Select Committee on European Union Minutes of Evidence

Memorandum by EURIM


  EURIM is the Parliament-Industry Group concerned with the politics of the Information Society. It has over 100 Parliamentary Members and over 70 Corporate and Associate Members. It seeks to identify and reconcile views across organisational and political boundaries and to secure progress where there is consensus. (See Appendix A for more information). This paper summaries relevant points for published "Briefings" plus two reports of recent meetings.

1.  What needs to be done to create confidence and stimulate electronic commerce?

  "The e-consumer process appears to be: browse, chat, make a test purchase of about $20, come again if satisfied. If not, don't come back. If really dissatisfied, stop buying on-line at all. It is the task of the e-comms companies to earn and build trust."

  Report of Meeting on 2nd February 2000 in European Parliament: Appendix J

  "Ninety per cent of international business is now conducted electronically at some stage of the transaction. In 1998 20 per cent of UK business transactions were electronic, but only 0.01 per cent were over the Internet . . . take up is being held back by widespread scare stories which are undermining consumer confidence . . . [the web] enables consumers to purchase from a remote, and maybe unknown, location which is not under human control during the course of the transaction, opening up new possibilities for errors, flaws and fraud. Consumers require a level of certainty which gives them confidence in the process used, the bona fides of the apparent trader, and the underlying security of their data and their money . . ..

  Those wishing to promote e-commerce (suppliers, traders and governments) must therefore be seen to be taking consumer protection seriously, including funding and other support. Government and industry should also actively promote consumer education, particulary by their own example. EU Governments and the Commission could do more to demonstrate confidence . . . by their own use of electronic commerce than by legislative initiatives . . ..

  "Trust is earned", by those who live up to their word, meeting their obligations, whether or not the technology works or their trading partners meet theirs. "Trust" is rarely conveyed by licensing, whether by Government or Trade Association, save where the licensing body is seen to build a track record of credibility, including the acceptance of liability for the consequences of its actions and of its decisions not to take action."

  Consumer Protection issues in Electronic Commerce: Appendix H

2.  Does the European Commission's draft Action Plan "eEurope: And Information Society for All" offer a realistic means of promoting e-commerce in the EU?

  Some members believe the draft Action Plan helps focus attention and could lead to more rapid progress. Others believe it better to target and do it better.

  "Technology assisted learning is . . . the solution to many of the education and training problems . . . but progress in large scale delivery . . . is slow . . . pilots, even if successful, are not scaled up for live running nor are they replicated elsewhere. Decision taking and procurement are fragmented and slow . . . competitiveness depends on bringing current players together in world class . . . teams."

  Reskilling Europe for the Information Society: Appendix B.

  "Given the volume of international trade that is already conducted electronically, albeit commonly via structured EDI and secure e-mail rather than the public Internet, it is important that any proposed changes to traditional regimes be rigorously assessed for their potential to disrupt well established and effective methods without giving commensurate consumer benefit."

Consumer Protection issues in Electronic Commerce: Appendix G

3.  Will codes of conduct and co-regulation provide sufficient protection? Is there a case for intervention by national governments and the EU?

  "There is a need to distinguish between situations where both parties are acting in good faith but the transaction fails to give satisfaction and the need to suppress deceit, fraud and other malpractice. The latter cannot realistically be left to self-regulation and requires frameworks for co-operation across borders between statutory regulators and law enforcement agencies.

  Informal processes for the resolution of problems are the most practical but consumer groups and most governments are expected to insist that customers retain the right to sue in the courts of their own state if these do not work. US courts will almost certainly claim jurisdiction in the event of a dispute involving a local customer and an overseas supplier (electronic or otherwise). Any attempt by the Federal Government to over-rule this [is] likely to be ruled unconstitutional.

  Report of Meeting on 2nd February 2000 in European Parliament: Appendix J

  "EURIM believes that self-regulation, despite some disadvantages, is the most appropriate form of governance for electronic commerce at the present time. Self-regulation which is primarily based on compliance with guidelines or formal Codes of Conduct may, however, also be within statutory frameworks which set out principles and establish penalties for non-compliance with approved codes."

The Role of Self-Regulation in Electronic Commerce: Appendix G

  "Banks, credit card companies and notaries are developing a variety of new electronic authentication, authorisation and payment protection services, based on existing "trust" frameworks . . . in the expectation that these will be covered by the same regulatory frameworks and statutory liabilities as for the traditional paper-base equivalents . . . Meanwhile some e-commerce product and service suppliers . . . wish to limit the liability of participants to enable increased competition . . . moves in the United States . . . to limit the default liability of software and service providers . . . lobbying [by] Telcos and Internet Service Providers regarding . . . liabilities for the traffic they carry.

Consumer Protection issues in Electronic Commerce: Appendix H

  "governments [should] support . . . initiatives . . . to develop . . . self-regulatory regimes . . . directed towards the creation of guidelines and codes of conduct, with co-operation and standardisation across industry, user community and state boundaries . . . ensure that self-regulatory structures are fit for purpose (including enforcement procedures) and that there is a strong incentive . . . to participate. Regulation by legislation should be a last resort and only where there are clear and pressing needs . . . that cannot be achieved through self-regulation alone."

The Role of Self-Regulation in Electronic Commerce: Appendix G

4.  Do the institutions of national governments on the one hand, and the European Commission, the Council of Ministers and the European Parliament, on the other, function with sufficient flexibility and coherence to promote the EU's objectives in the field of e-commerce?

