Software & Information Industry Association

*Revised*

Comments of the

SOFTWARE & INFORMATION INDUSTRY ASSOCIATION (SIIA)

On
"Electronic Signatures in Global and National Commerce Act"

(Study on the benefits and burdens of requiring consumer consent
to receive information electronically pursuant to Section 101(c)(1)(C)(ii))

March 16, 2001

Introduction

We appreciate working with staff of both the Federal Trade Commission (FTC) and the National Telecommunication and Information Administration of the U.S. Department of Commerce (NTIA) on various issues related to electronic signatures generally, implementation of the "Electronic Signatures in Global and National Commerce Act" (ESIGN) bill, and in particular provisions related to consumer protection. We have requested the opportunity to participate in the "Electronic Signatures Workshop" scheduled for April 3, 2001. These comments should be substituted for the preliminary comments submitted by SIIA on March 16, 2001.

About SIIA

SIIA is the principal trade association of code and content companies, representing more than 1,000 high-tech leaders that develop and market software and electronic content for business, education, consumers and the Internet. SIIA's membership is comprised of large and small software companies, e-businesses, and information companies, as well as many other large and small traditional and electronic commerce companies having various business models and interests.

The members of SIIA are at the forefront of developing global e-commerce markets in which business, consumers and users can have confidence. Thus, one of the priorities of our Association is to promote the removal of barriers to the recognition of electronic records, contracts and signatures as key steps toward providing a framework for promoting cross-border electronic transactions. In particular, SIIA is monitoring implementation of the Uniform Electronic Transaction Act (UETA) by the states and the ESIGN bill domestically, as well as implementation of the European Union Electronic Signatures Directive generally. Implementation of the ESIGN bill is a high priority for SIIA and its members.

Recommendations for the Study

We appreciate the opportunity to comment to the Secretary of Commerce and the Federal Trade Commission on the benefits and burdens of requiring consumer consent to electronic transactions in the specific manner required by section 101(c)(1)(C)(ii) of ESIGN. In reporting to Congress as required under section 105(b) of ESIGN, the Secretary and the FTC are required to report by June 30, 2001 (12 months after enactment) with an evaluation of:

"…any benefits provided to consumers by the procedure required by section 101(c)(1)(C)(ii); any burdens imposed on electronic commerce by that provision; whether the benefits outweigh the burdens; whether the absence of the procedure required by section 101(c)(1)(C)(ii) would increase the incidence of fraud directed against consumers; and suggesting any revisions to the provision deemed appropriate by the Secretary and the Commission."

The language found in section 101(c)(1)(C)(ii) attempts to define a "technological access" condition for a consumer accessing information as an element of consent. It is important to note that the section is limited to those situations where a "statute, regulation or other rule of law requires that information relating to a transaction or transaction in or affecting interstate or foreign commerce be provided or made available to a consumer in writing."(1) In these cases, the use of an electronic record to provide or make available such information satisfies any such requirement that the information must be in writing if:

"… (C) the consumer … (ii) consents electronically, or confirms his or her consent electronically, in a manner that reasonably demonstrates that the consumer can access information in the electronic form that will be used to provide the information that is the subject of the consent."

This requirement for "reasonably demonstrating" consumer access is just one of a larger number of steps found in ESIGN related to providing information electronically if information is to be in writing as required by law or regulation. The provision of the information electronically meets the requirement if the consumer:

has affirmatively consented to such use and has not withdrawn such consent.(2)
is provided, prior to consenting, with a clear and conspicuous statement of any rights of options to make it available on paper in "non-electronic form" and the right to withdrawn consent to have the record provided or made available in any electronic form, including conditions, consequences or fees in the event of such withdrawl.(3)
is provided, prior to consenting, with a clear and conspicuous statement of the scope of the consent; i.e., whether it applies to a particular transaction or to identified categories of records.(4)
is provided, prior to consenting, with a clear and conspicuous statement describing how to withdrawn consent.(5)
is provided, prior to consenting, with a clear and conspicuous statement with information on how to obtain a paper copy of an electronic record and whether there is any associated fee for doing so.(6)
is provided, prior to consenting, the hardware and software requirements for access to and retention of the electronic records.(7)
is provided, after consent, with any revised hardware and software requirements related to access to and retention of electronic records and the right to withdraw consent without any fee and imposition of any condition.(8)

In reviewing this section in light of all the steps required under ESIGN, and in the context of the purposes for which ESIGN was enacted (discussed below), we want to bring to the attention of the FTC and NTIA a number of points that should be reflected in their report to the Congress.

