Australian Government Policy Framework for Consumer Protection in E-Commerce - Essay Example

Australian Government Policy Framework for Consumer Protection in E-Commerce: Review Student’s Name: Name of Institution: Instructor’s Name: Course Code: Date of Submission: Introduction Electronic commerce (e-commerce) has come to form part of shared experiences for many Australians. Not only is this important to consumers but also the government, i.e. economically. For example, a survey by the Australian Bureau of Statistics (cited in Selby, 2000) found that many Australian exporters were doing business online, i.e.: over two-thirds were found to be connected online; over four times of the connected ‘exporters’ were found to own websites as ‘non-exporters’; and two-thirds of exporters were found to use e-mail. The popularity of e-commerce has continued to grow in the years and still does today. According to Budde et al. (2012), although direct debit cards and credit cards remain the main tools for online payments in Australia, PayPal has also continued to assert itself as a new online payment method outside banks, hitting 1,000 hourly transactions in 2011. Even more, in 2011, online shoppers in Australia hit 9.5 million and online sales amounted to about $1.05 billion (Budde et al, 2012). However, one should note that the experiences of consumers in e-commerce differ from those in the traditional retail contexts. Without a proper policy framework, e-commerce could present big risks to the consumers, i.e. in relation to how information is availed to consumers, consumer privacy, security of online payments, access to redress, etc. Recognizing these risks, in January 199 the Australian government established A Strategic Framework for the Information Economy which emphasized industry regulation over government intervention. This provided a basic framework that has since undergone several amendments to become the May 2000 Electronic Commerce: A Best Practice Model for Business, and The Australian Guidelines for Electronic Commerce of 2006, which borrows from certain key legislations (Commonwealth of Australia, 2006). The question, however, is: do these tools of e-commerce policy frameworks provide sufficient consumer protection? This paper will evaluate the provisions in them and examine their capacity to protect consumers. E-Commerce and Australian Consumers Indeed, the internet (e-commerce) offers significant benefits to consumers. S. peaking of ‘consumers’, one should note the various categories of consumers in relation to the various e-commerce market categories. (Geist n.d.) notes these market categories as: Business-to-Consumers (B2C), which sell directly to individual consumers; Business-to-Business (B2B) between businesses, e.g. large selling to small; Consumer-to-Consumer (C2C) between individual consumers, e.g. as provided for on eBay; as well as Government-to-Business (G2B) and Government-to-Consumers (G2C). Of these, the most common markets are B2C, B2B and C2C. Although B2C and C2C are the most prominent in the public, many analysts have found the B2B market category has a higher business volume. Regardless, there are two key categories of consumers: individual consumers and businesses as consumers (Geist n.d.). The benefits of e-commerce include a greater variety of goods and services from across the world, the ability to conduct research before making a purchase decision, a more expansive trading between consumers, as well as the convenience that virtual shopping provides. Also, it provides suppliers efficiencies in both retailing and distribution, thereby cutting prices. However, e-commerce has also presented certain problems for consumers. These problems mainly fall under four categories. Problems with the goods and services These include delayed or completely failed delivery of goods, delivery of defective goods, billing and warranty mistakes, misleading advertising, as well as deceptive and unconscionable conduct. According to Burnley (2007), 50 percent of adult Australians either ordered or purchased both goods and services online. However, owing to this risk, many still did not opt to purchase online. The biggest problem is that of undelivered orders, amounting to about 20-25 percent of all e-commerce complaints (EC 2006b; FTC 2007a). And according to the NSW Office of Fair Trading (Burnley, 2007), partial or non-delivery accounted for nearly 50 percent of complaints received. Generally though, complaints regarding e-commerce have been of a significantly small proportion. For instance, e-commerce related complaints received by the ACCC between 2001/02 and 2005/06 accounted for a mere 6 percent of all complaints received. But it is important to note that, in comparison to offline-related purchases, it is possible that e-commerce disputes are under-reported. This may be for various reasons: the disputes are of low value; consumers are uncertain or unaware about their rights and the avenues for redress; or that such losses may be accepted as a price of online business. Security of Online Payment ASIC (2007) estimated that approximately 11 percent of all charge and credit card transactions are conducted online, and that the figure has continued to increase. While some of the fears related to online payment systems and processes are likely to fade as consumers become more experienced, consumers are still concerned about potential risks related to online payment. New Practices This refers to novel internet-specific practices. These include spoofing, spyware and cookies, spam, phishing, etc. Spam, for instance, refers to unsolicited electronic marketing messages sent to email account holders (ACCC, 2007). This differs from the conventional direct offline marketing in the sense that the marginal cost is extremely low, while the speed is instantaneous. According to DCITA (2006) spam accounted for about 60-80 percent of the total