Memorandum by the National Consumer Council
1. INTRODUCTION
The National Consumer Council welcomes the opportunity
to give evidence to the Select Committee. NCC represents the interests
of domestic consumers in the United Kingdom. We have a specific
brief to represent the interests of disadvantaged consumers so
the implications for access to goods and service and for consumers
protection in the developing e-economy is of particular interest
to NCC. Much of NCC's policy development is directed toward UK
institutions although we do work at EU and international levels
too. We liaise with several EU institutions including the Commission's
European Information Society Forum, set up to advise on the social
and societal implications of the information society. The Forum
recently launched the EurVoice website to encourage citizens and
consumers to join the debate. NCC also works with BEUC (the Bureaux
Europeen des Unions de Consommateurs) the umbrella consumer group
based in Brussels and with our colleagues in CEG (Consumers in
Europe Group) who deal with a range of EU institutions. CEG are
also submitting evidence to the committee.
2. TRUST AND
CONFIDENCE
The barriers to using e-commerce are well documented
and include: access and affordability, payment mechanisms, security
and data protection, dispute resolution, redress and enforcement.
National governments and the EU institutions need to work together
to ensure people's concerns are met. The global nature of e-commerce
makes it essential, however, that EU bodies also work at the international
level to develop agreements and effective mechanisms to generate
and sustain trust and confidence.
3. ACCESS AND
AFFORDABILITY
Consumers need to feel confident that the effort
and expense involved in engaging in e-commerce is justified, and
not disproportionately burdensome. This includes factors such
as expenditure on hardware, computers, interactive digital televisions,
advanced mobile telephones, modems etc, on connection charges,
subscription fees, and "online" costs. Transparent and
predictable pricing, open and fair terms and conditions will help
consumers to make comparisons and to come to informed decisions.
The market and the technology are, however, still developing and
consumers may be reluctant to spend money on equipment, which
may quickly become obsolete. Questions of interoperability between
networks, equipment and services need to be addressed so that
people can be confident in their purchasing decisions. Skills
and training, design and ease of use all contribute to improving
access.
3.1 Regulation may deal with some of these
questions but a clear public policy lead is required on how to
ensure the market will deliver on issues like transparency and
interoperability, as well as how to cater for people who cannot
access electronic services from their home. The question of universal
access is especially pertinent in the context of access to essential
information and the delivery of government services electronically.
It is unlikely that liberalisation and competition alone will
be sufficient to deliver access to consumers on a low income or
who live in remote areas.
4. PAYMENT MECHANISMS,
SECURITY AND
DATA PROTECTION
Consumers are concerned about the potential
for fraud in e-commerce. They need to be able to check onto the
identity and reliability of sites and traders. Consumers also
need to feel confidence that their financial details and transactions
are secure and that their personal data is protected from misuse.
4.1 Technological solutions and regulation
provide some answers. Encryption and electronic signatures are
being developed to protect the integrity of data and to ensure
authenticity. But how will consumers be able to check the veracity
of claims that their details are protected if they use a particular
site or service?
4.2 e-Commerce opens up opportunities for
more efficient data collection and sharing and for developing
sophisticated targeted marketing practices. Spamming, hacking
and the user of cookies are less welcome aspects of the electronic
market. The Data Protection Directive provides some reassurance
for consumers that their personal information will not be misused
but the global nature of communications gives rise to some concerns.
Clear systems for complaints and redress must be in place for
consumers within the EU and across non-EU boundaries. Consumers
also need to be made fully aware of their rights with regard to
data protection and privacy.
4.3 A flexible and secure payment mechanism
for low value electronic transactions would be particularly helpful
for consumers who want to use e-commerce but who do not have a
credit card or bank account.
5. DISPUTE RESOLUTION,
REDRESS AND
ENFORCEMENT
Consumers need to know they can resolve problems
in e-commerce quickly, cheaply and easily—whichever trader
or supplier they have dealt with. The question of cross border
redress is fundamental to e-commerce, requiring co-operation between
Member States of the EU and internationally. Cross-border purchases
are not uncommon yet arrangements for dealing with problems and
redress are limited, and consumers are ill-prepared to pursue
redress outside their own country by formal or informal mechanisms.
5.1 Codes of conduct and co-regulatory schemes
have some advantages over formal regulation. For example, codes
are relatively flexible and can be modified quickly in response
to technological change. But, to inspire confidence in consumers,
such codes need to meet a number of criteria—including some
independence for the industry being regulated. Backing by legal
instrument also makes a crucial difference. Codes and co-regulatory
schemes are unlikely to be effective if they are allowed to develop
in an ad hoc manner, in isolation from a common set of
standards or guidelines. The NCC's "Models of self regulation"
(NCC, 1999) gives an overview of schemes and their features, concluding
with a "credibility checklist". (See appendix 1.) At
the Annual Assembly of Consumer Associations, held in Brussels
in November 1999, the working group on e-commerce asked the Commission
to look into the possibility of linking a statutory requirement
with standards. For example broad-based legislation establishing
a duty to trade fairly would be linked to compliance with a set
of standards for e-commerce. (See appendix 2, report from working
group, section 6.)
5.2 A proliferation of schemes will tend
to confuse consumers and reduce credibility in the co-regulatory
approach. At the EU level the Commission needs to consider the
following:
— establish criteria for EU schemes,
including independence, transparency, accountability;
— ensure there is consistency in the
criteria and standards being adopted in Member States;
— avoid levelling down to the lowest
common denominator;
— encourage mutual recognition of national
schemes;
— establish a mechanism for dealing
with cross border problems;
— insist on independent monitoring
of national schemes;
— give clear guidance on the duties
and powers of relevant national regulatory bodies.
5.3 The global nature of e-commerce means
that international agreements will also be required. The EU and
national institutions need to take into account developments elsewhere,
for example the OECD guidelines for consumer protection in e-commerce.
5.4 Codes will never be comprehensive. There
will always be traders and organisations which choose to stay
outside a voluntary framework. As a last resort, consumers need
to have an option to go to court—preferably in their own
country. A system needs to be put in place that enables this to
happen cheaply, and which operates throughout the EU. And if a
co-regulatory approach fails then governments and the EU will
need to consider other forms of intervention to protect consumers.
5.5 UK consumers using a credit card to
pay for goods and services with a value over £100 have an
additional route to redress for non-performance, or for unsatisfactory
products. (Under Section 75 of the UK Consumer Credit Act.) If
consumers knew this level of protection applied to all transactions
paid for by credit card, whatever their value and wherever the
purchase was made, it would help boost confidence in using e-commerce.
The commission could investigate the possibility of making all
EU credit card providers subject to a similar kind of liability.
Consumer and trader awareness of this added means of redress would
stimulate confidence and encourage high standards in the e-commerce
sector.
5.6 Consumers and traders will need access
to effective and up to date information and advice about how to
deal with disputes, particularly in cross border cases. Consumer
information centres or Euro-guichets could form the basic network
for consumers. Consistency of remit and adequate funding will
help to raise awareness of their role.
6. Policy development and co-ordination
within the EU could be improved but the NCC does not wish to offer
any specific suggestions about structural changes.
February 2000
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