First, and most obviously, ESIGN provisions related to assuring consumer confidence do not depend exclusively on requirement of "reasonable demonstration" found in section 101(c)(1)(C)(ii). Indeed, as the extensive list above demonstrates, the procedural steps outlined in section 101(c)(1) are by any measure a comprehensive, point-by-point delineation that is required for an electronic record to meet the requirements of a writing found in law or regulation. Thus, in our view, it is difficult to identify what additional benefits consumers may draw from the specific requirements found in the section. Our careful review of the legislative history of ESIGN, and of any publicly available commentary since its enactment, provides no insight into what additional benefits the section was meant to provide in this constellation of provisions and existing consumer protection laws.

Second, we note that the language of section 101(c)(1)(C)(ii) raises potential questions as to how business and consumers should comply. In our research, the standard of "reasonably demonstrates" was not found to appear in any related consumer or contract statutes addressing consent. As noted previously, nothing in the legislative history, or any analytical commentary related to ESIGN indicates the origin of this standard nor the specific challenge that was being addressed when an electronic record is provided where information is to be provided or made available to a consumer where a writing is required.

A third factor that should be noted by the Secretary and the FTC in its report is that section 101(c)(1)(C)(ii) raises the distinct possibility that consumers (and businesses) will be locked into specific technical approaches on access to information that preclude alternative technical or business-consumer models for meeting the public policy goal of the section. Note that the requirement of the section indicates that the consumer at the time of consent or confirming consent electronically, must "reasonably demonstrate" that he or she can access information "in the electronic form that will be used" to provide the information for which consent is granted. Thus, it appears from the language of the statute that the form you consent in is the form you will receive any information required by law or statute in electronic form.

Fourth, the specific section appears to put additional burdens on existing business-customer relationships. Section 101(c)(1)(C)(ii) does not have a phase in or time frame in which it applies. It appears to cover all pre-existing and future requirements in law or regulation for information where a writing is required. Thus, where a company has been providing, where required, information in electronic or a mix of electronic and paper format, the section would require "renewing" the relationship even where the provision of information had been satisfactory from the customer perspective or adequate to meet existing law or regulation.

As a final point, we want to respond to the question posed in section 105(b), "whether the absence of the procedure required by [the] section … would increase the incidence of fraud directed against consumers" and whether the benefits outweigh the burdens. In carefully considering this question, we note that fraud against consumers is a complex and challenging issue. We do not pretend to be experts in all the ways that consumer protection authorities, such as the FTC, work to eliminate illegal acts, including fraud, against consumers either in the off-line or on-line environment.

In answering this question, we recall our analysis above that the procedure found in section 101(c)(1)(C)(ii) is one of several step-by-step details that are required in order to provide information in electronic form where information is required to provided in writing. The absence of this section would not affect, in our view, the operation of the other steps found in section 101(c)(1).

More significantly, ESIGN includes clear legal mandates that as discrimination against a signature, contract or other record in electronic form is eliminated, existing consumer protection laws are not to be affected. The law does this in two ways. First, generally, nothing in ESIGN serves to "limit, alter, or otherwise affect any requirement imposed by statute, regulation, or rule of law relating to the rights and obligations of persons under such statute, regulation or rule of law other than a requirement that contracts or other records be written, signed or in non-electronic form."(9) Second, with regard to disclosures, nothing in ESIGN "affects the content or timing of any disclosure or other record required to be provided or made available to any consumer under any statute, regulation or other rule of law."(10) Thus, absent section 101(c)(1)(C)(ii), legal protections to prevent fraud against consumers would still be law and unaffected by the implementation of ESIGN and the underlying contract would still be valid.(11)

As Senator Patrick Leahy, co-manager of the conference report on ESIGN and a key author of the provisions incorporated into section 101(c), put it:

"… [ESIGN] includes a broad savings clause which clarifies that the bill does not limit any legal requirement or prohibition other than those involving the writing, signature, or paper form of a contracts. Laws - including common law rules - that prohibit fraud, unfair or deceptive trade practices, or unconscionable contracts are not affected by this Act. A wrongdoer may not argue that fraudulent conduct that complies with the technical requirements of section 101(c) is beyond the reach of anti-fraud laws. By the same token, a consumer is always entitled to assert that an electronic signature is a forgery, was used without authority, or otherwise is invalid for reasons that would invalidate the effect of a signature in written form"(12)

Context of ESIGN Enactment

As a context to the specific questions posed by DOC and FTC in its Federal Register notice, we believe it is important to recall, as the report is developed, what was (and was not) the purpose of the ESIGN Act.

