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the trustmarks industry
This page looks at the trustmarks industry.
It covers -
An
indication of major schemes, past and present, is provided
on the following page of this profile.
types of schemes
The following page provides a very basic inventory of
some trustmark initiatives.
Broadly they fall into two categories -
- marks
under the auspices of industry or other associations,
generally operated on a cost-recovery basis and often
with minimal infrastructure (eg no proactive compliance
monitoring)
- marks
that have a wholly commercial basis
statistics
As we suggested on the preceding page, there is considerable
uncertainty about -
- the
number of webseal schemes that are currently active
- the
number of sites that adhere to the codes (as research
suggests that some site operators are committed to a
particular code but do not display the trustmark on
their site)
- the
number of sites that display 'ghost' marks, ie those
for extinct schemes
- the
number of disputes relating to the schemes
- the
number of disputes settled by scheme operators or under
their auspices (and the percentage in favour of consumers)
- aggregate
administration costs and benefits
- the
revenue of scheme operators
-
consumer recognition of the marks
-
consumer perceptions regarding the credibility of the
marks
-
patterns in consumer communication of those perceptions
(of interest given counterintuitive suggestions in some
academic research about strategies for promoting new
trustmarks).
Comprehensive
statistics about the 'trustmark industry' in Australia
and overseas are not available.
The 2002 Privacy Online: A Report on the Information
Practices and Policies of Commercial Web Sites (PDF)
by William Adkinson Jr, Jeffrey Eisenach & Thomas
Lenard suggested that marks were displayed on under 50%
of the top hundred US sites and under 12% of randomly
sampled sites, a figure that appears to be a significant
overestimate in terms of the web as a whole.
Ernst & Young claimed in its E-Security &
Privacy paper that 41% of surveyed online retailers
in 2000 "believed having a seal of approval on their
site would make consumers much more likely to use it",
although only 15% "actually had a seal" - indicating
perhaps that they don't believe what they are telling
the interviewer. In practice retailers have not embraced
particular schemes: the final page of this profile for
example highlights marks that appear on four, ten or eight
sites.
history of trustmark schemes
The online trustmark industry essentially has three bases.
One sector represents an extension online of existing
marks, such as the Better Business Bureau's offline mark.
That extension was supported by resources from the operators
of the offline schemes and initially concentrated on the
sites of existing members, with the operators leveraging
existing contact databases and performance appraisal or
dispute resolution protocols.
A second sector represents innovators such as TRUSTe (under
the auspices of IBM, Microsoft and the EFF during its
controversial cohabitation with capital) and ICRA, with
perceptions of internet exceptionalism being addressed
through an internet-specific mark. Development of such
marks centred on privacy and, more diffusely, on codes
of business practice for new B2C retailers that were not
members of offline mark schemes.
A third sector, emerging just before and after the dot-com
crash, was opportunistic - based on expectations that
ready availability of risk capital would allow new entrants
to build significant market share while the innovators
were embroiled in regulatory or public relations problems.
The sector also encompassed niche operators that have
sought to exploit markets for certification of e-health
sites/services, often in response to new legislation such
as Australian and US data protection law discussed in
our Privacy guide.
Australia's eTick, for example, in heading for a public
floatation announced that its
mission
was to become the global new-economy certification authority
establishing a benchmark for e-commerce internationally
One
of the more enthusiastic reports
commented that
E-Tick
has seized on an enormous opportunity ... Within a short
time [it] has become an internationally recognised name
for trust, security, privacy and service in the new
E-commerce market. ... In addition to providing accreditation
and international recognition of standards, Etick [sic]
will package the training courses and modules. During
the next ten years, Etick expects to train about 50,000
Indian auditors. The expected royalty is about $200
per trainee.
Trustmark
schemes were often welcomed uncritically by politicians
and regulatory agencies as a sort of magic bullet that
would effectively address perceived consumer uncertainties
about large-scale engagement in electronic commerce within
and across jurisdictions. The emphasis on action by industry
associations and commercial bodies was consistent with
the deregulatory zeitgeist captured in Fred Brenchley's
Allan Fels: A Portrait of Power (Milton: Wiley
2003) and works highlighted on the preceding page of this
profile.
Three years later several of the commercial and non-commercial
marks have shut up shop. That appears to reflect higher
than expected costs and lower than expected revenues,
difficulty in securing consumer recognition, competition
with marks that do not impose fees and scarcity of capital
following April 2000 - problems facing many of the dot-coms
whose sites were supposed to be decorated by the various
marks.
administration
Some schemes simply involve the site owner agreeing to
abide by an industry code, that agreement being signalled
by display of the pertinent trustmark. There is little
if any provision for verification of practice.
Other schemes are based on self-assessment, with site
owners completing a questionnaire that's designed to both
supply an understanding of a code of practice and to exclude
entities that do not meet basic requirements. One example
is the ICRA online content rating scheme: the front page
of this and associated sites bears the ICRA trustmark
following our completion of the ICRA online questionnaire.
Follow up by the operators of such schemes (eg to weed
out sites that have misunderstood or simply abused the
process) is often uncertain.
