INTRODUCTION

The evolution of virtual shopping on the World Wide Web gives rise to new and complex consumer protection issues. The conventional elements of jurisdiction over consumer protection are hard to execute in the Internet realm. The principal reason is that "countries throughout the world have in place numerous different regimes to protect their consumers based on the 'old world' presumption that consumers will shop in proximity to where they live and will not give up their sovereignty in applying these laws."1 This presumption, however, no longer holds true, as cross-border exchanges over the Internet are now prevalent.2 Such exchanges raise serious questions for consumers who do business with merchants located in different countries. These questions include "whose laws apply, what a contract means and how [one] get[s] recourse when something doesn't work."3 At present, "there is no single set [sic] of international legal rules that apply to electronic commerce."4 Instead, governments have been grappling with how best to safeguard their citizens without imposing further barriers to trade.5 Governments have not met this challenge and such attempts have only contributed to further uncertainty and doubt in the international electronic marketplace.6

This Note will discuss the growing concerns consumers and businesses face as they interact online and examine the question of how best to protect consumers when cross-border disputes arise. Section I provides a brief introduction to electronic commerce and its development in the international marketplace. Section II examines key concerns pertaining to consumer safety in the global electronic marketplace, including dispute resolution, business and marketing practices, enforcement, and privacy. Section III then summarizes the various efforts and online initiatives that law enforcers and the private sector have executed worldwide. The section then discusses the three following examples of current initiatives seeking to build international consensus on core protections for electronic consumers: (1) the U.S. Federal Trade Commission's (FTC) Report on Consumer Protection in the Electronic Marketplace (FTC Report);7 (2) the Organization for Economic Co-Operation and Development Guidelines for Consumer Protection in the Electronic Marketplace (OECD Guidelines);8 and (3) The Electronic Commerce and Consumer Protection Group's Guidelines for Merchant-to-Consumer Transaction (ECCPG Guidelines).9 Section IV explores possible legal frameworks for regulating online transactions and discusses the advantages and consequences of adopting such frameworks. Finally, Sections V and VI offer a response and conclusion on how electronic commerce may be monitored in order to provide appropriate protection and legal certainty to citizens and businesses around the world.

DISCUSSION

I. E-COMMERCE AND ITS DEVELOPMENT IN THE GLOBAL MARKETPLACE

A. What is E-Commerce?

Electronic Commerce (E-Commerce) as a general concept includes "any form of business transaction in which the parties interact electronically rather than by physical exchanges or direct physical contact."10 These types of business transactions are usually separated into two categories: business-to-business transactions and business-to-consumer transactions.11 This Note is principally concerned with transactions between businesses and consumers. The business-consumer category primarily relates to electronic retailing, which has expanded significantly with the introduction of the Internet.12 There are well over 70 million websites offering all sorts of services and products, ranging from books and music to wine and art.13

Although consumer E-Commerce is still in its infancy,14 several examples have emerged.15 A few of these will serve to illustrate the commercial relationship between consumers and businesses over the Internet.

* Internet Book Shop (http://www.bookshop.co.uk): The Internet Book Shop (iBS) has no physical boundaries; it exists only as a Web site on the Internet.16 Supposedly the largest Internet bookstore in the globe, iBS allows consumers to browse and search their database of over 915,000 titles.17 Consumers can order and pay online for books that are then sent through customary delivery channels.18

* CD Universe (http://www.cduniverse.com): This site offers music at discount prices. Consumers visiting this site can browse, sample music, and subscribe to list serves catered to the user's interests.19

* Virtual Vineyards (http://www.virtualvin.com): Similar to iBS, Virtual Vineyards operates only through the World Wide Web.20 It has "shipped tens of thousands of bottles of wine to online purchasers globally."21

* Travelocity.com (http://www.travelocity.com): Travelocity.com provides "Internet and wireless reservations information for more than 700 airlines, more than 50,000 hotels and more than 50 car rental companies."22 The site also provides over 6500 vacation packages.23 Travelocity.com has "sold more than 20 million airline tickets [over the Internet] and has registered more than 32 million members."24

* eBay (http://www.ebay.com): eBay is an auction Web site that provides "[t]he worlds [sic] largest online trading platform where practically anyone can trade practically anything."25 eBay is the largest online seller of automobiles, collectibles, computers, photo equipment and supplies, and sporting goods.26 It traded nine billion dollars worth of goods in 2001-equivalent to approximately twenty percent of all consumer E-Commerce that year.27

* DIPA GmbH (www.http://www.dipa.gmbh.com): DIPA furnishes "high quality photographic images."28 Customers visiting the site can browse an extensive collection of photographs and purchase the selected images online.29

B. Benefits of E-Commerce

Electronic commerce provides unparalleled opportunities for cross-border exchange.30 The OECD has said that "there is great potential for this new commercial tool to change the economic landscape, allowing goods and services to be delivered to a market that largely ignores political and geographic barriers-improving productivity and communication and providing global market access to businesses and consumers worldwide."31 This new commercial tool offers many opportunities to businesses and corresponding benefits to consumers.