global email. Generally, spam affects the speed and efficiency of the internet. Electronic Privacy This mainly concerns: the likeliness of consumer information legitimately held in the databases of online businesses (e.g. insurance companies, financial organizations, doctors, etc) being cracked by or provided to other illegitimate parties; and potential unknown or unauthorized interception of information during online searches and/or transactions (Patterson 2001). Online Investment and Identity Fraud Potential unauthorized interception of financial information and identity is a matter of concern for both consumers and providers of financial services. ASIC (2007), while noting that online banking fraud was relatively lower than credit card and/or cheque fraud, also noted that it was in the rise, amounting to net losses of about $25 million in Australia annually. Dealing with this problem is more difficult since online financial frauds are quite sophisticated and evolving fast. Redress and Enforcement of Cross-border Disputes As e-commerce has continued to grow, cross-border transactions have also continued to grow within Australia and other countries as well. Generally, obtaining redress for e-commerce disputes between, say, consumers and their suppliers (e.g. regarding deceptive and /or misleading conduct) is more difficult than it is in the traditional business/purchasing context. However, the difficulty is amplified when the transaction also involves parties/people in other countries, in which case focus turns to cross-border redress and enforcement by regulatory authorities. Gawith (2007); OECD (2006c) notes the difficulties experienced in trying to obtain judgments in cross-border disputes. One difficulty regards the question of jurisdiction. A consumer has the choice to either institute legal processes in the supplier’s country or in his/her own country. The former can be costly, while the latter faces the problem of jurisdiction. Enforcing judgment is made difficult by the fact that there is not global framework that enables “mutual recognition and enforcement of judgment between two countries” (Gawith, 2007, p. 23). Small Businesses There is also the issue of small businesses. As Productivity Commission (2008) states: “small businesses have a dual role in consumer policy”. This refers to the fact that these business are suppliers (to individual consumers), but also consumers. In dealing with big businesses, small businesses can, and do, face many issues such as the ones faced by individual consumers, especially regarding uneven bargaining power as well as lack of enough resources with which to effectively negotiate the contracts in which they enter. Australian Policy Framework Many e-commerce consumers have adopted their own protective strategies to deal with the potential risks. For instance, surveys have found that many e-commerce consumers prefer the websites of major and famous offline retailers or organizations, domestic suppliers and brands. Also, Industry Canada (2004) found that most online purchases deal with relatively low-value goods, e.g. music, books, etc. Hardly do consumers buy high-value goods such as cars and houses online. In the end, an average of the amount that may be lost is thus relatively lower. However, Stevens (2009), citing a report on the attitudes and behaviors of e-commerce consumers, argues that such preventative measures merely rely on informal knowledge. Also, these precautions overlook the likeliness of unauthorized parties getting access to the private (financial, for instance) information. Besides, the fact that losses may be of low value does not make it right for people to lose money in online transactions. It is therefore important for the government to provide a comprehensive policy framework to address every potential risk related to e-commerce. Australia has a robust framework for the protection of e-commerce consumers. This is mainly underpinned by the Australian Communications and Media Authority (ACMA), a statutory body for the regulation of communication and media, the general laws on consumer protection and other telecoms interest groups. ACMA, among other duties and responsibilities, investigates complaints regarding online content, encourages the government to develop codes of practice for online services providers and teaching consumers about online safety risks (Stevens, 2009). The Australian Guidelines for Electronic Commerce of 2006, an evolved version of the May 2000 Australian E-Commerce Best Practices Model, provides a framework for e-businesses on how to run their activities for the benefit of consumers. In this regard, the guidelines borrow from the Trade Practices Act 1974, the Privacy Amendment (Private Sector) Act 2000, the Australian Securities and Investments Commission Act 2001, the Spam Act 2003, as well as Australia’s generic consumer law, amongst others. Ultimately, it provides for: fair business practices; advertising and marketing; consumer privacy principles; redress of online contractual disputes, etc (Commonwealth of Australia, 2006). In 2003, the Australian government enacted a specific anti-spam legislation, i.e. Spam Act 2003. Although several globally famous spammers that formerly operated in Australia have since left, it is still unclear what effect it has really had, especially since many Australians still receive spam in the emails. This case of spam reveals how difficult it is to design specific legislations fast enough to keep up with the developments in a highly dynamic market. By 2007, for instance (that is, four years since the Spam Act 2003 came to force), spam had evolved from being a mere annoyance and burden to consumers and network resources, to being a key tool for fraudulent and other malicious activities, e.g. using spyware. Simply, a more appropriate legislation should have greater flexibility so as to cope with the corresponding