July 7, 1998
Visa U.S.A. Inc. ("Visa") is pleased to file this comment letter with the Federal Trade Commission ("FTC") in response to its request for comment on its proposal (the "Proposal") to issue a policy statement (the "Policy Statement") on the application of current FTC rules and guides to newer forms of electronic media, such as the Internet, e-mail and CD-ROMs.
Visa is a joint venture comprised of over 21,000 financial institution members from around the world that have issued over 618 million Visa payment cards. These cards are accepted at more than 14 million merchant locations and 380,000 automated teller machines worldwide. Visa - which provides transaction authorization, clearing and settlement, risk management and related services to member financial institutions - supports more than $1 trillion in Visa-related payment transactions annually throughout the world. Visa's transactions volume in the United States is approximately $470 billion per year. At peak volume, Visa systems process over 2,400 card-related transactions per second.
Visa supports the FTC's efforts to ensure that unfair and deceptive acts or practices do not occur over electronic media. In order for both consumers and businesses to realize the full benefits of electronic commerce, consumers must have confidence that they will not be victimized by unfair and deceptive acts or practices when doing business over the Internet and other electronic media.
In part for this reason, Visa, together with other associations and leading technology vendors like VeriSign, IBM, MasterCard, Microsoft and Netscape, has developed a protocol for securely conducting payment transactions over insecure networks like the Internet. This protocol is called Secure Electronic Transaction, commonly known by its acronym, SET. The SET protocol uses digital signature technology to authenticate the parties in a payment transaction. Digital signatures tie the payment transaction to the party and ensure that the payment information has not been altered. The SET protocol also incorporates encryption during transmission over the Internet in order to shield during that transmission confidential payment information from access by unauthorized parties. Indeed, the SET protocol even allows a merchant to accept card payments without the need to know a cardholder's account number -- an additional level of security not even provided in today's physical card environment. As a result, the SET protocol has been endorsed by the financial industry and the payment card industry as the standard for payment transactions on the Internet. Visa cardholders and merchants already are implementing SET in more than twenty-five countries around the world to conduct electronic commerce.
The FTC's rules and guides for electronic media should be sufficiently flexible to accommodate the wide variety of current and future types of electronic media and related acts and practices. As the FTC recognizes in the Proposal, it is a complex undertaking to extend its rules and guides to the Internet and other types of electronic media. The unique aspects of the Internet and other electronic media, including electronic images, hyperlinks, multiple web pages, and push-technology, will make it difficult for the FTC to draft a simple framework for applying to electronic media consumer protections that were developed for the paper-based or telephonic world.
Given the unique and developing nature of the Internet and other electronic media, Visa recommends that the FTC not attempt to develop rigid "one size fits all" rules for electronic media. Such an approach would run the risk of locking a particular electronic media technology or practice in place, and precluding consumers and the business community from benefiting from future technological developments and refinements. Imposing rigid requirements on or across different industries and businesses will not only impede the development of electronic media and electronic commerce, but also will impose unnecessary costs on consumers and businesses.
For example, in the Proposal the FTC seeks comment on the use of separate web browser "frames" and "banners" on Internet web pages to provide consumer disclosures. While as discussed in more detail below a business certainly should have the option of using web browser frames or banners to satisfy applicable consumer disclosure requirements, the FTC should not mandate these browser frames or banners. While they may be a popular format for current Internet web pages, future developments in web browsers, communication modem speeds or computer monitor sizes may make frames or banners either obsolete or a secondary display format.
Instead, Visa recommends that the FTC utilize in its Policy Statement a flexible approach that allows different industries and individual businesses to determine the best manner to provide the appropriate consumer disclosures and other protections in the context of the Internet and other electronic media. This will allow consumers and businesses to enjoy the benefits of innovation in the rapidly developing and changing field of electronic media. Under this flexible approach, the Policy Statement could include a listing of various factors, methods and examples that a business could consider when using electronic media to satisfy the FTC's rules and guides, but would not dictate any specific methodology or requirements.
The FTC should rely to the greatest extent possible on industry self-regulation, rather than mandated rules, for electronic media. In the Proposal, the FTC notes that one of its intentions in issuing the Policy Statement is that it will serve as a guide for self-regulation by industry groups. Visa supports self-regulation for electronic media and electronic commerce. The United States, and indeed the world, is undergoing a unique period in which numerous new products and services (such as electronic newspapers and interactive computer games), as well as new means of providing existing products and services (such as through the Internet and CD-ROM) are rapidly being developed and deployed. The FTC recognizes this rapid pace of technological development in the Proposal. During this period, electronic media formats and technologies are changing too quickly for statutory or regulatory regimes to effectively regulate all the different industry members and different products and services that use electronic media in some means. However, as evidenced by the development of the SET protocol discussed above, industry has a strong interest and incentive in ensuring that consumers are protected from unfair and deceptive acts and practices in this new environment, so that they will not be hesitant to utilize this new electronic media.
Visa believes that the best approach is for the FTC to encourage industry groups to undertake self-regulatory efforts to provide appropriate protections to consumers in this rapidly evolving electronic marketplace. The FTC's proposed Policy Statement could serve a valuable role in providing guidance on different factors and techniques that an industry group or sector could undertake to comply with FTC rules and guides in the context of electronic media. Under this approach, different industry groups or sectors would be allowed to develop their own approaches to electronic media that would vary to meet their own electronic media formats, customers, and products and services. Self-regulation will thus provide the requisite flexibility discussed above to enable the appropriate consumer safeguards in this varied and rapidly changing environment, without distorting or otherwise precluding important technological and other advances from which consumers will greatly benefit.
