million users connected to the Internet globally. By the end of 1997, that number had jumped to 96 million. Projections put the number of online users at nearly 1 billion by 2005. The Internet has penetrated our lives more quickly than any other technical advance in recent history. For many small and medium sized enterprises (SMEs), the Internet and electronic commerce have lowered market entry barriers. They can now do business at a much lower cost, particularly internationally. There is no doubt that electronic commerce and the Internet is revolutionizing the way we communicate and interact with consumers.
Acceptance of Internet commerce is occurring at unprecedented speed. The Internet as a consumer medium is only four years old, so it is natural that different consumers may require varying degrees of comfort level to use it. For example, it has taken several decades for consumers to become comfortable using credit cards. The reluctance of some consumers to engage in Internet commerce after such a short period should not be seen as a need for regulation. Free market responses, technological innovation and cultural change, rather than special government rules, are the best means to let individuals decide to shop on line at their own pace.
Clearly there is a continued need for governments to protect their citizens. But we ask that they balance this without unnecessarily inhibiting the growth of electronic commerce. There is no need to develop an entirely new set of rules for consumer protection in the online environment, but there may have to be adjustments and additions to existing protections. We believe that providing consumers with choices regarding their protection will become a market advantage, and, in many instances, technology may solve some of the most difficult issue. For example, recent surveys indicate that consumers are reluctant to conduct transactions over the World Wide Web for fear that confidential information could be misused or disclosed.
We have found that ITAA member companies endeavor to provide consumers with choices to protect the privacy, security, and confidentiality of their transactions. Many companies see it not only as good business, but as a competitive market advantage. This has lead to creative approaches to consumer protection.
Role of Technology
In addition to industry self-regulatory policies, sophisticated, robust technological tools for consumers have been developed and continue to be developed to protect and empower consumers. For example, the use of a "clickwrap" process for online purchases, where a consumer is guided through a series of steps stating the terms and conditions of contract and permitting a consumer to accept or decline each screen, has helped to resolve some of the uncertainties regarding contract execution. Additionally, improved authentication and security mechanisms could also be used to identify and verify parties in an electronic transaction and ultimately reduce incidences of fraud.
We also believe both government and industry have an obligation to educate consumers regarding their rights and responsibilities and ability to exercise choice with respect to consumer protection. Much of the fraudulent behavior found online, such as pyramid schemes, is not new or unique to the online environment. The best weapon against fraud is educating consumers.
Existing International Efforts
The Organization for Economic Cooperation and Development's (OECD) Consumer Protection Committee has been working on a set of consumer protection guidelines for nearly a year and OECD trade ministers released a declaration on Consumer Protection at the October 1998 Electronic Commerce Summit. While we agree with the spirit of the document we are concerned by the draft guidelines, which ministers have called to be completed in 1999. Given ongoing technological developments, industry self-regulatory initiatives and the early stage of multilateral discussions on consumer protection, the proposed OECD guidelines on consumer protection may be premature. We are also concerned that industry was not involved in the drafting discussions until relatively late in the process.
The European Union has also issued several directives that address consumer protection (e.g., the Communication on Security and Confidence in Electronic Communication 8 Oct 1997 and Directive 97/7/EC on Protection of Consumers in Respect to Distance Contracts). Most recently, the European Commission released a draft directive on certain legal aspects of electronic commerce that addresses consumer protection both directly and indirectly.
For example, we feel the current version of the directive includes language on commercial communication that could adversely affect consumer protection. The draft directive includes a definition of commercial communication that would apply to any form of communication designed to promote, directly or indirectly, the goods, services or image of a company, organization or person pursuing a commercial, industrial or craft activity. While the directive does not actually apply to the domain name (e.g., Error! Bookmark not defined.) it does apply to product information found on a web site. This could have an adverse effect on consumer protection in that much of what is contained on web pages includes information on a company, including their products, policies, as well as contact information. Consumers should be able to locate such information easily. This type of information is critical to empowering users.
An important element of any multilateral discussion of consumer protection is to make sure both industry and consumer interests are represented.
International Standards Organization
The ISO/IEC JTC1 Business Team on Electronic Commerce has identified key consumer requirements in electronic commerce that are recommended for standardization work. The Group is next expected to prioritize consumer-related standardization activities and allocate work to appropriate standards committees.
World Customs Organization
The WCO issued a recommendation on the acceptance of electronically transmitted customs declarations, including digital signatures, in courts of law. The organization is now looking at the risk management based control techniques that would maintain effective social and environmental controls while at the same time facilitating legitimate trade.
Proposed FTC Spring 1999 Workshop
Given the current private sector activity and OECD discussions, the FTC workshop on online consumer protection comes at an appropriate time. The workshop should provide a forum for industry, consumer groups and other interested parties to demonstrate current technologies and policies in place to protect consumers.
With these preliminary comments in mind, we recommend that the FTC workshop:
More specifically, the workshop should provide a forum for the identification of issues that need to be addressed. In our preliminary discussion of consumer protection, we have identified the following issues:
Thank you for the opportunity to provide our comments on this important issue and the FTC workshop. We would be happy to participate in greater detail.
Harris N. Miller