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section heading icon     hot spots

This page considers areas of online activity that are of particular consumer and regulator concern, including auctions, internet service providers, spam and adult content.

It covers -

  • introduction
  • internet service and other connectivity providers
  • spam and telemarketing
  • auctions and retailing
  • adult content - quality of service, billing and other problems
  • domain names and resource identification
  • email scams - the 'Nigerian' 419 scam, lotteries and other offers of instant riches
  • identity fraud
  • advice to the unwary - health cures, psychics, digital urban legends and hate speech

subsection heading icon     introduction

Consumer concerns regarding the net are an extension of traditional disquiets about communication, services and business practices. They are qualitatively and quantitatively different because consumer expectations and government responses have not always kept pace with fraudulent activity and because some offences occur across jurisdictions or involve a degree of anonymity.

Misleading and more obviously improper online practices include -

  • seeking payment in advance for tangibles or services that will not be provided
  • supplying goods or services that are of a lower quality than those paid for
  • failing to supply the requested goods and services
  • persuading customers to "buy something they do not really want through oppressive marketing techniques"
  • using an invented or appropriated identity in order to perpetrate a fraud.

As we have suggested elsewhere in this guide, the indifferent - or merely slow - government response to particular consumer concerns (and variation across jurisdictions) appears to reflect

  • priorities
  • resources - particularly in regimes such as Australia where overall funding for consumer protection agencies has been substantially reduced over the past two decades
  • a lack of expertise

subsection heading icon     internet service and other connectivity providers

Two areas of consumer unhappiness are relations with internet service providers (ISPs) and relations with other connectivity providers, such as mobile phone operators.

One reason for that unhappiness is the ruthlessness of competition among ISPs and phone companies, particularly in locations such as Australia where there are several hundred ISPs (many of which are financially marginal). Some operators have made undertakings that they cannot keep, for example overloading infrastructure in an echo of overbooking by airlines or outsourcing help desks to low wage/skill locations. Others have used promotional material that is deceptive and used agreements that to many people are often unintelligible or meaningless, because for example they have been copied word for word - and typo for typo - from a US model.

Unhappiness is exacerbated by inappropriate consumer expectations - perusal of laments on the Whirlpool broadband forum suggests that many participants have little sense of industry economics and assume "all you can eat ... for free" business models are sustainable - and the absence of agreed industry terminology, standards or service level agreements.

In 2004 the Australian Telecommunications Industry Ombudsman (TIO), the chief industry self-regulatory body, indicated that complaints about the connection of internet services increased by 158% to 1,340 (of which broadband accounted for 82%). We note that is a small fraction of the several million consumers, although some potential complainants may not be aware of the TIO.

The TIO commented that the complexity of wholesale and retail relationships in ADSL services is at the core of the broadband complaints, requesting the ACA (now ACMA) to consider directing broadband providers to develop an industry code. Notions of independent assessment of internet service quality have been contentious and were tacitly abandoned by the ACA in 2002.

In July 2005 Consumer Affairs Victoria more usefully started inquiries into the advertising practices of ISPs, in particular use of the word "unlimited" to describe broadband services. It found many ISPs were promoting offers of "unlimited broadband downloads" although in fact download limits applied so that users were restricted to speeds similar to the slower dial-up services once a limit was reached. ISPs contacted by the government agency included Telstra BigPond, TPG, OptusNet, Netspace, WestNet and People Telecom.

Bundling of services - typically plans that include landline, mobile phone and internet - appears to be generating increasing angst, with consumers claiming that they (and vendor staff/agents) cannot understand what was offered.

Others have noted
what are claimed to be substantial anomalies in billing and heavy-handed action to recover supposed debts (highlighted by ACCC warnings to a Baycorp subsidiary over putative Telstra consumer accounts).

That is an echo of past problems with Telstra - evident in federal parliament hearings into the 1990s 'Casualties of Testra' (COTs) cases - and sustained contemporary criticism of Telstra service quality, consistent with underfunding of maintenance, staff reductions and a move to 'rebalancing' Telstra charges (cutting individual call charges but increasing line rental charges by around 300%).

subsection heading icon     spam and telemarketing

As we have noted in discussing spam - and more particularly the Australian and New Zealand spam-regulation regimes - for some consumers the dominant concern regarding the net is a daily flood of electronic junk mail. It is mirrored by spam SMS (aka speam) and by unsolicited voice calls. Such telemarketing is likely to increase with uptake of VOIP (many analysts forecast a plague of spIT alongside traditional spam), 24/7 database-driven automated dialling and the proliferation of offshore callcentres. Electronic direct marketing is a function of the ease with which large scale contact lists can be developed or acquired and the low cost of spraypainting a population with largely unwanted messages.

Regulators have had some success in crimping junk sent by or for entities within their particular jurisdiction. They are hampered, however, by the willingness of sufficient consumers to respond to offers and by origination of messages from other jurisdictions, often from ephemeral domains or using forged email addresses. Consumer concerns about voice messaging have been unevenly recognised through national do-not-call registers, which often feature substantial exclusions and which by their nature will not restrict calls for overseas entities.

subsection heading icon     auctions and other retailing

[under development]

subsection heading icon     adult content

Concerns regarding adult content have taken three forms.

The first is unwanted access to that content, whether through spam or through abuse of expectations about domain names (eg a porn site operator employing a domain name that previously identified non-adult content or a name that is a mis-spelt version of an address that is likely to be encountered by someone who is not looking for erotica).

The second form involves misleading claims about what is available on a commercial site or the quality of service. As we discuss elsewhere on this site, many promotional statements about what's available once you have paid for access are exaggerations or outright lies. Figures about the number of images on some sites, for example, are incorrect. Supposedly new, unique or particularly thrilling content may in fact be recycled or otherwise not live up to expectations. Downloads of video and other content may be incomplete or otherwise defective.

The third - and for many people most serious form - is misuse of credit card numbers or other payment systems that are used to gain access to commercial sites. It is likely that consumers of online adult content tend to underreport their unhappiness. However it is clear that some are billed - often recurrently billed - for services not received or even not requested. Details harvested through a particular site may be illicitly passed to a third party for the purpose of identity theft. Consumers wishing to cancel a subscription may encounter difficulty in getting a site operator - or an adult mobile content provider - to respond to that request (for Australian consumers most are located outside the government's jurisdiction) and getting a credit card company to refund overbilled payments.

subsection heading icon     domain names and resource identification

Domain names are a hot spot because many people misunderstand domain name system rules and the DNS industry.

Some people have accordingly expressed concern because they believed that registration gave them 'ownership' of a particular address in perpetuity, discovering to their chagrin that failure to renew a name can result in its reregistration by a competitor or a third party. Others have simply assumed that registering a company or having a business name automatically gave them a comprehensive right to one or more domain names, a right that is of course inconsistent with trademark practice (where the same word can be used by different owners for identification in different discrete trademark classes)

Names are also a concern because of poor practice within the domain name industry, perhaps unsurprising given the newness of domain naming and the competitiveness of domain name registrars in what is increasingly a low-margin commodity business.

Some people have discovered that registrars are unobliging if the consumer wants to transfer to another registrar. Even in Australia, where the auDA regime has prevented many of the problems evident overseas, there have been criticisms that some registrars have sought to 'lock in' registrants and have responded slowly - if at all - to domain name keys.

Others have questioned marketing practices, with naive registrants for example misreading the fine print about cut-rate domain name registration. Potential abuses include low prices that are conditional on bulk buying (the registration is only dirt cheap if you acquire 50 or 100 other names within a specific period) or on hosting (eg the registration is 'free' but the registrant must use a particular hosting service, often at a premium price).

Some consumers, regulators and courts have expressed broader concern about online resource identification. Such concerns have included criticism of misleading metatags - increasingly being dealt with through traditional restrictions on passing off - and of placement in search engine results.

subsection heading icon     email scams

Email scams are arguably the bottom end of electronic direct marketing. They are ones with which most of the online population are familar but - whether through lack of thought or greed - continue to snare victims every year.

In discussing the 'Nigerian' or '419 scam' - an email version of traditional advance payment frauds - we have noted the sheer implausibility of some email-based frauds and why people will accept an electronic offer that they would dismiss with derision if made on paper or in person.

Consumer complaints include unhappiness about -

  • 419 schemes - a grieving widow, daughter, dictator's son, bank executive or trustee offers to share several million dollars loot with you on the the condition that you first provide some money for minor processing fees
  • lottery schemes - you have won a lottery, it seems, irrespective of not having entered the competition or the author of the email knowing your real/full name/address. There is only one catch ... you first need to pay a fee for processing of a little paperwork. The scammer may even use the name of a legitimate lottery and have an official-looking website
  • charities - your donations are sought to succour starving children, disaster victims, endangered species, political prisoners ... with payments being made online or even by cheque to an address that is typically offshore. Pleas for money may come from bogus organisations, with or without a site that induces unwarranted confidence, or from those who have nastily appropriated the name of a legitimate philanthropic body.

subsection heading icon     identity fraud

For some people the net is an engine for identity crime, a label that encompasses everything from phishing to 'joe jobs'.

A multi-part discussion of historic and contemporary Identity Fraud mechanisms, issues and legislation features elsewhere on this site.

subsection heading icon     advice to the unwary

A final area of concern is use (and abuse) of information online, whether in the form of websites or in online fora such as chat rooms and newsgroups.

It is clear that consumers in many countries are making increasing use of commercial, personal, government and other sites for health or other guidances. Online publication, as noted in discussion of the Wiki movement, is not equivalent to quality. Several studies have indicated that much online health information is misleading or indeed quite incorrect. Many consumers, however, appear to lack a basic 'digital literacy' that would allow an effective assessment of such information.

Some consumers similarly appear to leave their skepticism at the door when they enter online fora that feature stock market or other financial data, when they encounter electronic chain letters or offers from online psychics, or visit sites offering investment tips and financial services. Our advice has been sought about too-good-to-be-true 'investment' schemes operated from Vanuatu and other jurisdictions beyond the immediate reach of the Australian Securities & Investments Commission or the ACCC.

Such schemes are a contemporary version of past mail schemes whose promotional literature was often intercepted by postal staff when it came across the border. That is much more difficult in an online environment.

However, regulators have had some success in prosecuting scammers who have some relationship with Australia and as noted elsewhere merely using an offshore agent does not magic away penalties for spam or speam.

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version of September 2005
© Bruce Arnold | caslon analytics