|March 25, 1999
Secretary, Federal Trade Commission
The Internet Consumers Organization (ICO) is pleased to submit comments in response to the FTC's request for academic papers and public comments on "U.S. Perspectives on Consumer Protection in the Global Electronic Marketplace." ICO is a new organization that plans to represent Internet users on a wide range of increasingly important electronic commerce and Internet issues, including:
ICO applauds the FTC's efforts to address important global electronic marketplace issues. The Internet currently enables consumers to obtain detailed and prolific information about companies, products, and services; comparison shop among competitors; access an unprecedented array of products and services; and purchase products and services that best meet their needs. Many activities can be accomplished conveniently, quickly, and often at lower cost than traditional methods of shopping and transacting business. But, the Internet's potential has not yet been fully realized. As its uses continue to expand, the Internet may ultimately provide consumers with the information and tools necessary to become the most informed and enlightened shoppers in history.
While the Internet is empowering, it can also be intimidating to many. In today's complex and confusing marketplace, it may be difficult for consumers and businesses to keep pace with rapid technological developments. New products, services, ways of accomplishing tasks and transacting business are being constantly introduced. As a result, consumers and businesses may fail to recognize the benefits of, understand how to take advantage of, or know how to maximize their positions in today's environment. Still others may be wary of the electronic marketplace due to fraud, security, privacy, and other concerns.
These problems may get worse in the future. It is, therefore, very important for businesses, governments, and groups representing Internet users to develop a consumer-friendly global electronic marketplace and educate current and potential Internet users - both consumers and businesses. While all affected groups need to work together, e-commerce businesses have a vested interest in creating an attractive marketplace that users understand. Protracted, acrimonious public debates on Internet and e-commerce issues threaten to undermine consumer online confidence. Working out the kinks as quickly as possible is not only good for Internet users, it is good for e-commerce businesses since this will encourage greater numbers of consumers and companies to enter the electronic marketplace sooner.
While the interests of consumers and different sizes and types of businesses must be factored into the emerging global electronic marketplace, it is important to remember that consumers vary considerably in their acceptance of new technologies. As a result, different consumers have different educational needs that must be addressed. ICO has identified three classifications into which consumers fall. Enthusiasts are racing ahead and sampling an abundance of technological offerings. They are extremely comfortable going online and transacting business, warmly embrace new products and services, and welcome change. Lukewarms do not welcome change, but they do not avoid it either. These people have probably gone online and may be experiencing some of the benefits of the electronic marketplace. While many are content to cruise along at current speeds, others may be starting to realize that they need to catch up. Reluctants are greatly intimidated by technology. They are skeptical of change, prefer to stick with what they have, and may have never gone online. If they should venture online, these people are likely to proceed cautiously. The challenge, therefore, is to develop educational outreach programs that respond to the diverse needs of these three very different classes of consumers. Successful education programs will hopefully entice reluctants and lukewarms into becoming enthusiasts.
ICO concurs with the FTC's view that the potential benefits of a global electronic marketplace will not be fully realized until: (1) the public has developed confidence and trust in dealing with online businesses in the U.S. and abroad, and (2) businesses are assured of a stable and predictable commercial and legal environment. In addition, ICO believes that consumer confidence and trust in e-commerce can best be achieved through a combination of activities, including consumer and business education, industry self-regulation, and efficient and effective law enforcement programs. Indeed, the cooperative efforts of industry, government, and groups representing Internet users will all be required to create an electronic marketplace that flourishes.
Consumers do not necessarily want or need a highly restricted environment that is encumbered by detailed rules and regulations. On the other hand, consumers do not want, nor will international, federal, or state policymakers likely allow, a "wild, wild, web" - an unfettered environment that lacks meaningful consumer online protections. Something between these two extremes is required - a marketplace that meets consumer needs, responds to reasonable concerns, provides necessary protections, and builds consumer online confidence.
International Cooperation and Consistency ICO believes that international cooperation is essential to avoid implementation of a patchwork of conflicting or inconsistent laws, regulations, and enforcement measures. While international trade is not a novel phenomenon, the proliferation of global electronic commerce has brought to center stage several consumer protection issues about which international consensus has not yet been reached.