1. Worldwide Access and Greater Choice

The boundaries of electronic commerce are geographically indeterminate.32 Through global data communications networks (e.g., the Internet and the World Wide Web), both businesses and consumers are able to transcend global barriers. The Internet frees businesses from the cost of physical location,33 allowing even the smallest businesses to attain a worldwide presence and conduct business on an international level.34 The corresponding benefit to consumers is global choice.35 Consumers have the opportunity to purchase products and services literally around the clock from vendors located around the globe.36

2. Enhanced Competitiveness and Quality of Service

By eliminating the limitations of distance and time zones,37 E-Commerce empowers businesses to improve competitiveness.38 It frees businesses from many of the costly requirements and limitations of conducting business (e.g., infrastructure, physical advertisement) in the non-electronic environment.39 These savings enable businesses to offer improved levels of sales support, better product information and guidance on its use, and prompt response to customer inquiries.40 Such information is also more likely to be current, given the relatively low cost of updating electronic information.41 The benefit to consumers is enhanced quality of service.42 Not only do consumers receive better information and quicker responses to their inquiries, but also discriminatory treatment (based, for example, on race, ethnicity, religion, or gender preference) is less likely to be a relevant problem because businesses have no physical contact with consumers.43

3. Mass Customization and Personalized Products and Services

Improved consumer communication with businesses creates the potential for "mass customization" and "personalized products and services."44 With electronic communication businesses can collect detailed information on the specific needs of each consumer45 and adjust the features of products based on those individual needs.46 The result is "customized products to those offered by specialized suppliers but at mass market prices."47 A good example of mass customization is CD Universe. Consumers visiting this site can sign up for an electronic mail newsletter that is tailored to each individual consumer's specific interests.48

4. Elimination of Intermediaries and Product Availability

In the non-electronic realm, manufactures typically rely on conventional distribution (e.g., wholesalers and retailers) for disbursing their products in mass volumes.49 This form of distribution focuses on getting the physical product "within convenient reach of the consumer so that a sale can and will occur."50 Such a method is no longer required to make a sale.51 Electronic commerce reduces the need for conventional intermediaries, including retailers and wholesalers.52 With electronic interaction, manufacturers can bypass traditional supply chains and connect directly with consumers.53 Physical location of the consumer no longer determines from whom and where the consumer purchases a good.54 The Internet makes it possible for products to be sent directly from the manufacturer to the end consumer without having to go through a wholesaler's warehouse, retailer's warehouse, and retail outlet.55 Eliminating such staging posts allows the manufacture to enjoy greater profits.56

At the same time, shortening traditional supply chains also benefits consumers.57 Direct connection gives consumers "the ability to rapidly obtain the precise product that is required, without being limited to those currently in stock at local suppliers."58 At least in theory, consumers will also experience lower prices since bypassing traditional supply chains enables the manufacturer to reduce its costs.59

5. Greater Efficiency and Lower Costs

Electronic commerce provides for greater efficiency in the global marketplace in part because "the lower cost for communication information electronically and for processing transactions allows this marketplace to include smaller as well as more geographically dispersed vendors."60 Not only does electronic commerce increase vendor competition, but it also reduces transaction costs for online businesses.61 While the cost of a transaction that requires human interaction might be measured in dollars, the cost of a similar electronic transaction might be a few cents or less.62 The Internet Shopping Network, for example, can handle a software order at four to ten percent of the cost of a telephone order and two to three percent of the cost of the same transaction in a retail store.63 Electronic commerce thus offers online businesses the potential for real cost savings, which can be passed on to consumers.64

6. New Business Opportunities and New Products and Services

Although the role of conventional intermediaries has diminished, novel business opportunities have arisen in their place.65 Electronic commerce provides the opportunity for entirely new intermediaries.66 Consumers lacking the time or knowledge to surf the Internet may contact brokers, aggregators, and directories for help navigating through the maze of global marketplace suppliers.67 Other new services that may arise include payment intermediaries (e.g., establishing universal payment procedures for electronic transactions), technical support services, and online delivery services (e.g., establishing coordinated delivery routes).68

Not only does electronic commerce present new business opportunities, but it also creates the possibility for new products.69 Through improved communication, "consumers may increasingly enter into symbiotic relationships with producers, becoming quasi-collaborators in product development and improvement."70 A publisher, for example could make it possible for consumers to customize selected books by offering a selection of plots and characters from which to choose.71 Such consumer interaction allows for new kinds of products to evolve.72

C. E-Commerce and The Future

Electronic commerce is not some forward-looking vision; it is very much a reality.73 According to the International Data Corp, "[n]early 1 billion people, about 15 percent of the world's population, will be using the Internet by 2005 . . . and their use will fuel more than $5 trillion in Internet commerce."74 These numbers represent only the beginning for electronic commerce.

Although electronic commerce is still in its infancy, several reports and statistical studies suggest that it is rapidly growing.75 The use of equipment for electronic commerce is becoming as prevalent as the ownership of television sets was in the mid-1950s.76 It is estimated that approximately thirty-five percent households in the United States already own at least one computer.77

Internet use is also expanding rapidly.78 The Computer Industry Almanac reports the worldwide Internet population as 349 million, and by year-end 2002 the number of online users was expected to reach 490 million.79 The number of Internet sites is also increasing quickly, "doubling every two to three months."80

Noting the variations in projections, "worldwide e-commerce is expected to grow from about $70 billion (US$) . . . [in 1999] to about $1.4 trillion by 2003."81 Another set of projections also suggests that twenty-six percent of all consumers' shopping will be conducted electronically by 2007.82

II. CONSUMER CONCERNS IN THE BORDERLESS GLOBAL MARKET

Along with the potential advantages of electronic commerce come uncertainties and risks. The very attributes that make electronic commerce advantageous also create risks that undercut consumer confidence.83 Using the World Wide Web, sellers can place themselves "beyond the reach of national courts, increasing consumers' exposure to unfair marketing practices, unsafe products, insecure payment methods, and loss of personal privacy."84 Reports estimate that "one in five Americans had a problem with an online purchase during the past 12 months."85 Because the laws governing the use of the Internet are still ambiguous, and sometimes non-existent, consumers have little or no redress for problems arising in the electronic marketplace.86 If the international electronic marketplace is to flourish and grow to its fullest potential, "Consumer safety risks must be eliminated or at least minimised."87

A. Dispute Resolution

One of the most difficult obstacles confronting E-Commerce's future as a public marketplace is the problem of resolving international disputes between buyers and sellers.88 When a consumer makes an E-Commerce purchase from a foreign company and the purchase goes sour, two important yet difficult questions are implicated.89 First, which country's laws govern the electronic transaction? Second, which country's courts have authority to settle the dispute?90

