|From: James Love <email@example.com>
Date: Mon, Mar 22, 1999 4:56 pm
Subject: FTC meeting on electronic commerce
The World Consumer Protection Organization
Paper presented at European Commission meeting on Political Institutions and Democracy in an Information Society
It is a pleasure to have the opportunity to address the topic of political institutions and democracy in an information society. I work at the Consumer Project on Technology (CPT) an organization created in 1995 by the U.S. Consumer Advocate Ralph Nader. CPT's focus is on information technologies, telecommunications regulation, electronic commerce, intellectual property rights, and essential health care research. We are a non-profit organization located in Washington, DC. Our work is detailed on our web page at http://www.cptech.org. I also serve as the US Chair of the working group on electronic commerce for the Trans Atlantic Consumer Dialogue (TACD).
My comments today are my personal views.
There are three important challenges for electronic commerce that CPT is working on. They are;
Because of limitations on time, today I will only address item 1, the issue of how we can create democratic and accountable mechanisms to extend necessary consumer protection to cyberspace. I will explore the difficult jurisdictional problems presented by global electronic commerce and propose the creation of a new World Consumer Protection Organization (WCPO) to play a role similar to the World Intellectual Property Organization in developing consensus for global norms for consumer protection.
JURISDICTION IN CYBERSPACE
Consumer protection programs in any country are an extensive array of laws, regulations and practices that touch on practical problems in commerce. No single government agency is responsible for consumer protection. In the United States, regulators of banks, insurance companies and public utilities have responsibilities to protect consumers, as do state attorney generals, the Federal Trade Commission, the Food and Drug Administration, and countless other agencies. We have laws to protect personal privacy, fight fraud, provide consumer information, and lots and lots more.
Other countries have their own laws and regulations on all of these matters, and here is the problem. Internet commerce is able to transcend borders. Consumers who receive services over the Internet can establish virtual residents anywhere in the world, and sellers of services or products can ever more easily shop around for the most permissive regulatory home. Any regulatory scheme that depends upon the location of the "seller" is necessarily limited by the ability of a firm to arbitrarily choose its virtual nationality. For years corporations in the United States chose Delaware as the most friendly place to incorporate, in part because of the lax regulatory environment. In the new world of Internet commerce, there are more than 200 possibilities for nationality, and any system that relies upon the jurisdiction of the seller will likely lead to competition for the most anti-consumer haven for commerce. This is happening now on issues such as the sale of unregistered securities, unethical sales of prescription drugs, off shore gambling and many other areas, and it could easily become the norm for more traditional forms of commerce.
There are obvious practical problems with rules based upon the destination of the buyer. With hundreds of nationalities and countless local subnational governments, it is difficult and in many cases impossible for a seller to comply with all of the rules offered by governments that claim jurisdiction in cyberspace. For an important set of consumer protection issues, it seems obvious that we need to develop uniform global rules.
The development of uniform rules is an extremely difficult proposition. Not only are the rules themselves often controversial, but the social, economic and cultural context is different for every country. Indeed this is in many respects a far more difficult task than many of the harmonization efforts within the EU, because the differences among countries are larger.
Despite these difficulties, it is possible to develop new global rules, and the clearest example of this is intellectual property. There are many treaties on various aspects of intellectual property protection. The World Trade Organization (WTO) TRIPS accord provides mechanisms to enforce an extensive set of global standards for trademark, copyright, patent and other forms of intellectual property. The TRIPS has real teeth behind it, through the WTO dispute resolution mechanisms. In 1996 the World Intellectual Property Organization (WIPO) adopted two new treaties of the new digital agenda" that set new global standards for protections of copyrights and performances on the Internet.
In the area of consumer protection, there is no similar initiative, and indeed, one is hard pressed to identify international bodies that would be appropriate for this task.
The WTO's role in consumer protection is essentially negative. Countries can challenge various consumer protection rules on the grounds that they represent barriers to trade. There is no mechanism in the WTO to challenge a country for not having a consumer protection measure. This is in contrast to the situation with Intellectual Property, where the TRIPS is used to raise levels of protection globally, and countries face sanctions for not having adequate protections.
One USTR official explained the difference as one that is due to the lack of an international body that sets global standards, a role that WIPO had performed in some measure for IP protection. The WTO is not an appropriate standard setting body for consumer protection", he said, and most consumer groups agree. But it is easier to say that it will not be the WTO than it is to say where this standard setting should be done.
