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2018/SOM1/ECSG/DIA/007
Online Consumer Protection: Views of Firms and Consumer Protection Agencies
Submitted by: Information Technology and Innovation Foundation
Public-Private Dialogue on Existing and Emerging Issues Related to
E-Commerce and the Digital Economy Port Moresby, Papua New Guinea
3 March 2018
@ITIFdc
Online Consumer Protection:
Views of Firms and Consumer Protection Agencies
Nigel CorySenior Trade Policy Analyst
March 3, 2018
Email: [email protected]
Twitter: @nigelcory & @itifdc
Overview
Aim is to:
– Talk about the context of domestic and international online consumer protection.
– Highlight some key challenges and issues for national regulators and private firms.
– Focus on the broad framework and policymaking setting. Avoid getting distracted in technical, anecdotal issues
related to online consumer protection issues/cases.
– Highlight the need for greater cooperation, whilst recognizing that the domestic context for many APEC
member economies are themselves undergoing change, which makes such international engagement trickier.
ITIF is neither a regulator, nor private firm. So don’t shoot the messenger!
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Contents
Overview
Challenge: Focusing, Measuring, & Comparing Consumer Detriment
Challenge: Insufficient Evidence vs. Calls for Action
Private Sector View: What do firms see across economies?
Consumer Protection Agency View: What do agencies see across international engagement/cooperation options?
Looking Ahead
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Setting the Context: Disruption and Change
The Internet and mobile technology have changed domestic economic activity, trade, and
international policymaking:
– When the OECD adopted its first E-commerce Recommendation in 1999, online spending was well-
below 1% of total retail spending. Fifteen years later, the figures jumped to almost 8% in the EU and
more than 11% in the United States.
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Setting the Context: Disruption and Change
Internet/technology has changed the makeup of trade
– Technology allows big firms to scale across multiple markets, while allowing startups to be “born global.” Technology has also democratized cross-border trade by enabling individuals “traders.”
Internet/technology has changed the content of trade:
– Involve purely digital goods and services—such as movies, music, or software—or a mix of digital components and tangible goods—such as with small-package e-commerce.
Together: The rapid growth of cross-border digital trade and e-commerce raises the profile of domestic and cross-border online consumer protection issues and the need for international engagement/cooperation.
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Modern Trade and Consumer Protection
Where there is trade, there is a need for consumer protection.
– Online shopping and issues relating to information disclosure, misleading and unfair commercial
practices, confirmation and payment, fraud and identity theft, product safety issues, and dispute
resolution and redress.
– Consumers want the goods they purchase to be safe, no matter where they were produced.
– They want effective remedies if a merchant sends an item that does not work, whether the merchant
is across the street or across the globe.
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Context: Private Firms & Online Consumer Protection
The three stages of the consumer–business relationship in which consumer protection
issues in e-commerce can be identified, namely:
– pre-purchase — information requirements, unfair commercial practices.
– purchase – unfair contract terms, online payment security, data protection and privacy.
– post-purchase – dispute resolution, redress.
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Private Sector: Modern Consumer Protection
Example: Facebook hosted its annual global safety summit in Washington DC on March 1.
– The daylong event will include panels centered on keeping children safe online and building products
according to "well-being principles."
– One panel will highlight emerging technologies to help battle child exploitation, human trafficking and
revenge porn, among other issues.
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Challenge: Measuring Consumer Detriment
Consumer detriment means the:
– “harm or loss that consumers experience, when, for example, i) they are misled by unfair market practices into making purchases of goods or services that they would not have otherwise made; ii) they pay more than what they would have, had they been better informed, iii) they suffer from unfair contract terms or iv) the goods and services that they purchase do not conform to their expectations with respect to delivery or performance” (OECD, 2014).
International Consumer Protection – a growing issue, but one where comprehensive and consistent data doesn’t yet exist.
– In 2011 alone, the U.S. Federal Trade Commission received over 132,000 cross-border fraud consumer complaints through its Consumer Sentinel system.
– Between 2009 and 2011, over 45,000 complaints were submitted through Econsumer.gov, a multilingual portal for consumers to file cross-border complaints.
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Challenge: Focusing on Consumer Detriment, Avoiding/Minimizing Impact on
Innovation & Competition
Challenge for regulators: to pursue legitimate regulatory goals such as those relating to health, safety, or consumer protection, while avoiding regulations that may unnecessarily chill innovation, entry, and competition.
Example: The sharing economy can produce disruptive innovation that greatly benefits consumers.
– Platforms and suppliers, however, should not be permitted to engage in unfair or deceptive acts or practices simply because they are introducing innovative products or services.