The legal questions raised have no simple answers. Determining which laws apply depends on how a country approaches the question of jurisdiction and applicable law. As there is more than one approach to determining jurisdiction and applicable law,91 consumers risk the probability of losing their home country protections and having to travel to a foreign forum to resolve their dispute in an unfamiliar legal system.92 Businesses, on the other hand, fear the opposite; they are potentially subjected to complying with hundreds of different consumer protection laws as many countries seek to regulate their activities.93

Business and Marketing Practices

The informal nature of the Internet, the lack of physical contact between the consumer and vendor, and the geographic distance of vendors from the consumer all raise serious concerns for consumers in the global electronic marketplace. Such characteristics have the potential of placing consumers in unfamiliar commercial situations, thereby creating new and unparalleled opportunities for consumer abuse through unfair business and marketing practices.94

1. Information Disclosures

The secret to successful E-Commerce is allowing consumers to make informed decisions -E-Commerce Web sites need to do a better job informing consumers of the identity of on-line companies and the terms and conditions of proposed transactions.95 In an informal international web survey conducted by the FTC, the agency discovered that "most companies provided helpful general business information, but did not provide important contract related information such as refund policies, cancellation terms and warranty information."96 For instance,

of the sites that allowed consumers to buy goods online: [o]nly 9 percent of the sites (four U.S. sites and seven non-U.S. sites) provided cancellation terms. Only 26 percent of the sites (16 U.S. sites and 15 non-U.S. sites) provided refund policies. And only 38 percent of the sites (nine U.S. sites and 37 non-U.S. sites) disclosed applicable currency.97

Improving these statistics is critical if consumers are going to gain the necessary confidence to conduct business in the global electronic marketplace.

2. Contract Terms

In addition to receiving poor contract-related information, consumers are also concerned with the enforceability of terms in purchase contracts.98 Some E-Commerce transactions "unfairly limit consumer rights and afford the consumer little choice regarding contract terms."99 An example of unfair contract terms includes "terms limiting the consumer's right to seek redress for defective merchandise."100 Obviously, this is a problem for the consumer because the average consumer may not understand the ramifications of limiting his redress. Seeking redress under the terms of the contract, moreover, may be too costly for the consumer if litigation is restricted to the country of the vendor.

Language barriers and cultural differences also present a problem in the enforcement of contracts for consumers in the electronic marketplace.101 Such constraints in the global electronic marketplace create the potential for textual disharmony-the possibility of having several interpretations for a single word or phrase. A situation where textual disharmony might arise is in contracts that contain evasive terminology such as "reasonable" or "fairness." Another situation in which textual disharmony may arise is in the translation of a contract.102 Some contract terms are not as easy to translate as others and, as a result, the revised contract could contain fewer protections than offered in the original (or vice versa).

3. Merchandise and Delivery Practices

Failure to perform and lateness are other concerns raised by consumers reluctant to shop over the Internet.103 They express concern regarding whether consumers should fear that an Internet order may never arrive.104 According to the facts uncovered by Consumers International105 and Andersen Consulting,106 the question should be answered in the affirmative. After purchasing a total of 151 goods from Internet sites in 17 countries, Consumers International discovered that approximately 9 percent of the orders placed were never delivered.107 Andersen Consulting similarly discovered after placing 445 test orders with 162 Web sites that "39% of orders placed with European e-tailers were not completed" and "of those, two-thirds were . . . not delivered.10"

Failure to deliver orders on time without notification of delay to consumers is also a frequent problem. Several online e-tailers, including Macys.com, Toysrus.com, and KbKids.com, were fined a total of $1.5 million for late deliveries that accrued during the 1999 holiday season.109

Also related to delivery practices is the concern that goods will either be defective or not conform to their advertised description. Consumers International discovered after purchasing a total of 151 goods from Internet sites in 17 countries that approximately "8 percent of those orders were filled with incorrect or damaged goods."110 With respect to nonconformity, the Internet provides new sources for consumer confusion.111 The lack of color accuracy standards for monitors and printers, for example, interferes with purchasers seeing what they are buying.112

4. Payment

Payment over the Internet is one of the greatest concerns expressed by consumers. According to a report released by the United Kingdom's National Consumer Council, thirty-nine percent of British consumers surveyed were "concerned about releasing credit card details over the Internet," and "of those who actually use the Internet, 54 percent had concerns."113 In general, consumers fear when making an electronic commerce payment that their "credit card information will fall into criminal hands, leaving the consumer to pay fraudulent charges and recover their credit rating."114 Most credit card companies, however, limit a cardholder's liability for unauthorized use. Consumers nevertheless suffer the inconvenience and embarrassment of having to prove to their credit card company that the charge(s) were unauthorized.115

5. Transaction Confirmation and Cancellation Policies

Another issue clouding consumer confidence in the electronic marketplace is the fear of inadvertently being held to an online contract because the consumer mistakenly clicked an order button rather than the exit button. Consumers are also concerned about their right to cancel electronic transactions.116 According to a recent study conducted by National Consumers League (NCL), "nearly half of Internet purchasers incorrectly believe that they have a three-day 'grace period' to cancel their online orders."117 This misconception is exacerbated by the fact that over ninety percent of Web sites surveyed by the FTC do not disclose cancellation terms.118 Consumers in general may not know where they stand in terms of their cancellation rights for online transactions.

6. Fraud and Deception

An additional concern raised by consumers is the risk of online fraud and deception.119 Consumers lack the means (i.e. physical contact) exercised in traditional commerce to authenticate merchandise.120 The FTC has said "one significant issue relating to authentication is the allocation of the risk of loss in the event that authentication technology indicates that a consumer has authorized a transaction, when in fact the consumer has not authorized it."121 Will the consumer bear the risk of authentication? Or better yet, will consumers have enough bargaining power to negotiate these risks with e-tailers?122 Such questions remain undecided as authentication technology evolves and governments grapple with the challenge of what to do.