The most publicly and contentiously debated issue is consumer data privacy protection. The ultimate resolution of this international issue will depend upon cooperation and collaboration by nations with very distinct and divergent views on privacy protections. International cooperation may also be necessary to resolve other consumer protection problems. The EC has proposed additional directives to establish European consumer protection standards for sales of products and services conducted via the Internet, telephone, or other remote means of communication. Likewise, the World Trade Organization (WTO) has a work program underway on e-commerce issues. Additionally, the Organization of Economic Cooperation and Development's (OECD) Consumer Policy Committee is developing international guidelines for consumer electronic commerce protection.
ICO believes that consumers benefit most in an open and competitive global marketplace. To this end, ICO encourages the FTC to continue to work closely with the OECD, the WTO, and other international bodies to develop global guidelines or policies that provide assurances of fundamental consumer protections and avoid an over-regulated and overly restrictive electronic marketplace. Likewise, ICO strongly urges the U.S. to work with the EC to ensure that fair and comprehensive consumer protections are in place without unnecessarily disrupting the flow of information between countries or in any way restricting innovation or competition in the electronic marketplace. The FTC is well positioned to contribute meaningfully and significantly to international discussions surrounding the development of appropriate consumer protections.
Governments, businesses, and representatives of consumer Internet users, like the ICO, should work together to design global consumer protection measures. Guidelines or rules that apply globally should primarily address online fraud and deceptive advertising or other unlawful practices. International uniformity of such consumer protection guidelines is a desirable objective. Care, however, must be taken to avoid erecting new regulatory barriers that could stifle the growth of e-commerce and negate important potential consumer benefits.
Voluntary Industry Efforts ICO urges companies doing business on the Internet to voluntarily embrace pro-consumer business practices. The creation of self-regulatory "seal" programs (e.g., TRUSTe and BBBOnline) demonstrates industry efforts to protect the privacy of online information. ICO also encourages the careful examination of emerging technologies that place control of online information where it most belongs - with Internet users. While the "infomediary" concept is relatively new, it could potentially enable companies to market only to customers who may be interested in receiving solicitations for their products and services. This approach might satisfy privacy concerns while also stimulating e-commerce. ICO urges the FTC to work with the seal programs and others to identify appropriate means for ensuring the protection of personal information and privacy on the Internet. The attached paper, "Protecting Privacy and Security of Personal Information in the Global Electronic Marketplace," addresses many potential consumer privacy and security issues.
Effective Consumer Protection ICO strongly believes that law enforcement, consumer and business education, and industry self-regulation are critical components of an effective consumer protection program. The FTC has the authority under Section 5 of the FTC Act to prosecute individuals and companies who engage in fraud over the Internet, as well as those who have engaged in false or deceptive advertising and marketing using this medium. Moreover, the FTC has numerous rules and guides, including the Mail or Telephone Order Merchandise Rule, which bind businesses selling over the Internet to many requirements that apply in the offline marketplace. Existing laws, rules, and guides provide a level of consumer protection that equals those enjoyed by consumers who conduct business in the traditional marketplace.
Current protections for consumers engaged in electronic commerce with foreign businesses vary by degree of coverage, geography, and industry sector. Such protections may not exist, or may be minimal, in many parts of the world. Therefore, U.S. consumers who purchase goods or services from foreign businesses should be made aware of the risks involved in dealing with unknown companies. Consumers should follow the "know your seller" rule and only conduct business with reputable companies to minimize risk. Education and awareness of the benefits and risks involved in e-commerce will empower consumers to take control of their online shopping experiences.
