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Module 4: Other key issues to be addressed in creating an enabling legal and regulatory framework to encourage internet use for business development
III. Protecting the consumer
For e-commerce to take off, consumer trust in online businesses is essential. Without the confident e-consumer, there can be no e-commerce. Thus it is imperative to ensure that the online traders observe specific rules and guidelines to allay the fears of the consumer and promote ethical online transactions.
Box 10.How Are Online Consumer Protections Different from Those Offline?
Unlike the offline environment, where consumers enter a store, inspect potential purchases and judge for themselves the trustworthiness of a seller, the online world does not provide the same opportunity to use a “buyer’s instinct.” Rather, many consumers are forced to proceed on faith, knowing little about the seller to whom they are entrusting their credit card data.
A. What Are the Main Concerns of Consumers with Regard to Online Transactions?
The primary concerns for the consumer that would need to be addressed by SMEs and by the broader legal and policy framework include:
The consumer’s exposure to unfair marketing practices;
Insufficient information disclosure; for example, refund policies, cancellation terms, warranty information;
Contract terms; for example, their enforceability;
Merchandise and delivery practices; for example, failure to perform and lateness;
Payment; for example, recovering fraudulent charges if credit card information falls into criminal hands;
Transaction confirmation and cancellation policies; for example, the consumer’s lack of knowledge on cancellation rights for online transactions, including for mistakenly made purchases;
Fraud and deception: for example, lack of means to authenticate merchandise purchased online;
Unsafe products;
Insecure payment methods;
Loss of personal privacy and protection of confidential data;
Risk misuse of personal information;
Other concerns include computer fraud, hacking, virus, interception and alteration of financial data, and misuse of personal information.
Box 11. A Balancing Act
Note that there exists a challenge for SMEs and for government policymakers in balancing sometimes competing interests.
For instance, the Internet creates a huge and highly affordable opportunity for small or new SMEs to market themselves to the global market. How should this interest be balanced against the desire to curb spamming and unwanted sales pitches?
To give a second example, how can governments assure consumers that their private information, for instance, credit card data, would be protected; and at the same time encourage the deployment and use of online payment mechanisms to promote e-commerce?
How can consumers be protected from fraud in the context of an Internet that knows no boundaries and where the perpetrators may lie out of the reach of the law?
B. General Principles for Protecting Consumers Online
The OECD’s Guidelines for Consumer Protection in the Context of Electronic Commerce was approved back in December 1999 and is designed to help ensure that consumers are no less protected when shopping online than they are when they buy from their local store or order from a catalogue. The guidelines establish the core characteristics of effective consumer protection for online business-to-consumer transactions, thereby eliminating some of the uncertainties that both consumers and businesses encounter when buying and selling online.
The guidelines feature eight categories of general principles:
- Transparent and Effective Protection
- Consumers who participate in electronic commerce should be afforded transparent and effective consumer protection that is not less than the level of protection afforded in other forms of commerce.
- Fair Business, Advertising and Marketing Practices
- Businesses engaged in electronic commerce should pay due regard to the interests of consumers and act in accordance with fair business, advertising and marketing practices.
- Online Disclosures
- Clear and obvious disclosures should be available for consumers.
- Confirmation Process
- To avoid ambiguity concerning the consumer’s intent to make a purchase, the consumer should be able, before concluding the purchase, to identify precisely the goods or services he or she wishes to buy; identify and correct any errors or modify the order; express an informed and deliberate consent to the purchase; and retain a complete and accurate record of the transaction.
- Payment
- Consumers should be provided with easy-to-use, secure payment mechanisms and information on the level of security such mechanisms afford.
- Dispute Resolution
- Consumers should be provided meaningful access to fair and timely alternative dispute resolution and redress without undue cost or burden.
- Privacy
- Business-to-consumer electronic commerce should be conducted in a manner that provides appropriate and effective protection for consumers’ privacy.
- Education and Awareness
- Governments, business and consumer representatives should work together to educate consumers about electronic commerce, to foster informed decision-making by consumers participating in electronic commerce and to increase business and consumer awareness of the consumer protection framework that applies to their online activities.
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