B. Privacy

Closely linked to concerns regarding authentication are concerns regarding consumer privacy.123 "Two-out-of-three consumers are 'very concerned' about the risk of misuse of their personal information by Web site operators, and 92% of all online households 'do not trust online companies to keep their personal information confidential.'"124 The concerns surrounding the interloper of personal information are not new;125 however, the global, borderless electronic marketplace amplifies them.126 The distinct global differences in privacy protection rules themselves cause unrest amongst consumers.127 Consumers sometimes have no way of discovering the geographical address or state of incorporation of an e-tailer. Consumers therefore have no means of knowing whether their personal information is sufficiently regulated.

C. Enforcement

Electronic commerce creates new challenges for enforcement. There are at least two components of enforcement that pose serious concerns for consumers: judgment recognition and law enforcement.128

1. Judgment Recognition

Serious doubts are raised when consumers attempt to achieve global recognition and enforcement of their private and public law judgments in the electronic marketplace.129 For instance, with regards to private suits, even if a consumer was successful against a foreign business in the consumer's home forum, the consumer still has to seek enforcement of the judgment in the business' forum.130 In several countries it is arduous to acquire acknowledgment and enforcement of foreign judicial rulings.131 In addition, the process is often more costly for consumers in terms of time and money than the value of the judgment itself.132

Global recognition of public law judgments is sometimes even more difficult to receive than private law judgments.133 "Unlike private law judgments, some countries do not readily recognize judgments obtained by public agencies, such as consumer protection law enforcement agencies, because of issues of sovereignty."134

2. Law Enforcement

Even in sections where the law among countries is similar, effective law enforcement is hopeless without cross-border cooperation.135 The borderless nature of the Internet and its potential for anonymous interaction debilitates law enforcers' capacity to catch and prosecute criminals in this medium.136 Law enforcement is unable to keep up with the "high-speed transactions that enable fraud perpetuators to victimize alarming numbers of e-victims almost instantaneously, and the technological shield that hides their identity."137 Until law enforcement catches up with computer technology, consumers will be virtually unprotected from crime in the electronic marketplace.

III. BUSINESS AND GOVERNMENT PARTICIPATION IN GLOBAL CONSUMER PROTECTION

A. Introduction to Online Initiatives

Because of the great potential and concerns that electronic commerce poses for the global economy, governments, international organizations, and private sector groups have begun to look ahead and address the concerns of consumers.138

Several recent government initiatives combat the problem of legal uncertainty in the electronic marketplace. The European Union (EU), for instance, recently adopted a new directive on E-Commerce, prescribing that all EU member countries conform their national laws on E-Commerce to the requirements of the directive by November 2001.139 The EU Directive provides for a country-of-origination approach and a framework for alternative dispute resolution.140 The United States is working on similar legislation referred to as the "Uniform Computer Information Transaction Act" (UCITA).141 The UCITA provides for a prescribed-by-seller approach for electronic commerce contracts and a countryof-origination approach as a default rule for applicable law.142 UCITA has been adopted in a few states, but it is still pending before a majority of state legislatures.143

Non-governmental initiatives addressing E-Commerce concerns have also been widespread. For four years the American Bar Association (ABA) has been studying global jurisdiction issues created by E-Commerce.144 Recently, the ABA released a report entitled "Achieving Legal and Business Order in Cyberspace: A Report on Global Jurisdictional Issues Created by the Internet," which describes a "borderless frontier in need of a set of multinational rules that are not dependent upon physical location."145 Another private sector initiative addressing the concerns of online consumers is the American Institute of Certified Public Accountants (AICPA).1(146) The AICPA instituted a seal program (referred to as "Webtrust") that verifies the business and marketing practices of websites located in the United States, Canada, Australia, and the Netherlands.147 Similar to the Webtrust program, the Better Business Bureau has also instituted its own seal program called "BBB Online."148

Efforts toward addressing the concerns posed by the electronic marketplace have also included international organizations. The International Chamber of Commerce, for example, has released a set of guidelines on marketing and advertising on the World Wide Web.149 The guidelines "call for ethical and truthful advertising generally and address issues such as data protection, advertising to children and unsolicited commercial messages."150 Another global organization involved with creating fair business practices over the Internet is the European Advertising Standards Alliance (EASA).151 This organization lists on its website the names of companies found to be in violation of its program standards.152

The initiatives described above represent only a few of the efforts performed by governments, international organizations, and private sector groups. There is a myriad of other online initiatives.153 This Note is primarily concerned, however, with three specific recent online efforts that all seek to build international consensus on core protections for consumers in electronic commerce.

1. FTC Report On Consumer, Protection in the Global Electronic Marketplace

For the past few years, the FTC, with the assistance of industry, consumer groups, and academics, has been considering how best to safeguard consumers while simultaneously providing businesses with a predictable legal environment.154 In June 1999 the FTC held a public international workshop to address the ongoing challenges posed by global online commerce.155 In September 2000 the FTC's Bureau of Consumer Protection released a report (FTC Report) summarizing the key findings of the 1999 Workshop.156 The FTC Report, however, does not purport to define any legal frameworks for E-Commerce.157 Rather, it makes various recommendations to be contemplated in reaching a solution to E-Commerce concerns.158

One of the recommendations discussed in the FTC Report includes the development of an international framework for jurisdiction and applicable law.159 The current jurisdictional framework provides for a country-of-destination approach, which "allows consumers to rely on their own country's core protections."160 As discussed above, the FTC recognizes that this approach causes online businesses to comply with hundreds of different consumer protection laws.161 The FTC also recognizes, however, that adopting a framework that subjects businesses only to the laws and forums of their own country ("country-of-origination" approach) has the potential of seriously undermining consumer protection and in the end consumer confidence in the global electronic marketplace.162 The FTC recommends improving the current jurisdictional system, rather than moving to a country-of-origination approach.163

