To: Secretary, Federal Trade Commission
Date: March 25, 1999
CommerceNet is the leading industry consortium dedicated to accelerating the growth of Internet commerce and expanding Internet markets. Launched in California's Silicon Valley in April 1994, CommerceNet's membership has grown over 200 leading U.S. organizations in areas such as banking, electronics, computers, online services, information service industries, as well as major end users. Together, we are transforming the Internet into a global electronic marketplace.
CommerceNet's comments on the issue of consumer protection in the global marketplace will be limited to policy issues rather than addressing the additional questions regarding international law. We believe a thorough study of existing international law on this issue is needed and would be helpful to U.S. electronic commerce companies and consumers alike.
There are a few high level issues which CommerceNet wishes to raise:
If these questions are not addressed in the comments received by the FTC, CommerceNet believes that they should be studied prior to the FTC undertaking further efforts in this area.
If there are structural impediments to international consumer transactions, then overcoming those impediments would seem more necessary than focusing on consumer protection issues. This is especially true in order to give industry practices in foreign consumer transactions time to develop. Industry alone may solve the problem of development of consumer confidence as a natural consequence of a competitive marketplace. Furthermore, imposing regulations may foreclose new innovative methods of gaining consumer confidence that may actually be more beneficial to consumers than any envisioned regulatory efforts.
An issue which must be considered is the relationship between competition and regulation. Clearly increased competition benefits consumers. Increased regulation however has a contradictory effect to the extent that it discourages competition. When regulation becomes burdensome to sellers, fewer sellers will be able to deal with regulatory burdens, which will lead to a decrease in the number of sellers and therefore lead to a decrease in competition.
Responses to Specific Questions Asked by the FTC
Conflicts of Law
Question 6(b): Which choice of law would best facilitate commerce and provide effective consumer protection?
CommerceNet notes that allowing a seller to enforce a choice of law provision facilitates commerce by adding certainty to contractual provisions and, to the extent that it increases competition, benefits consumers. This is especially true with regard to small and medium enterprises which are unable to monitor either current law or new legal developments world-wide.
CommerceNet notes that the Internet promotes increased consumer knowledge as evidenced by such sites as BizRate(1), which actively seeks customer feedback on its member merchants and publishes that feedback on the BizRate site, e-Bay's (2)Feedback Forum, and the FTC's own E-Commerce and the Internet consumer protection sites(3). The Internet empowers consumers by providing effective means for educating themselves on company practices and furthermore, by providing a highly effective public forum for unsatisfied consumers. An unacceptable choice of law provision is likely to become the subject of consumer feedback on such sites.
CommerceNet encourages the FTC to educate consumers on the availability of Internet sites which seek out and publish consumer feedback.
Questions 9-11: To what extent do existing laws, conventions, treaties, or practices governing contracts need to be modified to provide effective protection for consumers engaged in electronic commerce with foreign businesses? 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 recognized and binding? How should the burden of proof and risk of loss be allocated with respect to potentially fraudulent uses of electronic signatures?
With regard to electronic contracts and signatures, CommerceNet believes that the work of the National Conference of Commissioners on Uniform State Laws on a Uniform Electronic Transactions Act serves as an excellent model. Consumers should be empowered to engage in electronic commerce so that they can avail themselves of the benefits of seeking out products from a large and highly competitive marketplace. No longer is the consumer relegated to having to choose between merchants within travelling distance of their residences. Instead, if the questions of delivery and access referred to above are resolved, they will be able to choose from a variety of merchants without regard to geographical proximity. Such merchants will vie for their business based on the level of customer service, including pricing, that they can deliver to the consumer. With regard specifically to question # 11, CommerceNet notes the efforts of such companies as e-Bay, which provides no-cost insurance and low-cost i-escrow services(4), to deliver enhanced customer protection when it is needed. CommerceNet suggests that depending on industry self-regulation in a highly competitive global marketplace may bring much more benefit to consumers than regulations that may inhibit the development of new consumer benefits. Burden of proof and risk of loss allocation are areas in which market conditions are likely to result in standards which promote consumer confidence. Market driven standards are more likely to reach the correct balance between enabling and protecting consumers, and are thus more likely than regulation to ensure that consumers can participate in commerce mechanisms that are beneficial to them.
Question 12(a): To what extent should businesses required to provide disclosures to consumers [in the global electronic marketplace]?
With respect to consumer disclosures, CommerceNet urges the FTC to ensure that two principles are followed in this area:
CommerceNet also notes that the issue of connect-time costs, which are much higher outside the U.S., are an extremely important factor with respect to disclosure requirements. In the U.S., where buyers typically pay low flat monthly access charges, sellers seek to maximize the time a buyer spends on their site. Outside the U.S., where buyers typically pay high per-minute access charges, minimizing time to accomplish an order on a site can be quite important. Thus requiring disclosures online, instead of, for example, accompanying the shipped merchandise, can be quite a barrier to e-commerce in high access cost countries. Until world-wide access costs are minimized, requirements for online disclosures should be discouraged.
Question 12(b): To what extent should there be mechanisms in place that enable consumers to complain about the practices of foreign businesses?
CommerceNet believes that the FTC should educate consumers as to the availability or non-availability of these mechanisms. However, CommerceNet also notes that the development of consumer confidence in foreign markets should be left to market participants rather than International regulation.
Question 12(c): To what extent should there be a time period during which consumers can rescind agreements entered into with foreign businesses (also referred to as a ''cooling-off period'')?
CommerceNet believes that such a "cooling-off" period is extremely detrimental to electronic commerce, in that it discriminates against such commerce by imposing conditions that are not imposed on traditional commerce. It is also detrimental to consumers, in that it may force consumers to choose between high-priced immediately available local goods and lower priced goods available via electronic commerce only after a time delay. Furthermore, such delays may completely inhibit the development of some time-dependent marketplaces, such as those for prescription medicines. Such "cooling-off" periods could develop into a lower standard, replacing other seller-offered benefits such as the 30-day no questions asked return period typically offered by many mail order sellers of computer equipment.
CommerceNet STRONGLY encourages the FTC to oppose any "cooling off" period requirements.
Question 12(e): Under what circumstances and to what extent should consumers using electronic payment methods, i.e. credit, debit, or stored-value cards, be entitled to have their accounts credited (also referred to as ''charge-backs'')?
CommerceNet believes that charge-back policies should be left to the offering entities of the specific electronic payment mechanisms. This will enhance competition in this area and is likely to lead to more extensive consumer benefits than those provided by regulation. However, the FTC should educate consumers, via the FTC's web-site, on the differences between common payment mechanisms in this regard.
Question 13: To what extent is there a need for international dispute resolution procedures or tribunals for consumers engaged in electronic commerce with foreign businesses?
CommerceNet strongly supports the use of dispute resolution procedures. We recommend that the FTC take a prominent role in ensuring that such procedures are available and that both industry and consumers are educated on their availability.
Questions 21 and 24: How does the provision of effective protection for consumers in the global electronic marketplace benefit industry members? To what extent do/will industry-led self-regulatory programs provide effective protection for consumers in the global electronic marketplace?
As our above comments indicate, CommerceNet does not believe that the question of consumer protection in the global electronic marketplace is inhibiting the growth of that marketplace as much as other barriers, such as consumer access, that are more significant at this point in time. In general, CommerceNet believes that competition will lead to better consumer benefits than regulation, and encourages the FTC to focus on education of consumers with regards to the characteristics or different payment mechanisms, availability of dispute resolution procedures, and methods by which consumers can determine, and comment on, the reliability of Internet merchants.
CommerceNet looks forward to working further with the FTC on these important issues.