The Organization for Economic Cooperation and Development (OECD) is struggling to adopt a modest set of rules for consumer protection, but so far it has not demonstrated an ability to stand up to business lobbies. The recent OECD meeting in Ottawa on electronic commerce appeared to many observers as more like an industry trade show rather than a serious discussion of the profound difficulties of providing consumer protection in cyberspace. The United States delegation included dozens of corporate executives and lobbyists, but not a single US consumer or privacy group. The ultimate authority of the OECD is also limited by its role as a club for the rich countries. It is possible that consumer groups will be more sympathetic to the idea of the OECD setting initial standards, and then seeking global acceptance, than has been the case for the much criticized proposal for a Multinational Agreement on Investments (MAI), but much will depend upon the substance of the OECD work and the willingness of the OECD to become a more forceful advocate for consumer protection measures. It will also be necessary to begin to engage governments and NGOs in developing countries on these issues.
It is possible that there will not be a single international body that coordinates consumer protection rules. After all, consumer protection covers so many different issues that are administered by so many different agencies, there is no reason to assume that they could or should be addressed by a single body. For example, in the US, the Federal Communications Commission regulates junk faxes, the FDA regulates marketing of medicines, the FederalTrade Commission regulates deceptive advertisements, bankingauthorities enforce consumer protection rules on lending andcredit practices, and the Securities and Exchange Commission(SEC) regulates the marketing and trading of securities, tomention only a few federal examples. Each of these areas ishighly specialized, and it seems difficult for a single agency to develop the expertise to set standards or provide enforcement of such disparate problems.
Thus, it might be the case that there would be many independent efforts to set global standards on particular consumer protection issues. Banking agencies, for example, might undertake an effort to discuss minimum disclosures for terms of credit and lending, securities agencies might have their own world congress to struggle with issues relating to marketing of securities on the Internet, and the World Health Assembly might get the courage to undertake serious proposals for the regulation of marketing of pharmaceutical products and medical devices on the Internet. This is a more decentralized approach that would also build upon existing international bodies to include ecommerce consumer protection on their agenda.
On the other hand, it may be beneficial to create a body, like WIPO, that facilitates treaties and harmonization efforts on ecommerce consumer protection issues. Indeed, we are quite interested in such an initiative. If one looks at WIPO as a model, you have a body that is accountable to the member countries, and has a mission to promote global norms for the protection of intellectual property, some of which are now enforced by the WTO, and some of which are implemented by countries independent of the WTO. Some consumer groups are critical of WIPO for a variety of substantive reasons, and have expressed concern that WIPO has become excessively influenced by large commercial interests. These are important and real concerns. However, the structure of WIPO seems to be a good starting point for a model for a new global effort to deal with consumer protection issues related to electronic commerce.
In keeping with the conventions for naming the WHO, WTO and WIPO, all of which start with world" and end with organization," I would call this the World Consumer Protection Organization (WCPO).
The role of the WCPO would evolve as it gained experience in addressing ecommerce consumer protection issues. There would seem to be no shortage of issues that could be discussed -- regulation of unsolicited commercial email, marketing of pharmaceutical and medical products on the Internet, standard disclosures for credit terms, privacy protections, and countless other items.
To the degree that existing international organization have an interest in developing global norms on these issues, they could work together, as WIPO now cooperates with dozens of pubic and private groups that are stakeholders in IPR issues.
It is always possible, and indeed likely, that such a body will be heavily lobbied by business interests. That happens now with national governments. However, the very name and mission of the WCPO would be a magnet for consumer and privacy groups, just as the World Health Organization has attracted the interest of public health groups.
There is, of course, a plethora of private sector self governance" efforts underway for electronic commerce. This can be viewed as a positive development, and we all look forward to whatever new voluntary consumer protectionmeasures giant corporations like Disney, Microsoft, America Online and IBM propose. However, unless one assumes thatthese voluntary efforts will solve all consumer protectionproblems, it is clear that there will have to be something else done to address the very real and very importantproblems that governments have been struggling with for years. In the end, this is the main issue. Do we want governments to have practical ways to extend consumerprotection measures to the Internet?
For some persons the idea that the Internet should be a hands off zone for governments appeals to utopianlibertarian impulses. And for utopian libertarians, the WCPO is a bad idea. I am not a utopian libertarian. I think the world has a lot of rough edges, and that governments should play a limited but important role in the economy. For electronic commerce, I expect the government to perform some functions in the areas of antitrust, consumer protection, and intellectual property. Most large businesses say they support limited government action some of these areas. We support limited government action in all three areas.
Thank you for the opportunity to visit Rome, and to discuss these important issues.
James Love, Director