Another recommendation provided in the FTC Report includes pursuing the development of alternative dispute resolution (ADR).164 The World Wide Web makes it conceivable to resolve cross-border disputes-particularly those involving small-value transactions-in a forum convenient to both the consumer and seller: Cyberspace.165 Online ADR "can be a practical way to provide consumers with fast, inexpensive, and effective remedies, and can reduce businesses' exposure to foreign litigation."166 Recognizing the benefits of online ADR, the FTC, in conjunction with the U.S. Department of Commerce, held a workshop solely on this topic.167

A third recommendation prescribed in the FTC Report was building consensus on core consumer protections.168 The FTC recommends "partial convergence of national and international consumer protection laws."169 It recommends first identifying common core protections, and then pursing either a bilateral or multilateral agreement that provides minimum standards for E-Commerce transactions.170

In addition to creating common core protections, the FTC Report also proposes encouraging additional private sector initiatives.171 The FTC believes that private sector programs (e.g., rating programs or seal programs) "are important compliments to the current legal system and often provide protections that consumers want but that are not required by law."172 The FTC recommends the continuation of these programs because it believes they are key to restoring consumer confidence in the electronic marketplace.173

Providing for foreign judgment acknowledgment and enforcement is another recommendation described in the FTC Report.174 The FTC believes judgments obtained by consumers must be effective across borders if law enforcement agencies are going to protect their consumers at home.175 The FTC recommends an international agreement that is "narrowly tailored to enable law enforcement to effectively combat harmful, cross-border commercial conduct."176

Finally, the FTC recommends developing a system for information sharing and cooperation.177 "Effective enforcement of consumer protection laws in the international online environment depends on extensive and systematic information sharing and coordinated action across borders."178 The FTC believes consumer protection is now an international problem and that no government can solve the problem alone.179

2. OECD Guidelines For Consumer Protection In The Global Electronic Marketplace

In April 1998 the Organization for Economic Co-Operation and Development (OECD) Committee on Consumer Policy started to construct a set of general Guidelines for regulating cross-border transactions in the electronic marketplace.180 The OECD released the Guidelines in December 1999.181 The OECD Guidelines reflect an international consensus among the twenty-nine OECD member states.182 They were designed to address many of the concerns raised at the ETC Workshop.183 Its fundamental principle is that "[o]nline shoppers should be afforded effective protection that is not less than protection afforded off-line."184 As guidelines, however, the standards set forth are not legally binding.185 Rather, the OECD Guidelines "provide a blueprint for governments as they formulate and implement consumer protections for electronic commerce [.]"186

One of the standards promulgated in the OECD Guidelines is acting in accordance with fair business, advertising, and marketing practices.187 This means business should not "make any representation . . . that is likely to be . . . misleading, fraudulent or unfair" and "should not use unfair contract terms."188 The OECD Guidelines also suggest providing appropriate online disclosures about the companies, their goods and services, and the terms and conditions of transactions.189 These requirements go to the principle that consumers should receive sufficient information to enable them to make an informed decision about whether to purchase a particular item online.190

Another standard set forth in the OECD Guidelines includes establishing clear mechanisms for confirming transactions and securing payment online.191 Article IV states a "consumer should be able, before concluding the purchase, to identify . . . the goods . . . she wishes to purchase" and "express an informed and deliberate consent to the purchase."192 With respect to securing payment online, the OECD Guidelines recommend and encourage "limitations of liability for unauthorized [sic] or fraudulent use of payment systems."193

A fourth standard described in the OECD Guidelines includes the creation of effective procedures for resolving cross-border disputes in a timely and reasonably priced manner.194 They recognize that E-Commerce poses challenges to the existing framework on jurisdiction and applicable law.195 If a new framework is to be devised, the OECD Guidelines recommend that governments ensure the new framework does not result in consumers having less protection than that afforded in the original framework or that redress becomes more costly or burdensome.196

Other standards described in the OECD Guidelines include developing policies and procedures for alternative dispute resolution,197 conducting E-Commerce in accordance with the privacy principles described in the OECD Guidelines Governing the Protection of Privacy and Transborder Flow of Personal Data,198 increasing efforts toward improving consumer and business education and awareness about electronic commerce,199and encouraging and facilitating global electronic cooperation.200

3. Guidelines for Merchant-to-Consumer Transactions

Industry representatives acknowledge the importance of consumer protection in the electronic marketplace and have assembled a working group to address these challenges.201 The Electronic Commerce and Consumer Protection Group (E-Commerce Group or ECCPG) is "comprised of seven of the world's leading Internet and e-commerce companies,"202 including America Online-Time Warner (AOL), AT&T, Dell Computer Corporation, Microsoft, and Network Solutions.203 In June 2000 the E-Commerce Group released a proposal designed to "reduce the need for compliance with a multitude of differing laws"204 and "inspire global discussion of legal issues related to consumer transactions in the borderless, instantaneous new medium."205 The proposal closely mirrors the OECD Guidelines,206 and the FTC "has pledged to give the proposal serious consideration."207

According to Network Solutions Vice President for Policy Roger Cochetti, "[t]he goal of the guidelines is to produce satisfied customers. Consumers should be empowered to deal only with reputable merchants, under terms that make them comfortable and with assurance that disagreements will be promptly and reasonably resolved."208 The ECCPG Guidelines contain a broad range of provisions to accomplish such objectives.

