|March 26, 1999
Re: U.S. Perspectives on Consumer Protection in the Global Electronic Marketplace -- Comment P994312
Dear Secretary Clark:
Consumers Union(1), the nonprofit publisher of Consumer Reports magazine, is pleased to submit these comments on consumer protection in the global electronic marketplace in response to the Initial Notice Requesting Public Comment published at 63 Fed. Reg. 69289 (December 16, 1998).
The way consumers interact with businesses, including how they shop for and buy products and services, is undergoing dramatic change -- change driven by technology and access to the Internet. The global scope of the new online marketplace has the potential to bring many benefits to consumers, such as access to more information, competitive pricing, and a wider range of choices. At the same time, there are many potential pitfalls, including, but not limited to, questions about the reliability of online information, the emergence of fraudulent practices, the failure to implement meaningful recourse mechanisms, and the lack of adequate protections.
It is widely recognized that the full economic and social potential of global electronic commerce will only be realized through its widespread use by consumers. Such use will only occur if consumers become confident and comfortable with the online world. Consumers Union appreciates this opportunity to comment on some of the issues that must be addressed for the global electronic marketplace to succeed. These comments are by no means exhaustive, but highlight areas that warrant discussion.
¨Consumer Protections - Protecting consumers online includes ensuring the application of existing laws to on-line transactions, modifying those laws where needed, or pressing for the enactment of new laws where existing laws do not offer protection. All online users should have some measure of protections, including:
Within the context of a global marketplace, it does no good if consumers are only protected domestically. Given the tremendous scope of e-commerce, especially the access to new markets abroad, it may be necessary to move beyond existing frameworks and create new mechanisms to ensure that consumers are afforded the same levels of protections globally. Today, there are no assurances that a consumer logging onto a site has any meaningful protections.
¨A Competitive Marketplace - In a perfect world, the open and non-proprietary nature of the Internet with its low barriers to entry, including low start-up and operating costs, should encourage the entry of new businesses and thus increase competition. In such an environment market forces should pressure businesses to pass lower costs on to consumers as lower prices. These benefits are lost in the absence of competition due to market imperfections. Competitiveness issues related to e-commerce have yet to be fully scrutinized, especially in the context of a global marketplace.
¨A Reliable Payment System - A major aspect of electronic commerce is how payments will be made, which raises questions about liability, error resolution, disclosure, and the solvency of the issuers of electronic money. Today, most transactions made by consumers are done using a credit card. Other payment mechanisms, such as smart cards, debit cards, electronic certificates, or digital cash could emerge in the future. The lack of protections provided for these alternative payment forms is a problem. Until meaningful protections are put in place it is unlikely that these forms of payment will be utilized to conduct transactions over the Internet.
¨Jurisdiction: Jurisdiction in the global marketplace warrants careful and practical consideration. Difficulties in accessing proper forums or resolving disputes in international settings could have a chilling effect on consumers going online. One of the major challenges to global e-commerce is to provide consumers with a reasonable and simple way to resolve disputes.
¨Identification/Authentication: The ability to determine the reliability and legitimacy of sites will help foster consumer confidence in the online world. Verification mechanisms are particularly important in a global marketplace.
¨Description of Rights: Today, levels of protection may vary depending on the countries in which the consumer and business are located. In addition to resolving jurisdictional questions, there is a need to inform consumers, perhaps in a standardized way, what types of protections they have, if any. In other words, consumers need assurances of the type and level of protection they are entitled to prior to finalizing the transaction, especially in cross-boarder transactions where there is a difference in the level of protections.
¨Privacy Protection: Another concern for consumers is privacy of personal and financial information. With the easy access to a multitude of records through the Internet, consumers are leery that once personal identifying information and financial information is on the Web, there is a great potential that the information will be widely disseminated. These concerns may be exacerbated if transacting with a business located in another country.
¨Risk of Fraud: Not only will easy access to information open consumers to unsolicited marketing, but also to fraud, including identity theft. In some cases, a consumers stolen password is used to assume that consumer's identity online. The increase in electronic commerce may also expose consumers to fraud through deceptive practices, including the misrepresentation of products or services offered online. For less than $30 a month and the cost of a computer and modem, a scam artist can be in business on the Web, taking orders from anywhere in the world. Vigorous enforcement mechanisms are needed.
¨Accessibility: Service providers and regulators must pay careful attention to both the structure and pricing of new electronic payment systems and the availability of electronic commerce. Not all consumers will get any benefits electronic commerce may provide if they cannot afford to buy a computer or access the Internet, or if they lack the basic skills to use these new technologies. This is true both domestically and abroad.
Electronic commerce can provide great benefits to both businesses and consumers, through increased efficiencies, greater profitability, convenience, and access to goods and services. But, several issues also need to be resolved before consumer confidence is gained. The concerns raised in these comments highlight the need to ensure that there is a consumer voice in international discussions on issues related to the emerging electronic marketplace.
Consumers Union looks forward to a continuing dialogue with the Commission about e-commerce and consumer protections.
1 Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization, serving only the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health, nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers.