global frameworks

This page deals with consumer legislation and codes of practice.

It covers -

• introduction
• consumer protection in an online global economy
• international consumer protection guidelines
• self-regulation
• studies

     introduction

As noted in the governance guide elsewhere on this site, despite proposals for a global Lex Internet, no legal regime covers all of cyberspace. There is thus no single set of consumer protection legislation or business law.

Perceptions about the rights and responsibilities of actors (retailers and service providers, consumers, government agencies, advocacy bodies, industry bodies) vary significantly from one jurisdiction. That is reflected in different market expectation and practices and in different legislation. Business-to-consumer (B2C) trading across borders is not new and predates the internet.

However, online commerce involving both and small businesses poses particular challenges. In which jurisdiction should any dispute be heard? Is resolution in another jurisdiction inconsistent with a nation's consumer protection regime (eg because cost or even language means that it is not available to an ordinary consumer)? Are particular terms & conditions invalid because they reflect another jurisdiction's legal regime? What of regulation regarding activity, such as spam, that is restricted in one jurisdiction but unrestricted in another nation? And what of practice within nations, where business practice in some sectors is poor and government regulators either lack expertise or interest in addressing abuses?

Consistent with principles of international law, governments have responded to those questions in three ways.

Firstly they have slowly moved to articulate broad principles and guidelines about consumer protection, with the expectation that governments will reflect those principles in national policies and thereby harmonise legislation across jurisdictions.

That is a challenge, because not all governments accept the principles or have the capacity to put them into effect (eg don't expect much protection in Papua New Guinea, Togo or Afghanistan).

Others place a greater emphasis on self-regulation by industry and on the autonomy of consumers. The broadness of the guidelines means that there are disagreements about interpretation, which extend from simple uncomprehension to use of regulatory regimes as invisible trade barriers.

Some international actors are more influential than others. As a major trading bloc the European Union electronic commerce and data protection directives, for example, have had a significant influence outside the region in driving national legislation and in encouraging international standards.

Secondly they have moved to establish bilateral and multilateral agreements on specific issues (eg the Australia-South Korea MOU on spam, highlighted here) and to build links between regulatory agencies, eg between the US Federal Trade Commission and the Australian Competition & Consumer Commission.

Thirdly they have made some effort to educate consumers about their rights, responsibilities and reasonable expectations in the online environment, something explored in more detail later in this guide.

     consumer protection in an online global economy 

John Goldring's prescient 1996 How Consumer Fraud Might Be Addressed in the Networld paper identified steps for the protection of consumers in the global "virtual marketplace" -

• First, the most obvious step would be for nations to seek bi-lateral treaties that establish reciprocal arrangements for enforcing consumer protection laws between nation-states that have similar laws.
• Secondly, the most effective means, but most difficult to accomplish would be an international agreement concerning the rights of consumers online, similar to the international agreements governing transnational postal services and telecommunications. These, of course, depend ultimately on the agreement of nation-states and implementation in national legislation. Although such agreements as the Law of Outer Space take years to conclude and promulgate, if consumer transactions online become a major component of international trade, the need to curb outrageous and damaging behavior may become sufficiently compelling to attract the interests of major trading nations to participate in a broadly based effort to establish international consumer protection norms.
• Thirdly, the World Trade Organization might determine that consumer fraud online constituted a threat to the viability of international trade. As sanctions may be imposed upon non-conforming nation-states, those countries that tolerated reprehensible behavior on the part of commercial entities operating within their territories might be censured by imposing restrictions on their import/export privileges with participating nation-states.
• Fourthly, individual nation-states may enforce their own consumer protection laws unilaterally by inhibiting the travel of offending parties foreclosing entry into their territories and/or by serving process upon such parties should they choose to enter. This may be a reasonably effective sanction to deter entrepreneurs who are global operators by limiting their mobility-if sufficient important states take this type of action. Also sanctions may be imposed upon nationals who fund or serve as agents for offending offshore parties. Moreover, consumer goods may be stopped at the border if they come from offending merchants. There are practical and political difficulties in such unilateral action, and in any event it may contravene obligations arising under international trade agreements such as the General Agreement on Tariffs and Trade.
• Fifthly, Information Service Providers and Internet Access Providers may themselves unite to establish industry norms for appropriate behavior in offering consumer transactions over their systems. Commercial entities that fail to comply may be refused service. Such arrangements are strictly private, and, despite their beneficial consequences for consumers, they may run the risk of offending against national anti-trust or other pro-competition laws.
• Sixthly, major commercial interests that choose to offer products online may establish industry organizations that purport to guarantee an optimum level of consumer protection for purchasers of their products. Like the Good Housekeeping seal of approval, participating companies may advertise their compliance as a major attraction to consumers who wish to be assured that they are engaged in a fair and equitable transaction free of fraudulent and unverifiable representations. This has the disadvantage that abuse of consumers is more usually committed by marginal operators rather than established firms with sound reputations, and these marginal operators are unlikely to join industry organizations.

     international consumer protection guidelines 

EU 2000 Electronic Commerce Directive, 2002 Directive on Privacy & Electronic Communications and 1980 UN Convention for the International Sale of Goods

In 1999 the international Organisation for Economic Co-Operation & Development (OECD) adopted Guidelines for consumer protection in online commerce. 