One of the provisions described in the ECCPG Guidelines includes providing full disclosure about a business, its goods and services, and the terms and conditions of the transaction.209 The ECCPG Guidelines provide for the following disclosures: vendor's contact information (legal name, address, phone number, e-mail address), accurate description of goods and services, any extra costs associated with the transaction (e.g., shipping), customer service and support information, and warranty information.210

Another provision contained in the ECCPG Guidelines includes providing clear policies for cancellation, return, and refunds.211 The right to cancel, return, or refund, however, is not mandated by the ECCPG Guidelines.212 Rather, they require clear notice for waiver of this right and if some rights are given, the extent and scope should also be posted on the relevant website.213

A third provision requires on-line merchants to act in accordance with fair business practices.214 The ECCPG Guidelines advise merchants "not [to] make any representation or material omission or engage in any practice that is deceptive, misleading, or fraudulent."215 They also require merchants to provide reasonable measures for securing a "consumer's transaction information."216 These measures should include "the use of password protection, encryption, or similar technologies [.]"217 In addition, merchants should adopt privacy policies "consistent with existing industry standards and legal requirements."218 At the very least, "such policies would provide for notice to a consumer as to what type of information is to be collected and how it will be disseminated."219 A final provision prescribed in the ECCPG Guidelines includes providing fair processes for resolving disputes and obtaining recourse.220 The ECCPG Guidelines establish two mechanisms for resolving consumer complaints.221 Businesses should establish their own internal mechanisms for addressing consumer complaints and "participate in reputable, independent third-party dispute resolution programs."222

IV. LEGAL FRAMEWORKS FOR ONLINE BUSINESS-TO-CONSUMER TRANSACTIONS

The conflict and uncertainty raised by determining applicable law and jurisdiction is a significant problem that has no easy solution.223 "The borderless, global marketplace in its present form has little correlation to geographical divisions of sovereignty;"224 whereas the current jurisdictional framework attempts to define the electronic marketplace in terms of physical boundaries.225 Applying the current legal system has the potential for creating regulatory differences that can interfere with the workings of electronic commerce.226 On the other hand, modifying the current legal system to a system of global governance or self-governance may be difficult to accomplish and establish.227

Recognizing that uncertainty as to what laws will apply to an online transaction is a central reason why consumers have little confidence in electronic commerce,228 it is important that one consider possible legal frameworks that may enhance consumer confidence and improve legal certainty in the global electronic marketplace. This Section explores three possible legal frameworks for regulating online consumer transactions and the potential advantages and disadvantages associated with the adoption of each framework.

A. Individual State Government Paradigm

It has been commonly assumed to date that the "borderless, global marketplace has physical boundaries and can tolerate inconsistent regulation analogous to the physical in-person marketplace."229 The individual state paradigm "denies that the electronic marketplace differs in any significant respect from conventional marketplaces."230 This sort of paradigm permits the government of Hong Kong, for example, "to file a US$13 million lawsuit against a U.S. citizen for violating Hong Kong copyright law by making available pictures from Action Asia magazine through an Internet server in the United States."231 Essentially, it allows virtually any government to declare jurisdiction over any citizen on the Internet and prosecute that citizen for any laws he or she may have broken in that country while conducting business over the World Wide Web.232

The individual state governance paradigm, however, acts as a temporary fix rather than a real solution to the problem of legal uncertainty in the electronic marketplace. The paradigm demands no understanding of how this borderless medium works.233 Modification of legal thought is unnecessary.234 Rather, courts continue to apply individual state law to safeguard their local citizens from misconduct in the global electronic marketplace.235

Although the individual state governance paradigm provides consumers with their own home country's protections, it creates serious disadvantages primarily for merchants and resultantly for consumers interacting in this global online environment.236 One of the main disadvantages associated with utilizing this paradigm for governing E-Commerce transactions is that it produces a compliance nightmare for merchants.237 Rather than provide predictability as to liability exposure, this paradigm enhances it.238 In some circumstances, merchants do not possess the ability to know where its customers live,239 and this paradigm opens the flood gates for potentially unlimited exposure to law suits in foreign jurisdictions.240 Another shortcoming of this paradigm is that it subjects merchants to an uncompromising degree of compliance costs. Indeed, "[t]he more jurisdictions and laws the company must contend with, the higher its compliance costs."241 This drawback also disadvantages consumers because merchants, in dealing with such costs, may ultimately pass them on to the end-user, the consumer.

A final drawback of this paradigm is that it "promotes international forum shopping."242 Due to high compliance costs and the possibility of unlimited liability exposure, merchants will avoid doing business in states that provide more favorable consumer protection laws. This will have the effect of reducing global competition and, in turn, contracting the growth of global E-Commerce.

B. Global Governance Paradigm

An alternative to implementing the individual state governance paradigm would be to "negotiate an international treaty that organizes a global electronic commerce governing body."243 This international body would be the sole ruling authority on electronic commerce transactions in the global marketplace.244 Uniform protections for consumers and merchants would apply across the board.245 The body could also serve as an arbitrator for settling cross border disputes.246 The experience gained by this function could also steer the body into drafting new regulations.247

This paradigm presents several positive benefits for both consumers and merchants participating in the online environment. First, it provides merchants with a predictable legal environment. Instead of complying with "hundreds of different consumer protection laws in hundreds of different countries,"248 online merchants would only be responsible for complying with the legal rules promulgated by the international body. These rules would put an end to unlimited exposure to liability, which in turn would also reduce compliance costs and make the electronic marketplace more competitive. Another benefit provided by this paradigm is that it would prevent international forum shopping because only one forum would exist-the international body. The fact that forum shopping would no longer be an option would also ensure consumers effective protections in the electronic marketplace. Consumers shopping on the Internet would be afforded uniform protection regardless of where the good or service was purchased. Uniform laws will make consumers more confident in international E-Commerce, as well as make it easier for governments to cooperate in law enforcement efforts with their cross-border counterparts who will be providing the same protections.249

Despite such positive benefits, the establishment of this paradigm also presents real difficulties. Attaining global cooperation for the implementation of the paradigm appears unlikely.250 Several of the issues involved impinge upon innate differences held by the governments of states. For instance, some states "believe in strong central government protection of privacy while others believe in minimizing intervention in the private sector."251 Some states have a tradition of strong consumer protection laws.252 Other states have stronger protections for merchants.253 Whatever the differences, consensus on an international treaty creating a world institution for governing E-Commerce will be difficult to achieve.254