Some address disputes internally. Others address disputes
through the services of specified Alternative Dispute
Resolution (ADR) providers.
Most schemes face substantial establishment and ongoing
maintenance costs, such as
- the
scheme operator seeking legal advice and in some instances
endorsement by trade practices or other government agencies
- marketing
by the scheme operator to web site owners, a challenge
given perceptions among site owners that a mark may
incur no tangible commercial advantage but expose the
site to liability
- marketing
to the wider community, a challenge given consumer scepticism
about benefits (or scheme operator self-interest) and
competition from other digital 'leaf litter' in an online
environment where many interests compete for a share
of the 'attention economy'
- compliance
monitoring and policing to ensure the perceived integrity
of the scheme, potentially including litigation over
misuse of a mark or failure to meet a code of practice
- operation
of automated validation tools, such as online registers
of 'valid' marks and bundling of individual marks with
a digital signature
or numerical code (eg that used by ICRA and HONcode)
- involvement
in initiatives such as P3P and PICS
Sometimes those costs are funded as part of membership
fees for organisations. The result is that some marks
are often little more than a signal of affirmation, without
much rigour in terms of process evaluation prior to application
of the mark and subsequent auditing/policing.
The cost of other schemes is explicitly funded through
licensing fees, either a flat fee or a percentage of revenue
on e-commerce sites. Critics of self-regulation have cited
trustmark schemes in questioning whether there's an inappropriate
conflict of interest, with perceptions that such funding
means that the scheme operators are necessarily biased
in favour of site owners and will be reluctant to prosecute
or shame owners that breach commitments. One example is
the furore over the perceived failure of TRUSTe to actively
address breaches by its members Disney and Microsoft.
Enforcement has devolved to government agencies such as
the US Federal Trade Commission, a reminder that forecasts
of 'death of the state' are at best premature.
It would appear that commercial trustmark businesses are
increasingly emphasising the provision of ancillary services,
such as privacy audits and training, rather than expecting
to generate most of their revenue through fees for application
of the mark.
It is unclear whether there will be a significant revival,
although increased national and multilateral regulation
of e-commerce (and progressive strengthening of privacy
legislation) suggests that few entrants will secure the
significant funding needed to market and maintain a new
mark in an environment where consumers rely on government
rather than for-profit trustmark schemes.
viability
In the absence of showcase litigation and an investment
of significant funds for marketing/compliance activity
the longterm viability of several marks is poor, as they
have not
- established
appropriate credibility among a sufficiently large number
of consumers (whether individuals or businesses), either
in differentiation from competitors or for trustmarks
per se
- gained
substantial endorsement by regulatory bodies
- secured
a significant market share among retailers, service
providers and other commercial entities
- grown
enough to enjoy economies of scale in marketing and
administration
Several
commercial mark services in the EU and North America shut
up shop or failed to proceed after the 1990s dot com slump
reduced the availability of risk finance
and the market for their services.
Some non-commercial services, such as the UK Consumers
Association (CA) Which? Web Trader mark
which ceased operation in early 2003, have also stopped
altogether or wound back compliance monitoring and resolution.
The CA for example announced that
Which?
Web Trader was launched in July 1999 to promote
consumer confidence in online shopping by providing
an independent code of practice with teeth. Since it
started W?WT has improved the practices of many traders
and has resolved over 2,000 customer complaints quickly
and free of charge. ... Since W? WT launched
three and half years ago, it has received over 8000
applications from e-traders, of which 2,700 were accepted,
and has successfully resolved over 2,000 disputes on
behalf of consumers. The scheme has succeeded in increasing
consumer confidence and has promoted higher standards
in e-commerce. As well as providing a great service
to consumers, W?WT has delivered a boost for business.
But providing such an effective and well monitored code
costs a significant amount of money each year - W?
WT has always been free to traders to protect the
independence of Which? - and as a charity and
campaigning organisation we need to use our resources
in the most efficient way possible. There is still a
need to increase consumers ' confidence about shopping
online and we think it is now up to business and government
to set up an alternative scheme to build on the successful
work of W? WT.
SMEs,
arguably those with most to gain from B2C trustmarks,
appear to be waiting for clear signs that the marks are
recognised and valued by consumers. One site somewhat
snappily commented
We
have no privacy seals or other assurance mechanisms.
In plain English, this means we cannot afford to pay
the outrageous fees charged by the various authentication
services. You'll just have to trust that we are who
we say we are, that the statements made in this policy
are true and that we'll do our best to resolve any disputes
over this policy that you may have.
Some
industry groups appear to have lowered their expectations
regarding trustmarks, instead embracing proposals for
discrete gTLDs (eg dot-pro)
or 2LDs (eg the 'law.au',
'med.au' and even 'catholic.au' spaces considered by auDA
in 2003). Only 'certified' entities would be allowed in
those spaces.
roles for government?
Perceptions about the role of governments in facilitating
development and maintenance of B2C, B2B and other trustmark
regimes vary considerably.
