March 24, 1999
Re: U.S. Perspectives on Consumer Protection in the Global Electronic Marketplace -Comment, P994312
Submitted by Ethan Katsh
I am very pleased to provide my views on the issue of consumer protection in the global online marketplace. This, of course, is the marketplace that will, in all likelihood, be where we conduct many, if not most, consumer transactions in the future. Some aspects of this marketplace appear familiar, e.g. online stores that have a physical presence somewhere, e.g www.sears.com, some aspects will appear to combine new elements with some traditional elements, e.g. amazon.com, a virtual entity that sells at a fixed price, and some will appear quite novel and may change our methods and even our framework for thinking about purchases. In the latter category I would place a site like eBay.com, which is often labeled an "online auction house" but which can be looked at more generically as a place where transactions occur at a negotiated price, and where the seller or buyer might be an individual, a store, an institution, or some combination of these.
My particular interest and expertise is not in how current consumer law should be adapted to this new marketplace or on what law should be developed to deal with consumer problems. Rather, I am mainly concerned with the issue, as stated in the Federal Register, "To what extent is there a need for international dispute resolution procedures or tribunals for consumers engaged in electronic commerce with foreign businesses." My concern is that along with any regulations, legislation or regulatory structure that might be proposed, attention be given to the manner in which disputes, which will inevitably arise, will be handled. Any such online processes of dispute resolution can be available for both local and international transactions. In many instances, the consumer may not even know whether he or she has transacted business with a U.S. or non-U.S. concern.
For the past two and a half years, I have directed a project involved in mediating online disputes. In May, 1996, I and a colleague established the Online Ombuds Office (http://www.ombuds.org) to provide mediation to anyone on the Net who was involved in a dispute. Most of the disputes we handled were interpersonal in nature although some involved problems with Internet Service Providers and other vendors.
In September, 1997, the Hewlett Foundation provided us with financial support for a Center for Information Technology and Dispute Resolution at the University of Massachusetts (http://www.umass.edu/dispute). This allowed us to continue the work of the Online Ombuds Office and to expand our efforts to study and attend to online conflict. Our most ambitious dispute resolution project is currently nearing completion. This is a pilot project conducted with eBay.com to try to mediate disputes arising out of online auctions.
Our experience with eBay and others suggests to me that the governmental role in cyberspace will be both more complicated and less direct than in physical space. There is no governmental authority that can claim sovereign authority over cyberspace although government can still exert some authority and considerable influence over firms located within their jurisdiction. What government should do, as it works to secure greater international cooperation, is provide support and recognition for experimental efforts to respond to and resolve online consumer conflicts.
In the physical world, alternative dispute resolution is conducted "in the shadow of the law." The threat of court or governmental involvement is helpful in bringing parties to the table. In the online world, dispute resolution is not conducted in the shadow of the law because national law throws few shadows in cyberspace. What advantage online dispute resolution has is that expertise can be applied and employed anywhere on the network. The communicative power of the Internet, while it might not yet be employed optimally for purposes of dispute resolution, should be exploited to allow rich interactions among disputants that might lead to consensus. While a traditional hierarchical regulatory process might be difficult to implement in cyberspace, new forms of protection, trust building and dispute resolution that rely on information sharing and distribution should be fostered aggressively.
We welcome the initiative of the Federal Trade Commission in this area and appreciate the opportunity to express our views on this matter.