C. Self-Regulatory Paradigm

The final paradigm assumes that the borderless, international marketplace embodies a completely new realm, one that should develop its own set of laws based on self-governing principles rather than artificial rules based on geographic boundaries.255 The self-governance paradigm supports the premises that "physical location has no relevance to the global marketplace environment"256 and "[i]nformation and transactions in this realm transcend physical boundaries."257 Instead of pushing for a system such as the individual state governance paradigm that is based on physical characteristics to govern this invisible realm, the international electronic domain should be viewed as something independent from the physical world.258

Self-regulation offers many advantages. For one, self-regulation is not a new concept to the Internet and World Wide Web.259 Many online initiatives-such as the FTC recommendations, OECD Guidelines, and E-Commerce Group Guidelines260 have developed through this process and are currently the only standards addressing global E-Commerce besides individual state regulations.261 Continuing this trend would require little effort for implementation.262 Furthermore, this paradigm "requires little or no institutional infrastructure."263 Leaving the private sector to devise its own rules of conduct and resolution of disputes lessens government costs associated with developing and imposing new legislation for E-Commerce.264 Additionally, self-regulation is not a "one-size fits all" approach.265 The private sector can develop rules best suited for the purposes of each industry,266 In effect, lowering compliance costs and improving competition in the global electronic marketplace.

Nevertheless, this paradigm also presents some disadvantages and difficulties. While self-regulation could work if the participants shared values and had comparable resources and political power, the global online environment hardly conforms to this depiction.267 "With the commercialization of the net the formerly homogenous group of users is split into merchants and consumers. And even within each of these groups one is likely to find a heterogeneous structure of social, cultural, economic, moral, and criminal versatility and diversity."268 This divergence in values will make it difficult for the private sector to establish a common set of norms.269 And even if the private sector is capable of doing so, self-enforcement of these norms is another problem. Consumers and merchants who break the rules do not care because they can "find alternative net access that is beyond the reach of the enforcers[.]"270 This is because "the user of network services is not really at the mercy of the rule setter. . . . If the user (combine) does not like the content of the rules, if the maker of the rules does not follow them or if the user is wrongfully disconnected, the user simply switches to another network."271 This means "self-regulation is unlikely to protect the poor, ethnic and other minorities, and those with more limited education or technical understanding."272 A final problem presented by this paradigm is the fact that it completely separates itself from the physical world. The online environment cannot entirely disconnect itself from human affairs when the players involved in the environment are humans.273 "How the global electronic marketplace functions affects humans."274 This fact must be taken into account when developing a legal framework for global E-Commerce.

V. ANALYSIS-A RESPONSE TO PROVIDING A FAIR AND PREDICTABLE ELECTRONIC ONLINE ENVIRONMENT

The concerns raised by consumers and merchants are realized and deserve increased attention if global E-Commerce is ever to reach its fullest potential. In order for electronic commerce to achieve its fullest potential, we must ensure the creation of an environment that is fair for both parties-the consumer and merchant-involved in the E-Commerce transaction.

As described in Section IV,

on the one side stood a somewhat idealistic cyber-libertarian conception of the Internet as a stateless "place," in which online communities develop a comprehensive system of self-governance without any state's interference. On the other side stood those who feared 'cyber-anarchy' and had no problem with government regulation, since the Internet should not be treated differently.275

Somewhere in between the dichotomy of self-regulation versus government regulation lies the right mix for governing E-Commerce transactions in the global marketplace. The key to finding the right mix between the two is determining the roles of business and government in international consumer protection in the online marketplace. Electronic commerce is long-distance selling,276 and we must look to the roles of these groups previously employed in relation to distance selling and see how they may be applied to the global electronic marketplace.

A. The Role of Government

There is a growing fear that governments may over-regulate the Internet in their attempt to shield their citizens from E-Commerce risks and, in so doing, thwart this technology and the development of global E-Commerce.277 Governments' limited skills in information technology and inability to keep regulation current with the pace of change in technology are other concerns raised by proponents of self-regulation.278 Notwithstanding these concerns, there is still a crucial role for governments to play in the global electronic marketplace.

One role that government may perform is to educate.279 Too many consumers and merchants are not familiar with the risks and consequences of doing business over the Internet. For instance, online shoppers are not always aware of the potential scams or redress mechanisms available over the Internet.280 Similarly, merchants do not always have information about the laws and law enforcement policies of a particular country.281 Governments should assume the role of educator-informing businesses about applicable laws and jurisdictions and consumers about special programs like online ADR and information on how best to safeguard themselves from online pyramid scams.

Government can also encourage the use of technology to resolve online global disputes in consumer transactions. In this information age, going to court is not the only method of resolving legal disputes. Another option is alternative dispute resolution, which "refers to out-of-court methods for resolving disputes, including negotiation, mediation, and arbitration."282 Utilizing ADR for resolving online global disputes in consumer transactions would mitigate the problem of having to travel to a foreign jurisdiction for the purpose of filing a complaint against a merchant or vice versa. Online ADR permits "parties who do not live in the same jurisdiction and do not live close to the same courthouse"283 to resolve their disputes over the same medium, the Internet, that facilitated the consumer transaction in the first place. For example, "CyberSettle uses technology that can 'split the difference' between blind offers and demands submitted through the Internet, generate state-specific settlement documents, and send money to a claimant within 'a nanosecond' through smart card technology."284 Allowing consumers to use the same technology used for shopping online to resolve disputes online would enhance consumer confidence in the electronic marketplace since it is "simpler, quicker and less expensive than courts."285

Governments' role in online ADR should be to educate and encourage its development in the private sector. Governments should not be involved with creating guidelines for ADR; rather, they should be educating consumers and businesses about the benefits of ADR and its incorporation in online consumer transactions.286 The task of developing online ADR procedures and implementing ADR programs should be private sector driven.287 Governments should also assume the role of ensuring these ADR programs are fair and effective.288 Some participants at a public workshop on online ADR suggested that governments create a set of criteria for examining ADR programs and certify those who satisfied the criteria as being fair and effective.289 This task makes sense for two reasons. First, it will enable consumers to recognize and sift through ADR programs that are either unfair or prejudicial. Second, accreditation by the government will enhance consumer confidence in resolving their disputes online.

