The U.S. Approach to Consumer Protection in the Online World U.S. Presentation FTAA Joint Government...

The U.S. Approach to Consumer Protection in the Online World

U.S. PresentationFTAA Joint Government

Private Sector Committee on Electronic Commerce

13th MeetingFebruary 2002

PublicFTAA.ecom/inf/122

February 13, 2002

Original: English

2

Consumer Concerns About Internet Shopping

• Consumers share 3 broad concerns when they go online:– Security of the transaction– Privacy of their personal information– Trustworthiness of the merchant

3

U.S. Approach to Protecting Consumers Online

• The U.S. approach to protecting consumers online relies on a combination of:– Government enforcement of laws prohibiting

fraudulent or misleading conduct– Private sector initiatives– Consumer and business education– International cooperation

4

Results of U.S. Approach

• Cooperative approach to building consumer confidence online has contributed to growth of B2C in the U.S.

B2C Projections

0

20

40

60

80

100

1999 2000 2001 2002Year

Bill

ion

s o

f D

olla

rs

eMarketerIDCGartnerJupiter

Government Enforcement & Cooperation

Pablo ZylberglaitLegal Advisor for

International Consumer Protection

U.S. Federal Trade Commission

6

Sources of Consumer Protection Rules

• Federal laws and rules

• State laws and Rules

• Self-regulation

Government Enforcement & Cooperation

7

Federal Trade Commission Act

• Section 5 of the FTC

Act prohibits:

– Unfair methods of

competition

– Unfair or deceptive

acts or practices

• Deceptive practices– Likely to mislead consumers– acting reasonably under the

circumstances• Substantiation

– Reasonable basis– objective claims

• Unfair Practices– Substantial Injury– Not outweighed by benefits– Not reasonably avoidable

Government Enforcement & Cooperation

8

Law Applied to E-Commerce

General• FTC Act• Other federal statutes

– Credit– Banking– Food and Drug– Product Safety

• Federal Rules– Mail Order Rule– Magnusom-Moss– Franchise Rule

• State laws and rules

Specific• Children’s Online

Privacy Protection Act of 1998– Notice– Parental consent for data

collection, use or disclosure

– Parental access to information

– Security of data– Safe harbors

Government Enforcement & Cooperation

9

FTC’s Role in Consumer Protection

• Coordinated law enforcement

• Self-Regulation

• Consumer and Business Education

Government Enforcement & Cooperation

10

Remedies

• Administrative Actions– Cease and desist– Corrective

advertising– Consumer

redress – Civil penalties

• Federal Court Actions– Injunction– Immediate Discovery– Asset Freeze– Receivership– Consumer Redress– Contempt (jail, fines,

etc.)

Government Enforcement & Cooperation

11

Sharing Information

Consumer Complaints• FTC (Web, phone, mail)• FBI• Postal Inspection Service• State Attorneys General• County and City Authorities• Canada Phone-busters• Better Business Bureaus• National Consumers League

• Restricted-access law enforcement site• National and international scope (U.S.,

Canada, Australia)• Law enforcers can search for complaints

and alert each other of ongoing issues

• Public site (www.consumer.gov/sentinel)

• Latest fraud trend information

• Consumer education materials

• Links to consumer protection sites (public and private)

Government Enforcement & Cooperation

12

E-Commerce Cases

• Modem hijacking• Page-jacking• Mouse-trapping• Diversion• Web “cramming”• Pyramid schemes• Auction fraud• Health fraud• Junk email or “spam”

Spam’s “Dirty Dozen”• Business opportunity scams• Bulk email solicitations• Chain letters• Work-at-home schemes• Health and diet scams• Easy money• Get something free• Investment opportunities• Cable descrambler kits• Guaranteed loans or credits• Credit repair scams• Vacation prize promotions

Government Enforcement & Cooperation

13

International Enforcement Cooperation

Bilateral Agreements

Canada

Australia

United Kingdom

• Discusses information-sharing and cross-border law enforcement

• Makes recommendations to policymakers

• Active in surf days

Government Enforcement & Cooperation

14

International Enforcement Cooperation

• www.econsumer.gov – where consumers all over the world can: – File e-commerce complaints

about companies in other countries

– Get tips about shopping safely online

– Get information about consumer protection in other countries

– Learn how to contact consumer protection authorities in other countries

• Consumer Planet Sentinel allows law enforcement agencies from participating countries to:– Search and review cross-

border Internet complaints filed with econsumer.gov

– Access trend data and top violator reports

– Use an international law enforcement library with the newest investigative tools

Government Enforcement & Cooperation

15

16

Self-Regulation

• More prompt and flexible than government regulation• Benefits from industry/consumers’ experience• Enforcement backstop provides strong incentive

FTC

• Feedback on codes of conduct

• Publicizes self-regulatory efforts

• Feedback in rulemakings

• Refers consumer complaints

Industry

Government Enforcement & Cooperation

17

Consumer and Business Education

Government Enforcement & Cooperation