06 September 2000

Text: FTC on Consumer Protection in Global E-Commerce

The U.S. Federal Trade Commission (FTC) says the consumer guarantees offered by foreign online retailers and the laws under which they operate do not protect consumers adequately.

In a report issued in Washington September 6, the FTC said that without "a workable framework for jurisdiction and applicable law," consumer confidence in the global electronic marketplace could be undermined.

Among its recommendations, the FTC calls for partial international convergence of consumer protection laws and development of international alternative dispute resolution mechanisms.

[Last week, the U.S. Commerce Department reported that retail electronic commerce is growing strongly in the United States. The department said the $5,500 million in sales in the second quarter of 2000 was a 5.3-percent increase above the first quarter.]

Following is text of the FTC press release:

September 6, 2000

FTC Releases Report on Consumer Protection
in the Global E-commerce Marketplace

The Federal Trade Commission's Bureau of Consumer Protection today released a report titled "Consumer Protection in the Global Electronic Marketplace: Looking Ahead." The report looks at several issues receiving increasing attention from governments, businesses and consumer groups, including what laws and courts should govern when consumers shop at foreign Web sites. The report cautions against allowing online sellers to be governed only by their own country's laws and courts, or only by the laws they prescribe in their sales contracts, as some have proposed. The report recognizes that partial legal convergence, marketplace competition, alternative dispute resolution (ADR), private-sector initiatives and cross-border cooperation are also key to a safe global electronic marketplace.

The report makes several recommendations for ensuring effective consumer protection in the global electronic marketplace:

• Develop a workable framework for jurisdiction and applicable law. The current system generally allows consumers to rely on their own country's core protections. This approach raises concerns about predictability and compliance burdens for online sellers. The task now is to address these concerns without moving to adopt a system that subjects sellers only to the laws and courts of their own country or as prescribed in the sales contract. Such a change from the current approach risks undermining consumer protection, and ultimately consumer confidence in e-commerce.

• Encourage the development of alternative dispute resolution. ADR has potential as a practical way to provide consumer protection and remedies, and reduces the risk of international litigation for businesses and consumers.

  The FTC and the Department of Commerce held a workshop in June 2000 on how to encourage the development of fair, effective and affordable dispute resolution for online consumer transactions.

• Pursue partial convergence of consumer protection laws. Common core consumer protections should be identified and partial convergence of laws should be pursued.

• Encourage continued development of private-sector programs that better inform consumers and prevent disputes. Private-sector initiatives that address consumer concerns, like certification programs, rating systems, codes of conduct and escrow and insurance programs, are key to the continued growth of e-commerce.

• Encourage the development of arrangements for cross-border judgment recognition and enforcement for both private and public actions. Judgments obtained by consumers and consumer protection agencies against foreign companies must be enforceable and effective across borders. These ends can be achieved through international agreements on judgment recognition and enforcement.

• Develop effective ways for consumer protection agencies worldwide to share information and cooperate. Effective international enforcement of consumer protection laws depends on extensive and systematic information sharing and coordinated action across borders.

The report also summarizes key findings from a June 1999 FTC workshop, as well as the guidelines of the Organization for Economic Cooperation and Development ("OECD") on this issue.

The Commission vote to approve the report was 4-0, with Commissioner Orson Swindle abstaining.

Copies of the Commission's report are available from the FTC's Web site at http://www.ftc.gov/bcp/icpw/lookingahead/global.htm and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580

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