Compounding the challenge: Few metrics and public/political calls for an immediate regulatory response raise the risk that an initial response may have significant impacts (often negative) on other sectors or other consumer interests.
Where targeted regulatory measures are deemed necessary to ensure that these new business models have appropriate consumer protections; but they should be no greater than necessary to address those concerns.
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Compounding the Challenge: A Lack of Comparative Analysis
Issue: The lack of metrics and detailed analysis means that international institutions
(such as the OECD or UNCTAD) are unable to benchmark/index different consumer
protection policies in an effort to promote greater action and adoption of best practices.
– Idea: An equivalent index to the World Bank’s “ease of doing business” index that would benchmark
various online consumer protection issues, such as “ease of lodging a complaint” and other
benchmarking of consumer redress processes.
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Private Sector Challenge: What do firms see when they look across economies?
Source: Online Consumer Protection Legislation Worldwide, UNCTAD, http://unctad.org/en/Pages/DTL/STI_and_ICTs/ICT4D-Legislation/eCom-Consumer-
Protection-Laws.aspx
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Answer 1: Varying levels of protection.
What do firms see when they look across economies?
UNCTAD: Despite the importance of consumer confidence for business-to-consumer e-commerce, many developing and transition economies still lack laws to protect consumers online.
UNCTAD: Many developing and transition economies still lack laws to protect consumers online.
– Out of the 125 countries for which data exist, 97 (of which 61 are developing or transition economies) have adopted consumer protection legislation that relates to e-commerce.
– But in as many as 67 countries, it was not possible for UNCTAD to obtain data, suggesting that online consumer protection is not being addressed at all.
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What do firms see when they look across economies?
Answer 2: Varying levels of focus and prioritization from policymakers.
The OECD Digital Economy Outlook 2017 surveyed 35 countries on their policy priorities
for digital development, including e-government services, strengthening security and
privacy, and consumer protection.
– Strengthening consumer protection ranked 13 out of 15 objectives and it didn’t feature as an objective
in any of its members’ national digital strategies.
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Modern Consumer Protection: Undergoing Change
The U.S:
– In 2015, the Federal Trade Commission held a public workshop entitled the “Sharing” Economy: Issues Facing Platforms, Participants, and Regulators” to examine competition, consumer protection and economic issues arising from online platform markets.
More than 2,000 public comments were submitted as part of this workshop.
The European Union
– In May 2016, the Commission put forward a proposal for the reform of the Consumer Protection Cooperation, with the aim of equipping EU enforcement authorities with the powers they need to better co-operate in cross-border investigations.
– In June 2016, the European Commission issued its “European agenda for the collaborative economy,” which provides non-binding guidance on how existing EU law should apply to the collaborative economy, including peer-to-peer markets and as consumer protection.
– In 2017, the European Commission concluded a review of EU consumer protection laws, suggesting that enhanced transparency of online platforms could be one area for possible change .
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Challenge for Private Firms: Uncertainty and Differences in Key Principles, Terms, and Processes
Specific difference: firms face different definitions of key terms
– Example: Online or digital products may not fall easily within traditional concepts of ‘goods’ or
‘services’ in a country’s laws/regulations, resulting in uncertainty about the application of consumer
guarantees.
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For Example: ACCC & Valve: What is/isn’t a Digital Good/Service
Valve Corporation: American video game developer and digital distribution company.
The Australian Competition and Consumer Commission alleged that a ‘good’ was supplied by Valve either because software was supplied (which it considers a good) or because Valve bundled software and services, and the definition of ‘goods’ includes computer software.
Valve Corporation denies that it supplied ‘goods’ within the meaning of ‘consumer goods’ in the Australian Consumer Law. It says that it supplied ‘online access to video games via a subscription service’.
Result: Court concluded that the contract between Valve and its customers was a contract for the supply of goods because the primary supply by Value to its customers was computer software (a good).
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For Example: ACCC & Valve
Case raises other questions that highlight the challenge for private firms:
– If the software downloaded are ‘goods,’ the statutory guarantee of acceptable quality will usually only apply if the software is supplied for consideration in trade and commerce.
What if the software is given for free to the user, meaning there is no consideration. Raises question as to whether this is a ‘supply’ under current law.
– As technology changes the methods for delivery and access to digital data will change. It is foreseeable that computer software may not need to be provided as part of the supply of the data.
For example, a subscription service to stream movies to a computer does not usually include the provision of software to the consumer by the supplier. What happens to consumer protections here?
