PART 6: WHAT COULD OR SHOULD GOVERNMENTS
197. Governments already regulate all types of business.
For example, accounts must be filed, directors have statutory
duties, products must be "fit for purpose" and factories
must not pollute. Governments have a variety of objectives in
mind, including preventing crime, protecting consumers, ensuring
companies are properly governed, collecting taxes, supporting
ecological aims and creating employment opportunities.
198. They also take steps to encourage business to
flourish through such devices as regional grant aid, tax breaks
on certain types of capital equipment and providing support for
199. Any one government action is likely to have
diverse consequences, contributing to some objectives while damaging
others. By adopting a portfolio of measures, governments wish
to strike a balance between regulation and creating an environment
in which business can flourish.
200. In principle the situation is no different for
e-commerce. Governments wish to stimulate the positive aspects
of e-commerce and control the negative consequences. The first
question is whether existing regulation caters for e-commerce.
There are clear reasons for supposing the answer is no, for example:
- e-Commerce creates new situations that are not
covered by existing regulations. Data protection laws deal with
the storage and processing of information. What then is the situation
when an ISP momentarily stores data which is in transit elsewhere?
What sales tax or VAT is payable on products, for example software,
that can be delivered digitally?
- e-Commerce can work in ways that existing regulations
have not envisaged. It may not be clear whether the existing regulations
apply and thus they have to be re-interpreted. Is a website in
effect the same as an advertisement? In the US, does the freedom
that mail order businesses have from sales tax apply to e-commerce?
- Existing regulations are often technology specific.
Formal police evidence is only acceptable (to the Courts) in paper
form. The circumstances in which investigating authorities can
intercept telephone conversations do not extend to Internet traffic
carried on a non-public network. (but see paragraphs 263 to 270)
- e-Commerce companies may have no physical assets
in countries in which they are trading. What then is the basis
for taxation? For consumer protection? What regulations apply
and how can they be enforced?
There is, therefore, a case for regulation.
201. The second question is whether governments can
effectively regulate e-commerce. The situation is made more difficult
for governments by three further factors.
(a) e-Commerce is global. A website can be
"hit" from anywhere in the world and it is not always
clear where a company and its websites are based. A video product,
for example, might be sold from a company in China via web servers
in other countries to a customer in the UK. What is then the position
with regard to copyright? Much e-commerce regulation must therefore
be international and involve co-operation between national governments.
(b) e-Businesses can easily move the location
of their operations, especially their websites, from one country
to another where they perceive that the regulatory regime and
business environment are more favourable to them. Quick and easy
moves are more difficult for companies with substantial bricks
and mortar assets.
(c) As e-commerce grows, possibly at very rapid
rates, there is competition between national governments to attract
e-commerce to their own countries. So, some countries may strive
to regulate less than others. However, in doing this, it may have
consequences which would be felt elsewhere in the world.
There is therefore a role for government but it is
a difficult one
202. There is tension between consumer and business
interests, national and international obligations, and existing
and new regulation. Overall government has the same broad objectives
it has always hadcrime prevention, consumer protection,
the creation of an attractive business environment and so onbut
in relation to e-commerce activity these objectives have to be
met in a radically different context. Governments have to adjust
the regulatory framework in a much shorter time-scale than they
normally would work within but with the complication that they
have to work with other governments to an ever-greater degree.
203. This suggests that governments may have to consider
whether their own ways of working are in alignment with their
e-commerce role. Can they react quickly enough to changing regulatory
demands? Are the mechanisms for international collaboration in
place? Do they have planning systems which will allow them to
predict the consequences of e-commerce on jobs, education, taxation
and so on, consequences which might occur extremely quickly? Are
they able, or willing, to consult with a broad range of industry?
It seems that government processes and structures will need to
be re-examined if they are to cope with the implications of e-commerce.
204. There is another reason why governments should
re-examine their operations. Their role in stimulating e-commerce
will be better performed if they adopt e-commerce for their own
transactions. These transactions would include dealing with the
public for such matters as social security benefits, administering
driving licences and issuing passports. They would also include
their own procurement systems. Several witnesses have emphasised
the importance that the United Kingdom Government should "lead
205. This discussion allows us to break down governments'
role in e-commerce into the following four areas.
(a) Stimulating e-commerce. This means what
the EU and the United Kingdom Government can do to create and
expand the positive impacts of e-commerce. This would include,
for example, fully liberalising the telecommunications infrastructure,
promoting appropriate venture capital arrangements and supporting
SMEs. (Part 7)
(b) Regulating e-commerce. This refers to what
the EU and the United Kingdom Government can do to combat the
negative impacts of e-commerce - preventing frauds, protecting
consumers and increasing security. (Part 8)
(c) Leading by example. This is what the EU and
the United Kingdom Government need to do to move towards e-government.
It would include making services available in the Internet and
moving towards e-procurement ie G2B e-commerce. (Part 9)
(d) Managing the e-economy. This refers to the
management processes, structures and mechanisms that need to be
in place for what the United Kingdom Government has called the
"Information Age". It would include government planning,
government re-structuring and consultation mechanisms. (Part 10)