Consumers contacting the National Consumers League Internet Fraud Watch Division in 1999 lost over $3 million to online fraud – a reported increase of 38% from 1998. (Please go to the National Consumers League Internet Fraud website at http://www.fraud.org/internet/intset.htm.) The Federal Trade Commission (FTC) received over 18,500 complaints concerning online transactions in 1999, more than doubling the amount reported in 1998. The majority of claims are related to online auction sites, as many of the smaller sites do not have an in-house dispute resolution system. (eBay, for example, uses SquareTrade to settle users’ disputes). Government and industry alike have been grappling for years with the intricacies of developing a system of guidelines to protect the consumer in the online setting.
FTC and Commerce
In early June 2000, the FTC and the U.S. Department of Commerce (DOC) held a workshop entitled Alternative Dispute Resolution for Consumer Transactions in the Borderless Online Marketplace. (Information related to the Workshop can be accessed at:http://www.ecommerce.gov/adr/.) As indicated by the FTC press release announcing the Conference, the Workshop was intended to spark a dialogue between consumer groups and industry over the viability of using alternative dispute resolution programs (ADR) for doing business over the Internet. (The FTC press release announcing the conference is at http://www.ftc.gov/opa/2000/02/adrrev.htm.) The FTC and DOC have solicited public comments as well as responses to specific questions listed in the Federal Register notice. (The notice can be found at: http://www.ftc.gov/os/2000/02/altdisputeresolutionfrn.htm.) The agencies are seeking feedback on existing ADR programs, approaches to applying ADR to the online environment and the keys to developing an equitable Internet-based ADR system. The interest generated by the workshop has been so great (about 40 comments have been received and posted to date) that the comment period has been extended to the end of June to accommodate all interested parties. (To access the public comments submitted for the forum, please go to http://www.ftc.gov/bcp/altdisresolution/comments/index.htm.)
At the June Workshop, the Electronic Commerce and Consumer Protection Group (ECCPG), an organization comprised of America Online, AT&T, Dell, IBM, Microsoft, Network Solutions, Visa USA, Inc. and Time Warner, Inc. announced their proposed Guidelines for Merchant-to-Consumer Transactions and Commentary. The Guidelines assimilate accepted business practices worldwide and apply them to the online commercial transaction. The proposal addresses refund and cancellation policies, standards for marketing practices, disclosure of information about goods and services, delivery, customer service, warranties, and consumer security and privacy. Merchants are urged to provide consumers with a "fair, timely, and affordable means to settle disputes and obtain redress" and the proposal suggests in-house and third party ADR mechanisms. (The ECCPG website is at http://www.ecommercegroup.org/ and the Guidelines can be accessed at http://www.ecommercegroup.org/guidelines.htm.)
Concurrent with the release of the Guidelines, the ECCPG also released a Jurisdiction Statement to address the issue of jurisdiction and online consumer transactions. (For the press release, please go to http://www.ecommercegroup.org/press.htm. The Statement is at http://www.ecommercegroup.org/statement.htm.)
The BBB and OECD
Great ideas are not usually created in a vacuum and such is the case with the issue of online business guidelines. While the ECCPG had been working on their proposal for the past nine months, the BBBOnline (Better Business Bureau Online) and the Organization for Economic Cooperation and Development (OECD) have been developing consumer protection guidelines over the past several years.
Early in the summer of 1999, the BBBOnline announced its project to develop a Code of Online Business Practices to provide online merchants with "guidelines that will help address important consumer protection issues raised by the digital marketplace." (The text of the press release is at http://www.bbbonline.org/about/press/6-8-99.html.) In the interest of self-regulation, the members of the BBB felt it behooved them to spearhead an online consumer protection Code to provide a voluntary standard for online transactions. The Code is now in its second and final version and has been approved by the Council of Better Business Bureaus Board of Directors Executive Committee as well as the BBBOnline Board. It is pending approval from the local BBB Boards, the National Members and the National Board of Directors. (The text of the revised and final draft is available at http://www.bbbonline.org/businesses/code/draft/index.htm.)
The OECD Committee on Consumer Policy has been developing a draft set of guidelines entitled, Guidelines for Consumer Protection in the Context of Electronic Commerce since 1998. In October of 1998, the OECD Forum on Electronic Commerce met in Ottawa, Canada to discuss the potential of global electronic commerce. Among the many topics discussed was consumer protection in the electronic marketplace and it was one of the issues incorporated into the Global Action Plan for Electronic Commerce formulated at the Conference. If adopted, the OECD guidelines would provide consumers in the online setting with the same protections derived from existing forms of commerce. (The conference materials make for some interesting reading and can all be accessed at http://www.oecd.org/subject/e_commerce/.)
One year later, in October of 1999, the OECD Forum on Electronic Commerce met in Paris, France to continue the dialogue on the digital economy begun the previous fall. (Conference materials can be found at http://www.oecd.org/dsti/sti/it/ec/act/paris_ec/paris-ec_docs.htm.) A commitment to finalize the consumer protection guidelines by the end of 1999 was announced at the Forum, but the guidelines would not enter into force until they receive the approval of the 29 country representatives of the governing Council. As of June, 2000, the OECD has not given its final stamp of approval to the guidelines.
Readers may be wondering what all of these guidelines mean to them in actuality. Once they are adopted by the various organizations the standards remain voluntary. Although similar in nature, the proposals do vary, leaving no industry-wide standard. Consumer groups are concerned that the customer will be forced to utilize ADR when they would prefer to handle the dispute through the courts or otherwise and jurisdiction in the online marketplace is still an issue which has not been resolved by any of the guidelines. Many are hopeful that ADR will serve as the enforcement mechanism behind these voluntary guidelines and self-regulation will be given the boost that industry has been awaiting.
I’d say - Consumers! Hold onto your credit cards, we haven’t heard the last on this issue!