Select Committee on European Union Written Evidence

Memorandum by the Consumers in Europe Group (CEG)

  CEG is an independent UK umbrella body for 34 UK organisations with an interest in the effects of EU policies on UK consumers.


  1.1  CEG's objective in e-commerce is to promote measures which increase consumer information, safeguard essential consumer rights, and provide fair and simple means of consumer redress. CEG believe that these are necessary to promote consumer confidence in e-commerce, which will in turn give UK consumers improved choices and thus encourage competition.

  1.2  CEG has commented in detail on a number of EU measures covering e-commerce, as well as on the extension of existing private international law to e-commerce transactions. These include the draft Directive on certain legal aspects of e-commerce, the Distance Selling Directive, the draft Directive on the Distance Selling of Financial Services, the reviews of the Brussels and Rome Conventions and the European Commission Action Plan on Consumer Access to Justice.


  2.1  Consumers do not yet feel fully confident about shopping on the Internet. Recently conducted surveys suggest that this lack of confidence is by no means unjustified. Visa International reported in March 1999 that Internet transactions account for 2 per cent of its overall business but generate 50 per cent of all credit card disputes. Moreover, researchers[25] from the German consumer organisation Siftung Warentest have made investigations into 435 online purchases in nine European countries (Germany, Belgium, France, UK, Spain, the Netherlands, Sweden, Italy and Portugal) and found the following:

    —  Information is inadequate. For example, delivery times were indicated for 50.6 per cent of transactions and in only 39.6 per cent of cases the deadline for returning goods. In 79.5 per cent of 273 credit card transactions, suppliers did not provide consumers with any information on data protection, security or encryption.

    —  The most widely used payment method was credit cards but in 72.3 per cent of cases accounts were debited before goods were delivered, 18.6 per cent of goods did not arrive at all and only 57.5 per cent were delivered within two weeks.

    —  For cross-border purchases, additional charges were very high. Delivery costs made up to 70.6 per cent of orders placed in Belgium, compared with 16.9 per cent in the UK.

  2.2  e-Commerce is global, and any effective e-commerce strategy intended to address the concerns of consumers will also have to be global. A strategy will have to be developed and co-ordinated beyond the EU, with international organisations, such as the OECD, the World Trade Organization, the United Nations Commission on International Trade Law (UNCITRAL) and the International Chamber of Commerce (ICC) playing increasingly significant roles as arbiters.

  2.3  At the same time, we see the European Union as having an important role in contributing on behalf of the Member States to such a strategy, based on its obligations under the EU Treaty "to promote the interests of consumers and to ensure a high level of consumer protection (Article 153).

  2.4  The expectations of consumers who shop electronically are no different from those making a conventional purchase. The goods or service should function properly, be in perfect condition, and match up to advertising or promotional material. Consumers expect that they will have proper legal protection and fast, effective and inexpensive redress. The issues of most importance to consumers when shopping electronically are information, security, protection from illegal or undesirable material, privacy and redress.


  3.1  It is widely recognised that e-commerce is outpacing the development of legally binding, national legislation and that effective self-regulation is one way of enhancing consumer confidence in e-commerce. However, definitions of self-regulation vary widely. Many countries have a mix of both self-regulatory and co-regulatory schemes.

  3.2  CEG has always supported self-regulation where it is within a legislative framework (co-regulation). Schemes that operate within a legislative framework such as the UK's Advertising Standards Authority code of practice—a co-regulatory scheme—are generally thought to be the most effective.

  3.3  Many self-regulatory codes of conduct are currently being developed, governing different aspects of electronic commerce (a number of these are described in an annex to this paper). Codes may be broad-based, covering all aspects of online trading; narrow-based with sectoral codes; or may cover specific aspects of online trading, such as privacy or authenticity. However, while many of these may have merit, a proliferation of codes is confusing to consumers and it opens the door to bogus logos which provide no protection. CEG would prefer to see the smallest possible number of codes of practice, backed up by independent accreditation (certification) bodies.

  3.4  The European Commission is currently considering recommendations on guidelines for co-regulation for discussion during the Portuguese Presidency of the EU that may ultimately form an International Standards Organisation (ISO) standard.

  3.5  Codes are meaningless unless they are accompanied by a clear strategy to make them effective and ensure compliance: independent monitoring is essential. Most importantly for consumers, codes governing e-commerce must contain clear online complaints procedures. It must be possible to access an online complaints form or helpdesk by clicking on the trustmark (compliance symbol) displayed on the trader's website.

  3.6  CEG supports co-regulation e-commerce, so that there is a legal back-up available to consumers where a voluntary scheme fails. CEG strongly believes that self-regulation should not be a substitute for any regulation in this area. A degree of regulation is necessary to create a fair trading environment for companies, as well as for consumers. Many companies will follow good business practices and offer alternative forms of redress: however, some will not, and consumers should not be left without any effective remedies. Nor should consumers have to waive their legal rights in order to take advantage of redress mechanisms offered under co-regulatory schemes.

  3.7  CEG therefore supports the Commission's proposed Regulation on the Brussels Convention. This will help to clarify the rights of consumers to bring legal actions for cross-border disputes arising frome-commerce—consumers will be able to bring actions in the courts of their own countries rather than that of the supplier's—as well as to confirm an existing right in relation to redress. It would not bring the transaction itself under the laws of the consumer's country.


