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

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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

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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

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Consumer and Business Education

Government Enforcement & Cooperation