Memorandum by the Consumers in Europe
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. CREATING CONSUMER
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
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
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
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
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 practicea co-regulatory schemeare
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)
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-commerceconsumers will
be able to bring actions in the courts of their own countries
rather than that of the supplier'sas 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 Internetas at least
one UK company has already doneit 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
5.2 Firms in the US traditionally view privacy
as a commodity that can be traded. However, many other countries
and the EU believe that individual privacy should be treated as
a fundamental human right and safeguarded as such through binding
legislationa 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 customerssuch as names, addresses, telephone
numbers and credit informationto 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" proposalan 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)
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. THE ROLE
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
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
2 March 2000
25 Commissioned by the European Commission
and reported in European report, No. 2464, 8 January 2000. Back
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
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
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