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Challenge: What Do Consumer Protection Agencies See When Viewing International
Engagement/Cooperation
Answer 1: An emerging set of forums, principles, texts, and actors. Counterparts with
varying degrees of protection, enforcement, and engagement.
Statement of fact: consumer protection agencies are limited to action within their
borders.
– Agencies need ways to engage internationally to address shared issues.
– Trade agreements have obviously been used to address specific trade-related aspects, but there are
many other shared interests that would benefit from international cooperation.
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Challenge: What Do Consumer Protection Agencies See When Viewing International
Engagement/Cooperation
Answer 2: An ongoing effort at the United Nations to house/develop multilateral efforts on consumer protection.
At the top: The United Nations Guidelines for Consumer Protection
– a valuable set of principles that set out the main characteristics of effective consumer protection legislation, enforcement institutions and redress systems.
The Guidelines assist interested Member States in formulating and enforcing domestic and regional laws, rules and regulations; they also help promote international enforcement cooperation and encourages the sharing of experiences in consumer protection
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UN Guidelines and UNCTAD
Housing and Operationalizing the Guidelines
– An intergovernmental group of experts on consumer protection law and policy, operating within UNCTAD, provide the institutional machinery for the Guidelines.
Functions of this group:
– To provide an annual forum and modalities for multilateral consultations, discussion and exchange of views between Member States on matters related to the guidelines, in particular their implementation and the experience arising therefrom.
– To undertake studies and research periodically on consumer protection issues related to the guidelines based on a consensus and the interests of Member States and disseminate them.
– To conduct voluntary peer reviews of national consumer protection policies of Member States.
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Challenge: What Do Consumer Protection Agencies See When Viewing International
Engagement/Cooperation
Answer 3: Varying levels of engagement and coordination.
The International Consumer Protection and Enforcement Network (ICPEN) provides a forum for developing and maintaining regular contact between consumer protection agencies and focusing on consumer protection concerns.
– National consumer protection agencies have been working together though the 60-nation ICPEN membership on activities that have included an internationally coordinated "sweep" of online pricing practices in travel and tourism.
The Econsumer.gov website, a project of more than 35 countries under ICPEN, helps consumer protection and law enforcement authorities gather and share cross-border consumer complaints that can be used to investigate and take action against international scams.
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Challenge: What Do Consumer Protection Agencies See When Considering
International Engagement
Online sweeps, such as the OECD online product safety sweep conducted in 2015 in 25
jurisdictions, are also seen as an effective way of enhancing international cooperation
(OECD, 2016).
Bilaterally: varying approaches
– Some countries have engaged in bilateral agreements that facilitate cross-border cooperation on e-
commerce issues.
– For instance, the Korea Consumer Agency has signed MOUs with the National Consumer Affairs
Center of Japan, the Better Business Bureau and the Office of the Consumer Protection Board of
Thailand.
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Looking Ahead:
Trend: Technological innovation will continue to change how people and firms use
technology in their daily lives/work.
Result: Cross-border consumer protection issues at the intersection of digital trade/e-commerce will only become more prominent.
– The need for greater information sharing, coordination, and cooperation between consumer protection agencies is only going to grow.
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Where Does This Leave Us?
For consumer protection agencies:
– The challenge is to identify where and how to improve international engagement—bilaterally, regionally, and/or multilaterally—to act as an extension of domestic policies, even while domestic regulatory arrangements undergo change.
– To come up with better measures of consumer detriment, including those involving cross-border issues, to use as the basis for domestic and international policy.
For private firms:
– The challenge is to recognize that the regulatory environment is, and will remain, in flux. For all firms, this will require constant vigilance and deeper/broader engagement with policymakers as changes are considered and made.
Given the lack of data around many of these issues, it’s critical that private sector players have a defined role and voice in any discussion.
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Where Does This Leave Us?
For trade negotiators/policymakers the changing nature of trade means that trade agreements need to change with it.
– The Past: the WTO Agreement on the Application of Sanitary and Phytosanitary Measures address issues around food safety and animal and plant health, which addresses an important regulatory issues with trade implications.
– The Present/Future: modern, comprehensive trade agreements, such as the CPTPP.
– The Past and the Future: The SPS agreement as a template for current cross-border consumer protection issues, such as data privacy. Apply evidence/science-based criteria to consumer protection issues in order to achieve legitimate public policy goals, while minimizing/avoiding trade distortion and discrimination.
See: E15 Initiative: Information Goes Global: Protecting Privacy, Security, and the New Economy in a World of Cross-border Data Flows. By: Usman Ahmed and Anupam Chander.
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