Some enthusiasts have called for government-operated e-commerce
trustmark schemes. That is unlikely, given resource requirements,
the deregulatory zeitgeist in all market economies and
suggestions that marks may be a solution in search of
problem. The difficulties in extending official certification
schemes across borders are considerable.
Other enthusiasts, recognising the costs associated with
large-scale implementation of online trustmarks by non-profit
consumer associations, have suggested substantial start-up
assistance or even ongoing financial support.
In practice the most likely global marks are those that
signify some degree of comfort for consumers engaged in
B2C transactions. Such marks are likely to the existing
brands of the major international credit card operators,
eg Visa and MasterCard. Those operators have global market
recognition, experience in dispute handling and can leverage
an extensive infrastructure.
Competing trustmark specialists have sought to co-opt
government in two ways.
The first is gain government endorsement for sectoral
or other trustmarks, whether operated on a commercial
or ostensibly non-profit basis. That reflects the tradition
of official recognition - de facto certification - of
labelling schemes in the professions and in market niches.
A second mechanism is for non-involvement by government,
with the market providing victory to players that are
the most efficient or that simply exploit advantages such
as substantial funding and existing offline relationships.
Governments should instead police abuses by site owners,
tacitly acting as agents for the trustmark scheme operators.
At a US Federal Trade Commission seminar in 2000 the operators
of BBBonline for example commented (PDF)
that governments should
Rigorously
monitor "trustmark" programs and take action
against deceptive trustmarks that do not adequately
inform consumers what they stand for and do not deliver
on claims being made. Governments should cooperate in
international law enforcement against deceptive trustmarks
and unfair ADR
If governments encourage the development of effective
trustmark program standards and dispute resolution processes,
we have no doubt that consumers will use those programs
to seek out participating merchants. And educated, informed
consumers - seeking out companies that participate in
these programs - will become a major force to drive
companies to seek out and participate in the best of
these "trustmark" programs.
They warned, however, that
we
must express some serious reservations with respect
to government sponsorships of processes that bring various
private groups together in an "unofficial"
effort to "negotiate" a regulatory "floor"
of some sort for trustmarks, codes of conduct and alternative
dispute resolution mechanisms.
Unquestionably, we applaud government-sponsored efforts
in the U.S. and Europe to bring interested groups together
to fully explore - and learn from - the various available
models. We would be extremely concerned, however, if
the effect of some quasi-regulatory "negotiation"
among various private providers and e-commerce merchants
resulted in a compromise, the effect of which was to
create a lower overall "floor" than certain
codes of conduct, trustmarks and ADR mechanisms currently
provide.
We share the European Commission's belief, expressed
in its post-workshop comment, that "competition
between them [ADR
schemes, Codes of conduct and trustmarks] should ultimately
produce ADR's and Codes of Conduct that best satisfy
both consumers and business." We believe this competition
should be allowed to flower. We fear that in a situation
where all programs, regardless of their comparative
quality, are "certified" by governments as
meeting the compromise regulatory floor, competition
among programs will be impaired. In such a situation
(where a high quality and a marginal quality program
are both "certified" as meeting the "floor"),
we believe that competition among private programs will
ultimately mean that the regulatory "floor"
could quickly become the de facto standard for all programs.
Put another way, the European Commission's express desire
to rely on the marketplace could easily be subverted
if an extra-marketplace imprimatur were to be placed
on programs that, by themselves, would not have risen
to the top. Consumers might easily perceive a formal
recognition (in the form of a government "accreditation"
mark) as the symbol or expression of value. That, in
turn, might well undercut marketplace-responsive efforts
to bring greater value - a value that would be difficult
to distinguish from other programs sharing the government-sponsored
imprimatur.
We believe a set of minimum standards may be necessary
to create some "bright lines" below which
regulatory action is likely. However, we also believe
the role of governments should be to require the submission
of independent audits of mechanisms and to ensure -
through a variety of channels - that comparative information
on trustmarks, codes and ADR mechanisms is readily available
to government, consumer groups and the general public
The
Global Business Dialogue on Electronic Commerce (GBDe)
- which modestly claims to embody "the spirit and
dynamic features of the digital age" - similar commented
that
Some
governments are tempted to regulate this new way of
providing consumer trust for fear that consumers will
be confused by different programmes offering different
levels of protection. ...
At present, only a few trustmarks programmes are being
used and are widely known. It is essential that trustmark
programmes are further developed and broadly disseminated
to enhance global consumer trust in e-commerce.
Governments should play an active in promoting and disseminating
trustmarks programmes. Government intervention is premature.
For trustmarks to enhance consumer trust, they should
remain a private-based initiative. Harmonization of
trustmarks by means of government recommendations or
compulsory government accreditation is a disincentive
for innovation and competition to the detriment of consumer
confidence and choice. The existence of different levels
of trust (e.g. by sector/issue specific programs) or
regional/local initiatives should be acknowledged and
encouraged.
Singapore's
government, through its National Trust Council, appears
to have encouraged the convergence of competing trustmarks
in that republic. That action arguably reflects consumer
and retailer confusion about the various marks and inappropriate
administrative costs.
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