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U.S. Perspectives on Consumer Protection in the Global Electronic Marketplace

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In June 1999, the FTC held a workshop on U.S. Perspectives on Consumer Protection in the Global Electronic Marketplace. The Workshop brought together industry members, consumer advocates, academics, and domestic and foreign government officials, who grappled with many difficult questions: What information disclosures do online consumers need to make informed decisions? What are fair business practices online? What are appropriate roles for government and the private sector in securing effective consumer protection? For cross-border, business-to-consumer transactions, which countries’ laws should apply, and which countries’ courts should hear disputes? How can stakeholders best work together internationally to protect consumers?

Although workshop participants agreed that online consumers should be afforded effective protection that is not less than the protection afforded to offline consumers, they identified three special concerns of online consumers: the anonymity of sellers who may be difficult to trace; consumers’ inability to examine products or labels; and obstacles to resolving disputes.

Accordingly, participants recognized a heightened need for disclosures about online businesses, the goods and services they offer, and the terms and conditions of transactions. They also identified the need for order confirmation mechanisms, to ensure that consumers clicking through a Web site are not held to the terms of an online contract they never intended to make. Consumer advocates also pushed for cancellation rights, protections related to merchandise delivery, and appropriate allocation of the risk of loss in connection with authentication technology.

The Workshop highlighted innovative private sector initiatives to address consumer concerns, including certification programs, public rating systems, industry codes of conduct, and escrow and insurance programs. While participants disagreed about whether industry efforts alone would be enough to address such concerns, they saw value in business practices that foster informed decision-making and consumer confidence in e-commerce.

Establishing a workable framework for applicable law and jurisdiction appears to be the most vexing problem. Some participants argued for a country-of-origin framework, which would subject companies only to the laws and courts of their own country, regardless of the location of their customers. Advocates of this approach promoted it as the best way to address business concerns about the difficulty of applying the current legal system to e-commerce, an unpredictable regulatory environment, and compliance costs that could impede market entry by small- and medium-sized enterprises.

Others favored a country-of-destination approach, under which consumers would be protected by their own laws, law enforcers, and courts. Proponents argued that this approach would ensure that consumers had effective protection and access to redress.

The participants agreed that some form of alternative dispute resolution might provide a practical solution that can be achieved in the short term. Even if consumers could sue foreign businesses in the consumers’ home courts applying local laws, they suggested, litigation over small-value Internet transactions generally makes no practical or economic sense. Even if a consumer obtained a judgment at home, it would be difficult, if not impossible, to have it enforced abroad.

Workshop participants also saw a need for enhanced international cooperation. They generally agreed that stakeholders should pursue efforts toward convergence of substantive consumer protection laws; strive for cooperation and information sharing among consumer protection law enforcement agencies; and work toward arrangements for recognizing and enforcing judgments in cross-border consumer cases.

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