March 26, 1999

Secretary

Federal Trade Commission

Room H-159

600 Pennsylvania Avenue

Washington, DC 20580

Re:       "U. S. Perspectives on Consumer Protection in the Global Electronic Marketplace Comment, P994312

Dear Secretary Clark:

On behalf of the Consumer Federation of America and the low income clients of the National Consumer Law Center, we submit the following comments on consumer protection in the global electronic market. We start this analysis with two basic premises:

Platform for Consumer Protections in Global Electronic Commerce:

Overview. Consumers must have effective consumer protections when shopping on the Internet. Advertisements should be truthful and provide complete information necessary to make an informed choice. Purchase decisions should be deliberate and documented. Products and services should be required to be as represented. Payment should be secure and consumers= risk of financial loss limited. If anything goes wrong, consumers should have recourse and opportunity for redress.

The goals for a consumer protection framework in global electronic commerce should be to foster justified consumer confidence, fair competition, and economic development around the world. Consumers expect at least the same level of protections in the virtual marketplace as they currently have in the real marketplace. Uniform and consistent rules help consumers learn their rights and responsibilities and reduce uncertainty. Unless and until consumers feel secure when browsing the Internet, the global electronic marketplace will not reach its potential. If the scam artists and thieves are allowed to pollute electronic commerce, legitimate businesses and consumers will both be cheated. The global nature of electronic commerce requires a fundamental reexamination of national consumer protection laws and regulations to resolve jurisdictional questions.

It is much less costly to build in comprehensive and effective consumer protections at the dawn of electronic commerce than to retrofit after consumer confidence has been eroded. Effective and enforceable regulations should be established now. Self regulation will not create an adequate degree of protections to foster consumer confidence and actually protect individuals from loss of money and privacy.

Low Income Perspective. We are particularly concerned that protections be crafted with the needs of low income consumers in mind. Protections provided to consumers must be universally accessible, retrievable, and useful to all consumers. The usefulness and applicability of consumer protections, especially authentication methods, should not be limited to those consumers who can afford them. Similarly, consumer protections should be universally enforceable, and not limited to enforcement only by those who have the financial means.

Coverage. We urge the Federal Trade Commission to view the electronic marketplace very broadly. E-commerce includes the Internet as an advertising medium and information source, as a shopping venue where items are purchased or contracted for, as a "mail-order" system where orders are placed or products and services actually delivered, as a payment system, and as a venue for after-purchase consumer recourse. Shopping in the "real marketplace" also involves electronic commerce through online data collection via frequent shopper cards, payment by debit cards, and through stored-value cards. It is difficult to think of very many retail transactions without electronic features.

Jurisdiction and Venue. The global nature of the Internet raises issues of jurisdiction and venue for handling disputes. Whose laws apply to advertising, contract terms, or fraud? Where do consumers complain? We support applying the laws of the country in which the consumer lives to electronic purchases. The "law of the consumer's country" is included in the draft OECD Guidelines on consumer protection and is also favored by other European bodies.

The European Commission has proposed that the laws of the country of origin apply to consumer transactions. This is a dangerous proposal because it would force consumers to rely on unfamiliar consumer protections. Furthermore, this would provide unscrupulous merchants a significant financial incentive to locate their Internet Service Providers in the country with the weakest protections.

Harmonization. Effective consumer protections in global electronic commerce will require governments around the world to harmonize their existing consumer protection and redress arrangements. An international body may be needed to assist in harmonizing national consumer protections. A World Consumer Protection Organization (AAWCPO@), similar to the World Health Organization or the World Intellectual Property Organization, could be formed to ease the jurisdictional divide in electronic commerce. AWCPO, proposed by Jamie Love, Director of the Consumer Project on Technology, could facilitate treaties and harmonization efforts on ecommerce consumer protection issues.

While harmonization of laws and standards is moving rapidly where business supports it, harmonization of consumer protections has lagged. Harmonization of consumer protection rules should receive the same level of attention as the integration of trade rules.

Enforceable Regulation is Required, Not Self Regulation. The global electronic  marketplace, by its very nature, makes effective consumer protections difficult. The consumer has no direct contact with the merchant and cannot easily verify the quality of the goods or the reliability of the vendor. Marketing messages can be personalized and instantaneous, enticing consumers to make impulse purchases. Protecting privacy and children is more difficult in the electronic market than in the real market.

While voluntary industry self-regulation is positive, experience in the on-line privacy debate over the last year demonstrates that industry's promise to adopt effective self-regulation has not worked. It is even less likely for global businesses to adopt and implement effective voluntary consumer protections. Consumer protections in global electronic commerce must be built on a firm foundation of enforceable laws and regulations in order to protect both consumers and ethical merchants. We should learn the lessons from long distance telephone slamming, payphone alternate operator overcharges, and 900 number scams.

CFA and NCLC view key consumer protection elements to include: Informed choice for consumers, safety, fair play, information disclosure, privacy, redress and enforcement. Necessary consumer protections are divided into the major functions for electronic commerce and listed in the logical sequence of the transaction. This platform is not exhaustive but illustrates the major protections needed by consumers.

Internet Commerce as an Advertising and Marketing Medium

  Provide consumer control over illegal or undesirable material sent via the Internet and develop easy to install rating and filtering systems for Internet content.

Internet Commerce as an Information Collection Devise (Privacy)

Internet Commerce as an Information Disclosure Mechanism

  National laws and regulations requiring information disclosures (such as pre-sale disclosures of the cost of credit and leases) in the paper system must be effectively and appropriately applied to the electronic system.

  All disclosures must be provided in a manner which they can be downloaded, saved and/or printed in a manner which self-proves their authenticity.

  All disclosures required -- both for general website and specific transactions -- must be accompanied by two dates -- the date when website was last updated, and the date when information on website becomes obsolete.

Internet Commerce as a Mail Order Mechanism

Internet Commerce as a Sales Venue

State attorneys general should also have enforcement authority.

Private right action with statutory penalties, actual damages and attorneys fees must also be provided.

Payment Mechanisms on the Internet

Additional Recommendations

Consumer Protection Laws

FTC Workshop

The focus of the FTC workshop in June should be to review of existing consumer protections and their application to global electronic commerce, a review of redress and enforcement mechanisms, and a status report on adoption of the OECD consumer protection guidelines. Participants should include American consumer and privacy advocates, the Attorneys General, representatives of Consumers International and the Trans Atlantic Consumer Dialogue, OECD, the World Trade Organization, the United Nations Commission on International Trade Law, business and trade organizations, and legal and academic experts. Consumer Federation of America and the National Consumer Law Center request an invitation to participate.

Sincerely,

Jean Ann Fox                                                 Margot Saunders

Director of Consumer Protection                       Managing Attorney

Consumer Federation of America                      National Consumer Law Center