March 26, 1999
The Information Technology Industry Council (ITI) is pleased to respond to the Federal Trade Commission's (FTC or "Commission") request for public comments on consumer protection in the global electronic marketplace. ITI commends the FTC for undertaking this inquiry and supports its goal of facilitating an ongoing dialogue on how government, industry, and consumers can work together to encourage the development of a global marketplace that offers safety, transparency, and legal certainty.
ITI represents the leading product and service providers in the information technology industry. Our members are involved in virtually all aspects of electronic commerce. ITI is committed to advancing the global competitiveness of its members through policies that encourage innovation, open markets, and enable consumer choice. In 1998, our members had worldwide revenue of over $444 billion and employed more than 1.2 million people in the United States.
B. Summary of Comments
Global electronic commerce has the potential to offer substantial benefits to consumers everywhere, including increased convenience, lower prices, and access to a wide range of goods. Electronic commerce grew significantly in 1998, and the pace of growth is expected to accelerate in the near future. Consumer confidence, which depends on a stable, predictable, and fair online commercial environment, is essential to this continued growth. ITI supports the FTC’s initiative to begin a review of the effectiveness of consumer protection tools in online commerce. In electronic commerce, consumer protection issues, like transactions, cross state and national boundaries and thus must be examined on a global basis.
ITI endorses consumer protection policies that are market-driven and industry led, that provide a level of protection essentially equivalent to that available for more traditional forms of commerce, and that are consistent, to the extent possible, with polices adopted in other countries. We believe that, in the vast majority of cases, industry self-regulation is the best way to achieve these goals. However, as electronic commerce is still young, it is too soon to make definitive conclusions about whether new or different consumer protection policies are needed. Accordingly, we urge caution in implementing new initiatives to protect consumers in cyberspace until additional experience is gained.
C. Technology as a Consumer Protection Tool
New technologies can be harnessed to provide consumers and policymakers with tools to enhance consumer protection through increased consumer empowerment and knowledge. The unique technological features of digital networks enable more comprehensive and effective online disclosures that will help consumers make informed decisions. New technologies also offer the Commission creative opportunities for creating new tools for protecting consumers from deceptive and fraudulent acts. In particular, hyperlinks, seals, and other click-through technologies offer consumers new options for receiving information that will allow them to make informed choices in cyberspace. Hyperlinks enable consumers to link to other information available within the company offering the online transaction, as well as to third party organizations such as the Better Business Bureau, or perhaps to the FTC itself. Online arbitration can provide an easy and inexpensive means for consumers to obtain quick resolution of their complaints.
D. Applicability of Existing Consumer Protection Mechanisms
Therefore, today, in both the online and offline worlds, consumer confidence is effectively achieved through industry self-regulation, technology initiatives, and public/private partnerships to implement traditional consumer protection laws. In competitive markets, marketplace pressures compel sellers to respond rapidly to consumer demands or risk losing business. The online environment, which allows consumers to instantaneously compare prices, contract terms, service levels, and product availability, is even more susceptible to competitive pressure because consumers can quickly and easily “vote with their feet” if they are dissatisfied. Further, since the online marketplace is in the early stages of its growth, all of the companies involved have a special interest in ensuring a stable environment that will promote consumer trust.
Electronic sellers have recognized the value of assuring customers a safe and comfortable place to shop and are adopting industry guidelines to guarantee that consumers’ needs are met. For example, the Electronic Retailing Association (ERA) recently adopted a comprehensive set of “online marketing guidelines” to which all of its members must adhere. ERA’s guidelines generally apply to online transactions the same rules applicable to offline transactions, including truth-in-advertising requirements; requirements for information about the vendor or advertiser; substantiation of health and safety claims; minimum disclosures of cost; warranty, and other material terms of an offer; and rules regarding endorsements, pictorial representations, order fulfillment, money-back refunds, and customer service. To address the special needs of children, ERA has adopted specific guidelines for marketing children’s products, which are complemented by the Better Business Bureau’s Children’s Advertising Review Unit.
Industry self-regulation is supplemented in the U.S. and around the world by a plethora of consumer protection laws and regulations. Many of these statutory requirements apply equally to offline and online transactions. Given the nascent state of electronic commerce, it is important to avoid making premature conclusions about the need for new or modified policies. Premature attempts to impose new rules or guidelines could have unforeseen negative consequences on the medium’s continued growth. It is possible that some existing rules may need to be modified to address the unique nature of the online environment, or to provide effective protection for consumers engaged in electronic commerce with foreign businesses. Any such modifications should be developed in light of the following principles:
For the most part, ITI believes that existing industry self-regulatory practices, backed up by existing laws and regulations, should provide adequate and effective consumer protection in global electronic transactions. However, cyberspace is unique in many significant aspects. We urge caution in translating traditional consumer protection rules and guidelines to meet the "special challenges" of the online environment.
ITI appreciates the opportunity to present our initial comments on consumer protection in the global electronic marketplace. The views expressed here are necessarily preliminary, thus we welcome the opportunity to participate in public discussions of the issues raised in these comments.