Industry members should be permitted to use electronic media to satisfy affirmative disclosure requirements. In the Proposal, the FTC is seeking comment on what, if any, guidance is necessary in its proposed Policy Statement on the use of electronic media to comply with affirmative disclosure requirements. In particular, the FTC notes in the discussion in this section of the Proposal that a business could use electronic media, such as e-mail or facsimile, to give a consumer a statement or disclosure that was required by FTC rules or guides to be in "writing."
Visa believes it to be most important for the FTC to permit electronic media to be used to meet affirmative disclosure requirements. There has been a significant growth in recent years in consumers' participation in electronic commerce, and electronic commerce is built on electronic communication. Electronic communication is the medium of communication and distribution for these services, and is essential for their existence. Many of these services would not be economically viable without the swift, accurate, convenient, and inexpensive transmission of information to and from consumers across public and private networks that advances in electronic communications and microprocessors have made possible.
A regulatory requirement that certain disclosures, notices or other communications be provided in writing would be a significant impediment to the further evolution of these electronic commerce services that consumers are demanding and from which they derive significant benefit. By accommodating electronic communications, the FTC will promote further growth and innovation in these on-line services.
Moreover, during the last several years, consumers who have chosen to utilize these on-line services have gained significant experience with electronic communications, through their use of such things as e-mail, private on-line networks, and the Internet. These consumers have come to appreciate how to use electronic communications, the benefits of electronic communications and the steps to take to ensure that electronic communications are received and, where desired, retained.
Visa has considered the specific issues raised by electronic communication of affirmative disclosures in the context of the Federal Reserve Board's review of its regulations to permit these electronic communications, which is discussed in more detail below. Based on this experience, Visa recommends that the FTC's proposed Policy Statement recognize that there may be various methods that a business could use to provide a consumer with electronic delivery of affirmative disclosures and other information. For example, these could include traditional paper mailings, e-mail, facsimile, posting of disclosure on a Web site for download by the consumer, or a combination of these different methods. To the greatest extent possible, the FTC should permit a consumer and a business to agree to a particular electronic media method. Given the early stage of development of the products that will utilize electronic communications in this manner and the level of uncertainty regarding the future development of these products, it is particularly important that the FTC not at this time preclude or potentially be interpreted as precluding any particular technology or equipment.
With respect to posting information on an Internet site, as Visa previously has indicated to the Federal Reserve Board, Visa believes that businesses should be permitted to satisfy affirmative disclosure requirements by posting information on an Internet site. However, the consumer should be provided notice about the Internet site, be provided instructions about how to access the site, and be aware that the information in question has been posted on the Internet site. For information that the consumer is not otherwise aware has been posted on the Internet site, such as would be the case with a not previously announced change in a product's terms, the consumer should be provided notice that the information has been posted. This notice could, for example, be provided by e-mail.
Visa opposes the suggestion in the Proposal that, for a disclosure via electronic communication to be effective, the consumer must in fact have the technological capabilities of receiving or viewing the information. Where the industry member has disclosed to the consumer certain specifications for the equipment to be used by the consumer in connection with the product or service in question, and the consumer determines to utilize that product or service, the industry member should be viewed as having satisfied applicable regulatory requirements if it transmits the electronic communication to the consumer in a format or communication protocol that permits the communication to be viewed on the specified equipment, assuming it is properly working. The industry member should not be responsible if the consumer does not in fact have the specified equipment, or if the consumer has the specified equipment but it is not properly functioning. To require otherwise would impose an untenable burden on the industry member -- which has no way of knowing whether in fact the consumer has the requisite equipment in proper working order -- and would stifle electronic communications and the electronic commerce.
Visa also opposes the suggestion in the Proposal that the consumer be required to confirm receipt of electronic communications. Certain methods of electronic communication, such as web site postings, do not accommodate consumer receipts, and would be precluded if the FTC were to impose such a requirement. Even where a confirmation capability is available, the fact that a consumer does not confirm an electronic communication does not necessarily mean that the consumer has not received the electronic communication. He or she may simply have not bothered to provide the confirmation. For these reasons, a requirement that a consumer confirm a particular type of disclosure provided via an electronic communication would, in essence, preclude the use of electronic communications for that type of disclosure.
The FTC should not address issues within the scope of the regulations issued by the Federal Reserve Board. Over the last several years, Visa and its member financial institutions have been working with the Federal Reserve Board and other banking regulators to revise certain banking regulations and interpretations to facilitate the use of electronic media in the provision of banking products and services. The Federal Reserve Board has amended Regulations E (Electronic Fund Transfers) on a temporary basis, and has proposed amendments to Regulation Z (Truth In Lending), Regulation B (Equal Credit Opportunity) and Regulation M (Consumer Leasing), to accommodate electronic media. Visa supports the decision by the FTC reported in the Proposal to not extend the proposed Policy Statement to acts or practices subject to these banking regulations. Given the consideration of electronic media issues already underway at the Federal Reserve Board, it is not necessary for the FTC to extend the proposed Policy Statement to these acts or practices.
Moreover, to the extent possible, the FTC should conform its rules to these banking regulations. Certain products, such as certain products issued by a joint venture between a bank and a nonbank, may be subject to both the banking regulations and the FTC rules. It may well be the case that such a product must satisfy the requirements of both the banking regulations and the FTC rules, which can only be assured if the requirements are consistent in both. In addition, the same requirements will ensure that consumers receive consistent treatment regardless of whether the business is subject to these banking regulations or the FTC rules. Different requirements will serve only to confuse consumers, as well as stifle innovation of financial products and services.
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Visa appreciates this opportunity to comment on the FTC's proposed Policy Statement on electronic media. If the FTC or its staff have any questions concerning this letter, please do not hesitate to contact me, at (650) 432-3111.
Russell W. Schrader