OECD: providing consumer protection in electronic commerce

Business America, Sept, 1998 by A.J. Campbell

What would it take for you to buy something on the Internet today? What kind of assurance would you need about what you buy, whether it is a consumer good (clothes, books, or wine) or digitized product (software)? Just as some people in the offline world are comfortable purchasing by mail order or over the television, some are more likely to purchase online then others. So the question is: How can the Internet community help people become more comfortable purchasing online? One answer is to develop a set of consumer protection customs that will help the public understand what avenues of recovery are available to them should the product not perform to expectations or even do damage.

The lack of consumer protection on the Internet is one of the core issues that limits the growth of electronic commerce. As we all know, the role of electronic commerce (e-commerce) in society is growing. The explosion of the global electronic commerce web has made it easy, quick, and painless to transmit all kinds of digitized data. This new cross-boarder platform eliminates some of the constraints of geography, time, and place. This unprecedented growth has spurred the development of all kinds of new information-based products and services at the same time as existing services are being transformed to use electric commerce to save costs -- for example, mail order houses placing their catalogues online.

The overwhelming amount of information available has the potential to influence commercial sales both online and offline by allowing consumers access to compare product information, and from the point of view of the business owners targets marketing and services to the user. Though all this potential exists, users are still not buying most consumer products online. Instead, most consumers choose to reach the product's cost and availability, and compare features, advantages, and benefits online, then buy using traditional means, (phone, fax, retail outlet).

Making the transition to true Internet commerce, however, raises questions about the accuracy of the information, the validity of forming contacts tot the web, and to whom one complains when something goes wrong. Direct business-to-consumer commerce will only come to fruition when the value outweighs the perceived risks. What people really need is an assurance that the electronic marketplace provides safe and predictable place for them to shop.

Potential Market Access And Growth

Technological advances are driving the growth of the Internet, in both hardware software networks. It is becoming easier to get on the web from more outlets than ever before. Consumers are relying on the convenience that technology adds to their lives. Because of closed network systems, such as automatic bill paying and automatic teller machines, consumers are becoming accustomed to using these services and features.

Building Consumer Trust

Direct business-to-consumer electronic commerce will not become as commonplace as using the shopping mall until e-commerce is safe and predictable. Consumer laws, policies, and practices that exist offline are attempting to find a technological equivalent in the online world, including unfair or misleading claims. Offline consumer protection rules that govern transactions are guided through a complex layered system of federal and state laws. Both business and consumers alike have to be aware of the consumer protection rules that apply to their transactions. In the offline world, consumer protection laws cover the rules that exist for the residence of the consumer. But in the online arena, a product is on sale to the world. Therefore, this makes it impossible to know where the purchaser is unless that information is provided -- hence, the applicable consumer protection laws.

Organization for Economic Cooperation and Development

Currently, the Organization for Economic Cooperation and Development is the only forum where a multilateral discussion exists on consumer protection and e-commerce. The Directorate of Science and Technology's Committee on Consumer Policy has developed a declaration on Consumer Protection in the Context of Electronic Commerce that was finalized at the 55th negotiating session, September 3-4, in Paris. The declaration will be presented at the Ottawa Ministerial, "A Borderless World: Realizing the Potential of Global Electronic Commerce," October 7-8.

The Consumer Protection Committee decided to state in the declaration that in building a framework for consumer protection, it is best not to search for the same level of protection as exists in the offline world but for an effective level of protection. The key here is that the Internet might require a higher level of protection in order for people to feel comfortable using the information, or lower if technology can assist in delivering information. For example, you have purchased a software product by downloading it from the web, as opposed to purchasing it retail. What happens if the software turns out not compatible, not functional, or, worse, ends up damaging your computer's programs? Domestically, the Federal Trade Commission has been working to raise public awareness about consumer protection fraud on the Internet.