  "The Commission commonly bases its consultation processes on [registered] trade associations . . . Those who lobby a Directorate or Department consistently over time are commonly consulted in advance . . . Those not represented by effective groups . . . can be unaware that consultation is under way before it is over . . . risk of backlash from those affected but not consulted and . . . incompatibilities and inconsistencies between Directives covering industries and technologies which are converging or evolving in unpredictable ways.

    —  The Council of Ministers, Commission and European Parliament should agree and publicise consultation processes for Directives, Regulations and Decisions.

    —  Consultation periods should be not less than eight weeks, commencing when papers have been delivered (including electronic access) to the European and National Parliaments and the national offices of the Commission and Parliament.

    —  Draft consultation papers and the texts of proposed Directives should be released (including electronically) immediately the original language version is agreed . . .

    —  Both Commission and Parliament home pages should point to tables of proposed Directives, Communications [etc.] with brief description . . . those responsible . . . relevant material.

    —  The inter-service consultation processes, Council Working Group activities and compliance cost assessments should be published . . . The performance of the Commission electronic information services . . . should be monitored and published.

    —  HMG should require UK Departments to adopt similar processes for their inputs to Council Working Groups and proposals for implementation."

  Consultation, Concealment or Confusion: Practices and Principles for EU Policy Formation: Appendix G

  "lack of market research into current . . . structures/needs/priorities . . . consultation overload . . . lack of input . . . from those with relevant expertise/ resource . . . consultations [should be] restructured/prioritised around the audience(s) to be consulted"

  Report of Meeting on 21 January 2000 on Flexible Working: Appendix I

5.   Should existing EU institutional structures be changed, or new ones created, to improve policy development and co-ordination?

  "[Need] a regime . . . which is able to interact rapidly and effectively with regulatory bodies in other industries, . . . to safeguard the consumer . . . and is a good fit with general competition law. [Current] national models tend to be sector-specific, reflecting a multiplicity of overlapping regulatory bodies focusing . . . separately on content and infrastructure. There is little or no converged regulation . . . the current model is unstable and unsustainable [but] "how do we get from today's unsatisfactory model to the far future and how fast do we want to travel?" . . . government [must] be clear on its . . . goals. That has yet to happen in most [EU member] states [and] will make even more difficult any agreement on harmonisation of . . . frameworks which [currently] reflect national cultures. . .

  The argument against rapid, radical, revolutionary change is threefold:

    —  it is inconceivable that a new regulatory regime could be made to work effectively in the short term if a significant sector of . . . industry was against it from the start;

    —  the probability of making the wrong choice of regime and thereby inhibiting growth and competition is too great;

    —  [the need for] stability of regulation ( . . . important to those investing for the future in advanced digital services and networks). . .

  The pace of evolution must still be relatively fast . . . if . . . structural changes in the industry are not to overtake the ability . . . to ensure . . . fair competition. Yet . . . change must not be so fast that regulatory stability and predictability, both so important to new entrants to the market in terms of investment risk, are jeopardised . . . "

  The Need for Regulation in a Converged Era: Appendix E

 6.  How can structural change be brought about fast enough to accommodate to the growth of e-commerce

  "The same law should, as far as practical, apply on-line as off-line. Specific measures should be technology neutral and recognise that business `models' (eg the `any-to-any' Internet), as well as technologies change . . . Attempts to use the harmonisation of e-consumer protection across the EU to `pull through' in other areas . . . could well be counter-productive . . . off-line laws vary . . . between nations (within the EU as much as globally) . . . cannot be consistency both across the Internet and between on-line and current off-line law at a particular location . . .

  There are well established rules on applicable law for international business to business trade.

  These have led to three broad approaches for physical cross-border commerce:

    —  shipping . . . to comply with the law of the country of destination (assumed by most existing legislation . . . );

    —  shipping `free on board' under the law of the country of origin (leaving the recipient to comply with all local documentary, fiscal, etc. requirements . . . );

    —  doing business under an agreed contract which specifies the applicable law and location for the adjudication of disputes (eg Islamic Law adjudicated in London).

  Many of the small firms being encouraged to sell over the Internet have never before sold their products and services across national boundaries. Some believe the growth of e-commerce will depend on their being able to sell overseas under the laws that apply in their domestic markets . . .

  Attempts to "harmonise" within the EU on issues which are outside the remit of the US Federal Government are likely to be counter-productive. Rapid progress within current international forums is unlikely.

  The growth of mass-market international e-commerce is more likely . . . to depend on contract-based frameworks which apply the expertise of the global freight-forwarding industry (largely centred around Heathrow) . . .

  It is important that both the trader and the consumer know what laws apply to the transaction they are considering. The problem of location provides an opportunity for the UK to be seen by the world's consumers as the place where problems can best be resolved . . . Little additional legislation is required within the UK to meet the needs of consumer protection in electronic commerce."

Consumer Protection issues in Electronic Commerce: Appendix H


    A—EURIM Aims, Membership, Deliverables.
    B—Briefing 18—September 1997: Reskilling Europe for the Information Society.
    C—Briefing 19—July 1997: The Regulation of Content on the Internet.
    D—Briefing 21—January 1998: Electronic Trade War, Detente or Entente Cordiale.
    E—Briefing 23—July 1998: The Need for Regulation in a Converged Era.
    F—Briefing 25—March 1999: The Role of Self-Regulation in Electronic Commerce.
    G—Briefing 26—May 1999: Consultation, Concealment or Confusion: Practices and Principles for European Policy Formation.
    H—Briefing 27—November 1999: Consumer Protection issues in Electronic Commerce.
    I—Report of Meeting on 21 January 2000 on Flexible Working.
    J—Report of Meeting on 2 February 2000 in European Parliament.

February 2000

1   Appendices not printed here. Please visit the EURIM website for more information. Back

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