The OECD Guidelines for Protecting Consumers from Fraudulent and Deceptive Commercial Practices Across Borders (PDF) were adopted in 2003. The guidelines establish a common framework for combatting cross-border fraud (whether online or offline) through "closer, faster, and more efficient" cooperation between consumer protection agencies. They are meant to address pyramid and lottery schemes, travel and credit-related scams, telemarketing scams and modem and web page hijacking.

An overview of international initiatives for consumer protection in the electronic marketplace is provided by the August 1999 report for the Global Information Infrastructure Commission (GIIC) and by The Consumer Law Sourcebook 2000: Electronic Commerce & the Global Economy (Washington: EPIC 2000) edited by Sarah Andrews.

Bodies such as the American Bar Association, in its major cyberspace law project report, have called for a global commission to set international rules regarding consumer protection, privacy, taxation, banking, gambling and other online activities. In January 2001 Ralph Nader called for a World Consumer Protection Organization (WCPO), on the model of the World Intellectual Property Organization but "more democratically run". Those calls are unlikely to bear fruit.

That means consumer protection, along with e-business law as a whole, will continue to be a patchwork of national (and local legislation), bilateral/multilateral agreements, industry codes, market pressure and consumer savvy.

The proposed Hague Convention on Jurisdiction & Foreign Judgements in Civil & Commercial Matters (HCCH), an international agreement applying to most private litigation, is one way of tying together the patches. There's a succinct introduction in a Commonwealth Attorney-General's discussion paper; for an opposing view see the criticism by the Consumer Project on Technology (CPT) and Richard Stallman's Harm from the Hague paper.

Cross-border issues are explored in International Perspectives on Consumers' Access to Justice (Cambridge: Cambridge Uni Press 2004) edited by Charles Rickett & Thomas Telfer.

Another perspective is provided by John Braithwaite & Peter Drahos in Global Business Regulation (Cambridge: Cambridge Uni Press 2000) and Dealing in Virtue: International Commercial Arbitration & the Construction of a Transnational Legal Order by Yves Dezalay & Bryant Garth (Chicago: Uni of Chicago Press 1998).

Particular markets are also setting de facto global consumer protection standards. The most notable example is the adoption of the EU data protection regime, described in our privacy guide, by New Zealand, Canada and (for transborder data flows) the US.

US perspectives on Consumer Protection in the Global Electronic Marketplace (CPGEM) were provided mid-2000 by a major conference under the auspices of the Federal Trade Commission. The Advisory Committee on Online Access & Security (ACOAS) of the Federal Trade Commission (FTC) recently reported on consumer access to information collected by commercial websites and the security of that information.

     the European Union

In June 2000 the EU adopted a major E-Commerce Directive (here) to ensure that providers/users of 'information society services' across Europe benefit from the principles of free movement of services and freedom of establishment. It extended the 1997 Distance Selling Directive (PDF).

The 2000 Directive embraces B2B and B2C activity, including services that are funded by advertising or sponsorship and those using online electronic transactions, such as interactive online shopping. Sectors covered include online newspapers, databases, financial services, professional services (such as lawyers, doctors and accountants), entertainment services (such as video on demand), direct marketing and internet service providers or content hosting.

The Directive articulates -

• requirements regarding the role of national authorities;
• transparency requirements for web advertising;
• principles relating to contracting online;
• limitations to the liability of Internet intermediaries; and
• requirements regarding disclosure of any codes of conduct, such as for online-dispute settlement, by which the service provider is bound.

The Directive was extended in 2002 by the Directive on Privacy and Electronic Communications (PDF), which includes some protection against spam.

     self-regulation

The US Electronic Commerce & Consumer Protection Group (E-Commerce Group) includes America Online, AT&T, Dell, IBM, Microsoft, Network Solutions, and AOL Time Warner.  

In launching the group a spokesman indicated that "we are proposing a model that can now be evaluated by all companies doing business online, consumers, and governments around the world," going on to describe its new guidelines as a contribution to "an important global dialogue on how to construct a set of global rules for a global medium." 

The guidelines cover marketing practices and information about goods and services, transactions, cancellation, security, privacy, and customer support. Merchants are encouraged to participate in third-party dispute resolution mechanisms.  

All very well, say consumer advocates, but the code of practice doesn't go far enough.

Locally the Australian Direct Marketing Association (ADMA) has placed its direct marketing Merchant Code of Conduct online and the Institute of Chartered Accountants licenses members under the global WebTrust program.

There is increasing interest in online alternate dispute resolution (ADR) mechanisms that allow businesses and consumers to address e-commerce disputes outside the courts. That is of potential value when the disputants are located in different jurisdictions. It builds on the long history of B2B arbitration discussed in Dezalay & Garth's Dealing in Virtue. This site features a profile on B2B and B2C ADR schemes and issues.

Retailers and service providers have sought to encourage consumer confidence by the inclusion of website 'seals' (aka trustmarks), indicating that the site owner complies with voluntary codes of practice. We've discussed the major 'certification' businesses, such as TRUSTe and BBBOnline, later in this guide and in a more detailed profile. 

For the CISG see John Honnold's Uniform Law for International Sales (The Hague: Kluwer Law 1999). Other perspectives are provided in Consumer Protection in the Age of the 'Information Economy' (Aldershot: Ashgate 2006) edited by Jane Winn and Consumer Protection in the 21st Century: A Global Perspective (Berkeley: Transnational 2002) by William Vukowich



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