Consumer protection in electronic commerce

Speech on the GILC conference 7^th of November 1998 in Ottawa, Canada

By Bjørn Erik Thon, Head of legal section, Consumer council of Norway

The subject of the conference is the public voice in the development of internet and the title of the panel is consumer protection in electronic commerce. This is a very important issue indeed, which, to my regret and also surprise, has been underfocused. In this speech I will try to explain why it’s so important, not to say essential, to listen to the consumer voice. I will also go more detailed into the major concerns regarding electronic commerce in the outlook of a small country in the outskirts of Europe, and not least how we can deal with consumer problems that may arise. I will try to highlight the topics listed in the heading, but will also try to share some of the experiences and ideas we have in Norway.

The issue of consumers and internet can be discussed both on a micro level and a macro level.

With micro level I mean question that is of importance for the consumer when he decides if he will use the internet to purchase goods or services. With macro level I mean problems that might not be an importance the individual consumer today, but which in the long run will be of importance and decide wether the consumer as such will continue using to use the internet. Bear in mind that the subjects can not necessarily can be put in on level or the other, and that the problems I discuss is not exhaustive. I will focus most on the micro level.

It’s of absolute importance that the consumer feel safe and confident when he’s buying on internet. In The Nordic countries we are carrying out a big survey to examine whether present Nordic legislation apply in the electronic commerce environment. So far we have found that present legislation to a large extent apply and also gives the consumer quite good protection. If we compare the survey with what the consumers feel is the main problems regarding electronic commerce, we see an interesting connection: It’s the same issues of concern, namely

- Privacy

- Secure payment

- Signatures and contracts

- Secure delivery

- Quality of delivery, especially services/good delivered electronically

- Redress and jurisdiction.

In the following I will go more thoroughly into this issues.

2.2. Privacy

This is absolutely essential, and is today on of the two most important consumer concerns.

On a national level in Norway this is not a very large problem, at least not in practice. In theses, however, many consumers have the impression that every movement they do are registered and misused by salesmen, which is not the case. Norway has a strict privacy regulation that is applicable on electronic commerce. On European level the directive of personal protection and privacy also gives a strong consumer protection. The main problem from our side is purchase from non European countries. What we must do is:

- Inform the consumer about the risk of registration so that he can choose himself whether he wants to buy

- Establish international rules regarding privacy

Among with privacy this is the biggest obstacle for a thriving marked. Surveys carried out by several organizations shows that this is a point of major concern for consumers. For us as a consumer organization this is crucial. If the consumer deny to pay, for example because he claims fraud, the money should be paid back to him. This put the burden of suing on the professional part. A charge back rule is a major condition in the Danish consumerombudsman guidelines for good contractual terms in electronic commerce. Another problem arise because the consumer often prepay the goods. What if the goods are never delivered.

The consumer claims are clear:

- Secure payment systems

- Charge back rules

- No prepayment, and if so, chargeback rules.

In the ´realª world it’s usually quite simple to decide who signed a contact. In electronic commerce this is not always the case. From a consumer point of view it’s important that we establish electronical signatures that proves that the right person entered into the agreement. It’s also important that the contract situation is clear. It must not be possible to buy something by pushing the wrong bottom. It’s important that the consumer get the right to confirm the order before a final deal is done. Another important question is the right to withdraw. In Norway, and soon in all the EU Member states, the consumer will have a cooling off period of 7 working days when buying on the internet.

2.5. Delivery

Delivery is a key issue and also a major problem regarding electronic commerce, and at the same time essential because easier delivery is one of the major advantages with electronic commerce. But the consumer must know that he gets what he order.

Especially interesting is delivery that is generated electronically to your mailbox, like dataprograms, netmagazines, games, music etc. This arise many interesting legal questions, like when is delivery made, how is it made, what remedies do you have if the product lack conformity etc. From our point of view it’s essential that the risk of dispatch is on the seller. to make efficient and safe systems risk has to be placed on the party that can influence the risk.

2.6 Redress and jurisdiction

As mentioned below national legislation is to a large extent applicable in an electronic environment. This is a start and the importance of a good national legislation should not be underestimated, since electronic commerce is still a national phenomena and most people buying on internet do it from a national shop. It is, however, even more interesting and important to examine the transborder purchases, since this is where the major concerns and also great advantages with electronic commerce will be seen.

It’s important that the consumer know witch jurisdiction that apply when he buy something on the net. Several conventions are applicable, and from our point of view the most important ones is the Lugano convention and the Brussels convention. Regarding consumer contracts our claim is that it should be the consumers laws that are applicable. If the rule was the other way around it would be impossible for the consumer to know which rights he has for remedies, redress etc. The Lugano and Brussels convention are to a certain extent on this line, but it will be very important for the consumer organizations to put a lot of pressure on this: The law of the consumers home country is the one that must applicable.

Regarding redress we have achieved a lot if it’s clear that it is the law of the consumers homecountry that applies. But how can an Norwegian consumer buying a CD from the US make a complaint and be assisted in his efforts in the US ? A key word is cooperation between consumer organizations and complaints boards, arbitration courts etc. It’s more important then ever to build up a network of consumer organizations. The EU has made efforts to do so, but there’s a lot more than can, and has to, be done.

An important measure is to establish a label, for example called Safe Netshopping after model of ´trustEª, where the seller must fill several conditions to be entitled to use the label, among them the measures listed here. This is a good way to assure the consumer safe shopping and will be of great importance to the trade and industry because they will build up their credibility. In Norway we have started negotiating about establishing such a label, and I must say the interest from trade and industry has been overwhelming.

To summarize the measures mentioned so far:

- Secure payment with secure standards and charge back rules.

- Burden of dispatch risk on the seller when the goods or services is delivered electronically.

- High level on privacy - prohibition to create profiles based on what we buy/sites we visit.

- Digital signatures, cooling of period and confirmation of order

- The law of the consumers home country must be applicable

When I talk about the macro level, I mean problems and challenges that in the short run will not have a great importance for the individual consumer, but which will be important for all the consumers in the long run.

It’s more political issues where we will see the results of an unsuccessful policy several years from now. If trade and industry is pressing to hard to get paid for their services, paid for access to homepages, paid for loading information, paid to seek information, they must be aware that they can undermine the consumers interest for using the internet. If the consumer, when searching for information, find to many closed doors and pages where he has to pay, register his name, give his age etc., he will try to go elsewhere to get the information he seeks.

3.3. A and B level

There is also a danger that there will be an A and B level in the population between those who can use the internet and those who can not. When everything is electronized, when essential information is so easy accessible, when everything is made available it might happen that we get a divided society, not only in terms of information, but also in terms of what you have to pay for the goods and services you want to buy. We shall not exaggerate this problem. The same happened when TV was introdused. My impression is also that the number of people that are familiar with the new technology is rapidly growing, which will reduse the gap.

Thanks for your attention