First, nothing in ESIGN prescribes a specific technological approach to ensure the recognition of an electronic signature, contract or record. On the contrary, part of the rationale behind ESIGN is to promote broad technological adequacy to assuring the legal recognition of a contract, record or signature in electronic form. If a state law requires that electronic records and signatures will be recognized only if they use a particular, designated technology, the state law would be pre-empted by ESIGN.(13) The authors of the bill recognized that some technologies are more secure than others, but that legal requirements should not inhibit technological innovation. Instead, "consumers and business should select the technology that is most appropriate for their particular needs, taking into account the importance of the transaction and its corresponding need for assurance."(14)

Second, ESIGN was not meant to be a comprehensive consumer protection law. As fully described in the prior section, ESIGN is meant to work compatibly with existing laws and regulations designed to protect consumers, whether in the off-line or on-line environment.

Finally, ESIGN was meant, for most purposes, to be a stop gap measure to provide confidence to business and consumers while states undertake implementation of the model law, the Uniform Electronic Transaction Act (UETA). Adopted by the National Conference of Commissioners of Uniform State Law (NCCUSL) in July 1999, UETA establishes electronic equivalency for contracts, records and signatures without affecting the underlying legal rules and requirements. As the report adopted by NCCUSL states:

"It is important to understand that the purpose of the UETA is to remove barriers to electronic commerce by validating and effectuating electronic records and signatures. It is NOT a general contracting statute - the substantive rules of contracts remain unaffected by UETA. Nor is it a digital signature statute."(15)

Under ESIGN, once a state statute, regulation or other rule of law "constitutes enactment or adoption of the Uniform Electronic Transaction Act as approved and recommended for enactment in all the States by the National Conference of Commissioners on Uniform State Laws in 1999,"(16) the provisions of section 101 of ESIGN no longer govern. The state statute, regulation or other rule of law remains in effect so long as it implements UETA consistent with the recommended draft adopted by NCCUSL.

Conclusion

SIIA appreciates this opportunity to comment on section 101(c)(1)(C)(ii) as the FTC and Secretary of Commerce prepare their report to Congress. SIIA and its members continue to work to develop global e-commerce markets in which business, consumers and users can have confidence. Our priority is to promote the removal of barriers to the recognition of electronic records, contracts and signatures as key steps toward providing a framework for promoting cross-border electronic transactions. In presenting our views, we encourage the FTC and the Secretary to note the potential burdens and likely uncertainty in the implementation of section 101(c)(1)(C)(ii). We also encourage the report to note that section 101(c)(1)(C)(ii) must be viewed in light of the constellation of step-by-step procedures found in ESIGN and the continued applicability of existing consumer protection laws and regulations, as well as the overall purpose for which ESIGN was implemented.

We look forward to hearing from others at the upcoming workshop on April 3rd, and working with the FTC and NTIA as it considers the comments received as part of its process of preparing its report.

1. Section 101(c)(1).

2. Section 101(c)(1)(A).

3. Section 101(c)(1)(B)(i).

4. Section 101(c)(1)(B)(ii).

5. Section 101(c)(1)(B)(iii).

6. Section 101(c)(1)(B)(iv).

7. Section 101(c)(1)(C)(i).

8. Section 101(c)(1)(D).

9. Section 101(b)(1).

10. Section 101(c)(2)(A).

11. Significantly, section 101(c)(3) recognizes this essential fact by assuring that "the legal effectiveness, validity or enforceability of any contract executed by a consumer shall not be denied solely because of the failure to obtain electronic consent or confirmation of consent in accordance with paragraph (1)(C)(ii). Section 101(c)(3).

12. Statement of Senator Leahy, 146 Cong. Rec. S5221 (June 15, 2001).

13. Ray Nimmer, "Electronic Signatures in Global and National Commerce Act of 2000: Effect on State Laws" (Discussion Draft), August 11, 2000. Found at http://www.bmck.com/ecommerce/ueta-esign-2/doc. See section 102(a)(2)(A)(ii) of ESIGN.

14. Senator Abraham, 146 Cong. Rec. S5223 (June 15, 2001).

15. Report of the UETA Drafting Committee, Prefatory Note to the "Uniform Electronic Transaction Act (1999)", Annual Conference Meeting of NCCUSL July 23-30, 1999, p. 7. Found at : http://www.law.upenn.edu/bll/ulc/fnact99/1990s/ueta99.htm.

16. Section 102(a)(1).