Workshop on U.S. Perspectives on Consumer Protection in the Global Electronic Marketplace

Remarks by Commerce Secretary William M. Daley

For Release

Last month at the Commerce Department we had a similar packed house for a conference. We were discussing ways to include e-commerce in government statistics. The fact is, people in the private sector are making billions of dollars in decisions about e-commerce -- without a reliable base of information.

A parallel can be made for consumers. Consumers are making major purchases on the web, often without knowing or having even heard of the companies they are buying from.

In the world of e-tailing, consumers cannot go to the store and see the merchandise. They cannot talk to employees, or have any visual cues to what the place is like -- as they do at the mall. So, we have to find new ways consumers can obtain information.

This is very important, because I absolutely believe in the history of business there has never been anything like the Internet. E-commerce's potential to change the way we shop, we work, we get our news, we conduct business is enormous.

It is creating businesses that would not exist without it. It is creating whole new forms of businesses. And now a mom-and-pop store in rural America can sell products on the Internet nationwide -- even worldwide -- just like a Fortune 100, with its massive distribution system.

Soon Vice President Gore and I will release an up-dated report on the Emerging Digital Economy -- showing its size and growing importance.

I released the first one last year, and we will make this an annual activity. The numbers showed our country's economy is very much tied to information technologies.

About a third of our growth has come from information technologies -- and remember this is an economy that has created 18 million jobs, and that has expanded more than any economy in peacetime history.

The declining price of information technology products has lowered overall inflation by one percentage point or more. And investments in information technologies account for more than a third of all business equipment investment -- up from just 3 percent in the 1960s.

I was reminded of this yesterday in Louisville. I was at a UPS facility, and they told me they now spend almost as much on information technologies as they do on airplanes.

Without getting into details, let me preview the forthcoming report by saying this. I know nothing surprises all of the optimists -- but even they will be pleased with the new numbers.

But the fact is, e-commerce is still relatively small, compared to the rest of the economy. Last year, business to business transactions accounted for less than a percent of our $9 trillion economy. And even though retail sales on the Internet tripled last year, they still accounted for much less than one percent of all retail trade.

It may be small, but it is growing fast. And the point I want to make today is, we need to act just as fast to deal with two issues that are of growing concern: privacy and consumer protection. If we do not deal with them, there is no doubt in my mind the Internet will never realize its potential with consumers.

First, on privacy, surveys show it is the leading cause of people not going on-line. Chairman Pitofsky and I have worked hard on this issue. The President and Vice President have asked the private sector to take the lead.

It has taken some prodding from some of us, and the job is not finished, by any means. But we can say this: nearly two-thirds of websites now disclose their privacy policies or information practices. That is a dramatic jump from a year ago.

As you know, to help companies develop privacy policies and enforce them, new groups have formed -- like the OnLine Privacy Alliance, TRUSTe, BBBOnLine, and CPA WebTrust. They have signed up hundreds of companies or associations.

As we look to the second issue -- consumer protection -- we need to show similar progress. In one respect, consumer protection and privacy are very different.

Unlike privacy, we have a lot of consumer protection laws and regulations already. The federal government has rules. Every state has rules. Every country does, too.

And that's how it should be. No one should be allowed to cheat consumers. What we need to ask is: how do we adapt the existing rules to the Internet?

Say the seller is in California, and the buyer is in Illinois. Whose rules do you follow? Or can you in California comply with the rules of the hundreds of other jurisdictions around the world, where you want to sell? Maybe you won't sell across state or national lines because it's too complicated, it is not worth it. That would deprive you of an incredible market.

These jurisdictional issues are complicated -- just as they are for copyrights and a host of related issues. And they are complicated on an international basis, too. No doubt, this will take years to sort out and resolve. There is no silver bullet. But I think we have to come to a consensus on jurisdictional issues.

We need to have a dialogue. And it cannot be just governments talking -- it has to involve business and consumer advocates, working together.

In the meantime, consumers need confidence -- now.

In this respect, privacy and consumer protection are very much alike. If people don't feel safe and secure, they won't use the Internet. All those rosy predictions on Internet use won't pan out. It must be the private sector that takes the lead -- as they have on privacy. It must be businesses, working with consumer groups, to build consumer confidence in Web shopping.

Consumers want to know whether the Websites they are visiting are safe places to do business. Consumers want to know they are dealing with a reputable company. There are too many cases of customers ordering a book, and are sent a tape, and then they find out they cannot return their order.

New technology -- and old-fashioned ingenuity -- can bring consumers more confidence. Look at the electronic auction business. There have been a number of fraud complaints, because not everybody in this world is a straight shooter at these auctions.

So, companies began to offer to insure the transactions, and there is now even competition among auction sites on who can give you the best insurance. Electronic escrow companies emerged saying they would hold the money due to the seller until the buyer got the product. Electronic assessors emerged, saying they would inspect and certify that the merchandise was what the seller claimed. And technology on the auction sites allows people to post information on both sellers and buyers.

So, there is instant feedback on whether you are dealing with an honest person or a phony -- information that was hard to get before the Internet.

As we get more bandwidth, as President Clinton has suggested, there will be even more ways for consumers to learn about businesses. So consumers can gain the same confidence in Cyberspace as they have on Main Street.

I hope at this conference we get down to the nitty gritty.

I hope businesses and consumer groups come in, tell us what are the effective consumer principles, what are the good ways to enforce them, and lay out a time line for putting all this into effect.

In the end, a seal could be provided to give consumers some visible signal that tells them what Websites are safe -- something equivalent to the Good Housekeeping Seal of Approval as a guide.

I won't stand here today and tell you in advance what exactly these principles should be. It's not my job to tell you what to do. You know what needs to be done for your customers. You know what to do to survive in this market.

Nor will I stand up here and say I will bless whatever industry comes up with. Industry has to take a leap of faith. Industry and consumer groups -- together -- have to set the floor on consumer protection. You have to get your colleagues to come on board. You have to expand the base of companies that participate -- just as you are doing on privacy.

Later today, I understand BBBOnLine will announce its plans to develop a code of online business practices. Thank you for stepping up to the plate. I look forward to seeing this and other efforts as they evolve.

Let me end on this: if we can work together to develop core consumer protection principles, this would be a win for the private sector, and prevent unnecessary government action.

It would be a win with consumer protection authorities. It would ensure good rules are in place.

It would be a win for e-commerce because it would prevent knee-jerk policy making that could stifle the Internet.

And it would be a win for consumers, obviously. People want to shop on-line. It saves time. They can compare prices better. They can shop day or night. And it is fun.

So, I just hope we can find a way to make this all work.

Contact Information

Contact:
Morrie Goodman,
(202)482-4883

Chuck Melley,
(202)219-4287