ICO believes that the same or equivalent consumer protections that exist in today's traditional marketplace (those that are available to Internet users residing in the U.S. and consumers who purchase from U.S. companies) must also exist in a global electronic marketplace. To this end, the FTC should encourage and assist other countries in putting similar enforcement mechanisms in place to more readily combat fraud and deception against its citizens. The FTC has already established several successful protocols for cooperation and collaboration upon which future efforts could be aptly modeled. The Commission could work with foreign countries to crackdown on scam artists and hucksters currently tainting the online marketplace. U.S. efforts might be patterned after the Canadian government's efforts to eradicate cross-border telemarketing fraud. Similarly, cooperation between the U.S. and other nations might be modeled on the FTC's methods of coordination in joint fraud investigations and law enforcement sweeps with state attorneys general. Alternatively, international law enforcement cooperation might take the form of the SEC's "cyberforce," which investigates and prosecutes companies that tout securities on the Internet (through monitoring online chat rooms, creating online newsletters and web sites, and conducting online fraud sweeps).
One thing is clear. Given the increased occurrence and complexity of fraud due to emerging technologies, it is more crucial than ever that local, national, and international law enforcement officials work collaboratively to combat fraud. Moreover, ICO would urge industry to work with government agencies to educate and train them on the use of new technologies to combat Internet and other cross-border fraud.
Consumer and Business Education Critical to the success of any global consumer protection platform will be the development of well-coordinated and widely disseminated international consumer and business education programs. ICO applauds the innovative, yet constructive, approach that the FTC has taken to educate businesses and consumers alike on issues relating to electronic commerce and the Internet. Through its "Internet Surf Days," teaser web pages, consumer brochures and alerts, industry and consumer conferences, and congressional involvement, the FTC has consistently kept industry informed of its concerns and positions. The FTC has also made great efforts to arm consumers with the information necessary to protect themselves.
A great deal more needs to be done to educate current and potential Internet users - both consumers and companies doing business on the Internet - about the benefits and pitfalls of today's electronic marketplace. Research is also needed to identify Internet user concerns, encourage Internet usage by select groups (older Americans, low-income populations, and minorities), and gauge public support for Internet-related proposals. In addition, lines of communication with all interested parties need to be established to facilitate a meaningful exchange of ideas. For its part, ICO plans to:
The success or failure of e-commerce hinges on fostering online user confidence. Indeed, a direct correlation exists between a company's ability to secure consumer trust and its ultimate success in the electronic marketplace. Given this, ICO encourages Internet and e-commerce businesses to support the government's efforts to educate consumers on important Internet and electronic commerce issues. In addition, these companies should develop aggressive education programs of their own and/or collaborate with others to develop imaginative consumer outreach initiatives. Private sector participation in consumer education is critical to dispelling consumer fears and instilling consumer confidence in surfing, shopping, and purchasing on the Internet.
ICO is very interested in working with industry, government, and other groups to help fashion an environment that meets consumer needs, responds to reasonable concerns, provides necessary protections, and builds consumer online confidence. ICO is also prepared to collaborate with the FTC and others to leverage available resources and conduct outreaches to affected industry and consumer constituencies.
ICO appreciates this opportunity to submit comments and hopes that they will assist the FTC in its efforts to protect consumers in the global electronic marketplace. We would be pleased to participate in the public workshop on June 8-9, 1999. ICO suggests that the Commission focus the workshops on the topics discussed herein.
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About The Internet Consumers Organization
The Internet Consumers Organization is currently organizing and preparing to apply for non-profit status. ICO plans to offer well-reasoned and balanced perspectives on a wide range of electronic commerce and Internet consumer issues. ICO will strive to identify Internet consumer needs, address Internet consumer concerns, and represent Internet consumers in important public policy debates. ICO also plans to create a web site at internetconsumers.org to educate and solicit feedback from Internet users. ICO's initial two-year action plan calls for a variety of education, research, and advocacy activities.
Peter Gray and Kent Brunette are ICO's co-founders. Peter Gray served as Director of Government Relations for Citicorp for over ten years. Peter represented this financial institution's diverse global business interests, including technology and consumer issues, in Washington. Kent Brunette was the chief federal consumer lobbyist for the 34-million member American Association of Retired Persons (AARP) for almost fifteen years. Kent has also served as a consultant and consumer advisor to Southwestern Bell Communications (SBC) and NationsBank (now the new Bank of America).