  4.1  One of the key elements for consumer confidence in e-commerce is that consumers should be able to access, in their own country, free or very cheap, informal, independent and binding schemes to resolve cross-border disputes.

  4.2  CEG wants to see a rationalisation of out-of-court procedures (with quality controls) across Europe. Co-ordinating bodies should be established in each Member State to serve as a single point of reference for cross-border complaints, which would include e-commerce complaints. Information on the procedures and redress mechanisms available in other Member States should be available on a Europe-wide online database. An easy-to-use online complaints and dispute resolution mechanism should be available on the websites of ombudsman schemes.

  4.3  Furthermore, under Section 75 of the UK's Consumer Credit Act, credit card providers have a liability to card holders in relation to the non-performance or unsatisfactory performance of goods and services with a value over £100 purchased on their credit cards. As a consequence, where goods are damaged or go astray during delivery, the credit card companies should reimburse the consumer where the amount is more than £100. This would be a particularly valuable means of redress in this context, given that most e-commerce transactions are paid for by credit card.

  4.4  CEG has strongly urged the Commission to examine the possibility of making all EU credit card providers subject to the same sort of liability in order to facilitate redress. If meanwhile credit card companies were to undertake voluntarily to guarantee purchases made on the Internet—as at least one UK company has already done—it could provide an enormous boost to consumer confidence in e-shopping.


  5.1  Consumers need to be sure that personal information acquired from companies trading on the Internet is not misused, and that they will not be subjected to unsolicited or undesirable advertising and marketing. Electronic commerce increases consumer susceptibility to unsolicited advertising and marketing.

  5.2  Firms in the US traditionally view privacy as a commodity that can be traded. However, many other countries[26] and the EU believe that individual privacy should be treated as a fundamental human right and safeguarded as such through binding legislation—a view shared by CEG.

  5.3  The 1995 EU Data Protection Directive reflects this approach. It gives consumers legal rights to limit the collection and use of their personal information, to access, and where necessary, correct personal information that has been collected, and to "opt out" of receiving unwanted sales pitches or direct marketing. Consequently, the transfer of personal data to third countries without sufficient data protection is banned, making it an offence for European companies to pass data about their customers—such as names, addresses, telephone numbers and credit information—to companies that do not abide by standards equivalent to those of the EU.

  5.4  Not surprisingly, the Directive has sparked a row with the US which regards the Directive as protectionist. It has led to recent European Commission and US negotiations on how US self-regulatory schemes can be made more acceptable under the EU Directive. Discussions so far have focused on the "Safe Harbour" proposal—an agreement that would allow US firms to receive and process data transferred from the EU if they comply with an industry-developed, self-regulating code of practice. Essentially seen as a compromise to industry's demands, this self-regulatory approach has been widely criticised by US consumer and privacy groups. The Transatlantic Consumer Dialogue (TACD)[27] which met in February 2000 continues to call for the European Commission to reject the "Safe Harbour" proposal and to adopt an International Convention on Privacy Protection.


  6.1  The European Commission appears aware of a previous lack of internal co-ordination in the field of e-commerce, and it has transferred overarching responsibility for the development and co-ordination ofe-commerce policy to the Information Society Directorate-General (INFSO). It is important that co-ordination is reinforced and maintained at the highest level, and that the Commission's Health and Consumer Protection Directorate-General (SANCO) is able to play a full part in developing policy in this area, with extensive public consultation.

  6.2  Traditionally, the Commission has encouraged the development of voluntary codes of conduct and out-of-court dispute settlements[28]. CEG welcomes the Commission's initiative in drawing up a recommendation on guidelines for co-regulation and hopes that consumer organisations will be fully consulted.

  6.3  CEG welcomes the importance that the Commission appears to give to the global consumer dimension of electronic commerce, and particularly the detailed responses it has given to TACD recommendations. The EU cannot act alone to regulate e-commerce and it must continue to work with its global partners to gain the confidence of consumers.

  Annex A is a list of some self-regulatory and co-regulatory initiatives in e-commerce.

  Other annexes (not printed) are

  A press release summarising a 1999 international comparative study in consumers' experience of online shopping published by Consumers' International.

  Extract from a Mintel survey (July 1999) on online shopping.

2 March 2000

25   Commissioned by the European Commission and reported in European report, No. 2464, 8 January 2000. Back

26   Many Governments, including Canada, Australia, Japan and nations in Eastern Europe have adopted or are in the process of adopting privacy laws that provide privacy protection comparable to that which is afforded by the EU Directive. Resolution on "Safe Harbour" proposal and International Convention on Privacy Protection, adopted by the Transatlantic Consumer Dialogue, Brussels, 23-24 April 1999. Back

27   The Transatlantic Consumer Dialogue (TACD) was launched in 1998 to bring together consumer organisations from the US and the EU Member States, to discuss and develop policies to promote the consumer interest. Its recommendations, including on e-commerce, are fed into the EU and US government. Although not binding, the dialogue is an effective way of considering global issues. Back

28   Articles 16 and 17 of the Proposal for a Council Directive on certain legal aspects of electronic commerce in the Internal Market COM (99)427 final of 1 September 1999. Back

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