Moreover, governments should also partake in developing a baseline of legal protections for consumer online shopping.290 Applying a strict laissez-faire approach to electronic commerce is not sufficient to produce adequate protections for consumers in the global marketplace because "not all businesses are legitimate, not all legitimate businesses participate in self-regulatory programs, and not all participants uphold program standards."291 Furthermore, low barriers to entry and a vast consumer base mean that new small entrants may not care about reputation or repeat customers.292 Accordingly, it is important that governments work together as described in the recommendations prescribed by the FTC and OECD to identify and converge common core consumer protections.293 Providing a baseline for international consumer protection will ensure the effectiveness of self-regulation and strengthen consumer confidence, which in turn will facilitate the growth of E-Commerce.

Lastly, in addition to constructing a baseline for international consumer protection, government should continue its role of promoting and encouraging self-regulation in the electronic marketplace. Self-regulation is critical and key to ensuring good business conduct and providing a safe, predictable global online environment. Without industry self-regulation, government would not have the capability of understanding the demands of the Internet and impose appropriate rules to ensure the stability and security of the environment.294 Governments should continue to support and encourage industry self-regulation for the global electronic marketplace.

B. The Role of the Private Sector

Electronic commerce displays many of the same characteristics and concerns as international trade.295 In both cases, the parties-the buyer and seller-involved in the transaction do not know one another.296 In international trade, an important body of law emerged as early as the Middle Ages-Lex Mercartoria, or the Law Merchant.297 The Law Merchant is non-binding law; in contrast, it provides rules and procedures for regulating international trade that are largely self-enforcing.298 The purpose for its development stems from the states' lack of knowledge and experience to create a practical legal framework for international business law.299 Merchants, on the other hand, understood the "need for flexibility and trust within a dynamic environment."300 Due to their experience with the needs of commerce, merchants were in the best position to develop the most suitable rules governing business practices and dispute resolution.301 Similar to international trade, "official governments today lack the authority and expertise to regulate the World Wide Web."302

Rather, the best approach is to let online merchants develop the rules best suited to the Internet; said otherwise, this is a role governments should leave to the private sector. History has repeatedly shown that managed economies under the theories of Karl Marx, John Maynard Keynes, and others have not been entirely successful. Instead, such economies "have turned to deregulation, regulatory reform and privatization . . . [r]egulation is a poor substitute, to be used only when competition fails."303 This is not the case in the electronic marketplace; competition is vast and expanding. The invisible hand in Adam Smith's free market theory should be allowed to permeate through the global electronic marketplace. Market pressures, in conjunction with baseline rules, can provide effective protection for consumers.304

Other reasons for allowing industry to take the lead on governing international E-Commerce include "the flexibility and efficiency available through self-regulatory programs, especially in an international environment where it is difficult to enforce national laws across borders."305 Unlike government, industry has a greater "ability to impose enforceable sanctions on non-compliant companies."306 In theory, at least, it would be faster "for a self-regulatory organization to impose sanctions on a business whose Web site violated industry standards than for the government to pursue the business through legal channels."307 Whereas industry is not confronted with issues of jurisdiction and cross-border judgment recognition, governments are making it more difficult for them to impose sanctions on foreign businesses operating in the electronic marketplace.

Another reason to empower industry in regulating international E-Commerce is industry's expertise and knowledge of commerce, and its ability to take that information and translate it into procedures for operating in the digital world. Whereas governments' legislative councils are constantly in session discussing at arm's length what laws to implement for the safety of their constituents, industry is not. Industry deals on a daily basis with the wheels of commerce and, therefore, is less prone to spend countless hours bickering about what protections should be afforded for global online transactions. Rather, that time could be saved and industry could implement codes of conduct at the same pace as the underlying technology evolves.

C. Government and Industry Working Together

International cooperation among governments and the private sector will be necessary to effectively protect consumers in the global electronic marketplace. It is imperative that governments move cautiously in the online environment and advocate the development of self-regulatory efforts and education efforts. Uninformed consumers and outdated laws will not provide the requisite confidence needed to permit global E-Commerce to reach its fullest potential. Global electronic commerce will never achieve this potential until consumer confidence in the Internet is established. It thus makes reasonable sense for governments to devote resources to educating consumers and industry in developing and implementing a code of conduct for online consumer transactions and online alternative dispute resolution.

VI. CONCLUSION

Electronic commerce "represents a new technology that allows world-wide relationships at high speeds and low costs."308 The benefits from international electronic commerce are unprecedented. In order for global electronic commerce to achieve its fullest potential, we all must keep an open mind and understand that principles that have worked well in the conventional marketplace may not be appropriate for the online marketplace. With this in mind, an important point to realize from the outset is that consumer confidence is necessary to sustain and increase the level of growth in the online marketplace. As discussed in this Note, the best way to achieve consumer confidence and effectively protect consumers in the global electronic market place is through international cooperation among governments and the private sector. Unlike governments, the private sector has greater expertise and knowledge in Internet commerce, and it has the ability to develop and enforce a code of conduct for online consumer transactions that theoretically would be faster than government pursuing noncompliant companies through conventional legal channels. Government, however, has a critical role to play; rather than spending countless hours determining what conventional marketplace laws apply best in the online arena, governmental efforts and resources would be better spent educating consumers and merchants about new technology such as online ADR and code of conduct for online consumer transactions. This dual-role regime takes into account the characteristics unique to global E-Commerce and establishes a new paradigm that is appropriate for protecting consumers in the global electronic marketplace.