Speaking Notes – Philippa Lawson
The growth of electronic commerce is, in many ways, a boon for consumers – immediate information, more choice, better deals, more convenience. But its benefits are not unmitigated. There are good reasons why consumers are reluctant to engage in online transactions. Quite rightly, they wonder:
- How do I know that my credit card is not going to be intercepted by some third party?
- How can I be sure that this is a legitimate business and that I’m not being taken in by some scam artist?
- Who can I turn to for recourse if it turns out I’ve been taken advantage of?
- How can I be sure that this company is not collecting information on me behind my back, and using it in ways of which I don’t approve? (And what are cookies, anyway?)
- How do I know that I won’t start receiving spam as a result of registering on this site?
The success of the online marketplace will depend to a large extent on the confidence of consumers, and that confidence will be gained only if these kinds of questions can be answered to the satisfaction of consumers.
Privacy is a serious concern in the marketplace generally, and nowhere more so than in the electronic world. Consumers recognize that they have considerably less control over their personal information in online transactions than they do in ordinary transactions. They see the ease with which personal information can be collected, manipulated and traded once it is in a computer. And they know that they don’t have the full story – that they don’t have control.
Survey after survey has confirmed that Canadians value the privacy of their personal information, and want control of it returned to them.
This concern was one of the factors that led to the development of the CSA Model Privacy Code, which sets out ten fundamental principles for protecting personal information. The key principle is informed consent.
Consumers must have the ability to control what information is collected on them when they contact a business through the Net. That means, first of all, telling the visitor to your website exactly what information about them is being collected, and for what purpose. It means providing the individual with a way of saying “no” – I don’t agree to that.
It means not sending unsolicited e-mail or making unsolicited phone calls to consumers who have purchased one of your products. And it means providing an easy way for consumers to get off marketing lists that they may previously have asked to be on.
Canadian Tire’s approach to online marketing gets a thumbs up with respect to the last point. But where was the notice telling me, a visitor to the website and subsequently, a subscriber to the e-flyer, what information of mine was being collected, what use it was being put to, and who else might have access to it?
A number of industry groups have, commendably, adopted codes of practice governing their members’ treatment of customer information. It has become clear, however, that such voluntary efforts are not enough.
First and foremost, they don’t capture those who don’t volunteer to be captured. As long as there are some bad actors out there, we need government to wade in and deal with them.
Second, many well-meaning companies have simply not gone far enough to address the privacy concerns of their customers. They need a shove.
This is why, I think, that there is so much support for the federal government’s current initiative to draft legislation governing private sector treatment of personal information, and to work closely with the provinces in extending the same rules to all players in the marketplace.
IF TIME PERMITS:
Let me just say that Privacy is not the only pressing concern for consumers.
Governments need to update their consumer protection laws so that they adequately cover online transactions. The borderless nature of the Internet is a problem – Authorities need to work together, nationally and internationally, to create efficient and effective dispute resolution mechanisms for consumers and suppliers in different jurisdictions.
And those who wish to benefit from Electronic Commerce must do their part in removing the risks to consumers of online transactions. Above all, that means giving consumers full information – about you the merchant, where you’re located, about the product or service in question, about the terms and conditions of the contract, and about how any complaints or disputes will be dealt with.
There are a number of innovative ideas and experiments being floated right now with a view to improving consumer confidence in Electronic commerce, but I’ll leave that for the discussion.
To sum up:
The promise of electronic commerce will only be fully realized if key consumer concerns relating to security, privacy, information and redress are dealt with, adequately and soon.
Neither government nor industry can do it themselves; and neither should try to do it without active involvement by consumers.
How-to’s:
1. Codes of Conduct – these should cover the full range of consumer concerns, and should do so to the satisfaction of consumer advocates. Each Code should cover as broad a spectrum of industry as possible, in order to get consumer recognition. The more Codes that are out there, the less likely it is that consumers will know about them. (IC booklet)
2. Use of reputable 3P, so as to give credibility to small merchants, who don’t have the reputation or brand name of a Canadian Tire, or the assurance of a regulated bank. (e.g., BBB)
Logo, on which the consumer can click, and hotlink to the 3P site, where the reliability of the merchant can be confirmed. The Better Business Bureau is apparently doing this already, but the standards it requires of its members are unduly limited – they don’t include consumer information or privacy standards.
3. Use a reliable 3P to take online consumer payments and hold them, until the transaction has been completed to the satisfaction of both parties. Once the consumer has received the product in good order, the funds would be released to the merchant.
4. Use online arbitration to resolve consumer complaints – apparently, there are two such initiatives currently being trialled in the US: Online Ombudsman and Virtual Magistrate.
5. Government (or indep.3P) to collect and publish marketplace info. on fraud, post-fraud measures – inform consumers! (e.g., Internet Fraud Watch)
5. Those businesses that effectively function as “gatekeepers” have a particularly important role to play in the building of consumer confidence:
– Credit Card Companies – Online consumer transactions will be handled in large part with credit cards. Not only should credit card companies play an active role in weeding out offenders (i.e., companies who generate sig. no. of consumer complaints), they should, through chargeback policies, provide consumers with redress via their credit card when a distance transaction fails. In the US, such chargeback policies are required by law, but I’m told that credit card companies now recognize that it’s good business, and have voluntarily extended their chargeback policies to cover international transactions. Why aren’t Canadian credit card companies doing the same?
– Domain Registries – There’s a saying: “The great thing about the Internet is that no one knows you’re a dog”. Well, this is also a great failure of the Internet – because without adequate disclosure by commercial entities, consumer trust will not develop. Domain Registrars hold the keys to electronic merchants. They have a duty to exercise this responsibility by requiring their registrants to meet certain informational requirements.
– Backbone Providers and Website Hosters – Again, these bodies have the ability to pull the plug on electronic entities that don’t meet certain basic standards of consumer protection.
Electronic Commerce (Business – Consumer)
Four different aspects:
1. Information/Advertising/Marketing
2. Communication/Feedback
3. Delivery (only re: digitized goods)
4. Transaction: Contracting/Payment
Key elements of consumer protection in EComm:
1. Location/Identity of merchant
2. Full Information on product and transaction, etc.
3. Security of transaction
4. Privacy of personal information
5. Clear rules re: what constitutes acceptance online
6. Availability of redress mechanisms (laws upon which liability can be easily determined; consumer able to sue in own jurisdiction;
Key Consumer Protections in Provincial Legislation:
- implied warranties (goods free from encumbrance, seller has good title; goods of merchantable quality, correspond to description….)
- required information to be provided to consumer
- when written contract required
- goods to be delivered within a reasonable period of time
- delivery deemed not to occur until buyer has examined goods
- rules against misrepresentations, pressure sales tactics, grossly inflated prices…
Needed Reforms:
- generally – need to harmonize consumer protection laws across provinces to the highest standard (e.g., information provision prior to finalizing transaction)
- contracts entered into by consumers should be deemed to have been entered into at address of consumer
- implied warranties to cover services as well as goods
- protection against external, incomprehensible or abusive clauses
Specific Online Commerce Reforms
- define what constitutes a “written” document; and what constitutes a “signature” in the context of electronic transactions;
- clarify what constitutes acceptance on the part of the consumer in the context of online transactions;
- update lists of proscribed business practices so as to include those that are specific to online commerce; and
- consider applying “cooling-off” periods to online consumer transactions.