quick evolution of such issues. An example of such legislation is the Commonwealth Criminal Code (DCITA 2005a). The Privacy Amendment (Private Sector) Act 2000 is meant to protect the privacy and personal information of Australian consumers, especially in relation to organizations in the private sector. It applies to both paper and electronic information. Regarding cross-border e-commerce disputes, the ACCC (2005b) notes the need for international cooperation so as to facilitate “the provision of information from foreign jurisdictions”. This would help determine the unlawfulness of conduct, gain experience on how to deal with newly arising e-commerce consumers’ issues, as well as boost the effectiveness of mechanisms for the enforcement of judgment(s). This recommendation is in line with that of the OECD on cross-border Consumer Dispute Resolution and Redress, which encourages bi and multilateral cooperation. The Australia-United States Free Trade Agreement, for instance, calls for the enforcement of monetary online judgments that have been obtained by the ACCC, ASIC, or other US agencies. Equally, the APEC economies (Australia being one) signed the APEC Privacy Framework to facilitate exchange of information between data-protection bodies/authorities. This would boost cross-border cooperation in both investigation and judgment enforcement. Also, according to Beal (2010) a survey conducted by TRUSTe in 2009 found that 56 percent of all small business online did not have privacy policy in place. As a result, the survey further showed, a third of these businesses simply copied and pasted private policies from the websites of other businesses. According to the Council of Small Business of Australia (COSBOA) (cited in Hutchinson 2011) argues, these businesses have been calling for regulatory and contractual protection in relation to large businesses, especially in cases where traditional retailer collude with online magnates (e.g. Google). Notably, this was written in 2011. But again notably, nothing much has happened to address this issue. Australia’s Fair Trading and TPA Acts are generally technology-neutral, i.e. although there may be differences, especially regarding enforcement due to jurisdiction constraints in cross-border cases, they apply in both online and offline transactions. This notably differs from the EU and USA which provide specific legislations and regulations governing online purchases. For instance, the EU Distance Selling Directive offers consumers the right to nullify online contract(s) within seven days for whatever reason and still get full refund. USA Cooling Off Rule by the FTC allows consumers to cancel online purchase within three days. In both cases, online purchases are supposed to be delivered in 30 days, except where the parties involved have agreed otherwise. In Australia, however, argues the Productivity Commission (2008) it is not obvious that such measures would add significantly to the protections already offered under its generic consumer law, especially since consumer protection is further enhanced by a number of supplier-driven mechanisms that boost consumer confidence and facilitate redress. eBay, for instance, provides a rating system for consumer feedback in which suppliers are given scores based on the number of positive or negative from their customers. Also, ‘charge-backs’ on credit cards permit a consumer who has paid for online purchases by a credit card to dispute aspect(s) of the said transaction through his/her cars issuer. As it were, the Australian government apparently puts al its faith in these online consumer protection mechanisms. But it is important to note that while the same mechanisms are available in Canada and the US, they are also provided for in the country’s laws. On the other hand, in Australia, charge-back protections are voluntarily provided through industry codes or other card issuers’ programs. This may imply that they may as well be withdrawn by the providers. Of course, such an act does not seem possible. Still, the implication is that the Australian government has left their successes to chance. Recommendations and Conclusion Indeed, Australia considers e-commerce an important industry. With an increasing range of consumer-related issues due to newly arising forms of online transactions, the following are some of the reasons why a more cautious regulatory and legal framework for response are needed: considering the inherent cross-border nature of e-commerce, domestic policy intervention is likely to achieve greater constraints than the traditional purchasing setting; with a highly dynamic online market landscape, targeted regulations are likely to quickly become outdated, and may thus hinder innovation; it is also important for the new regulatory and legal considerations to create incentives for reputable e-businesses to develop and establish their own systems (e.g. the eBay ratings for suppliers) by which to respond to the needs and concerns of consumers. This would encourage repeat business. The Australian government has therefore taken, and is increasingly taking, significant efforts to implement both a regulatory and legal framework to support further growth of e-commerce. Indeed, the framework at present is positive in certain ways. However, again as we have seen, it is inadequate in certain areas. Achieving positive results for e-commerce consumers also demands effective cooperation and coordination between various regulatory agencies- within Australia or abroad. In this regard, certain measures may be necessary so as to facilitate the sharing of information and cooperative enforcement with other countries. In the end, it is important for the Australian government, as well as other governments, to ensure that the regulatory and legal considerations it undertakes are both in line with each other as well as with a wider global approach. Along this line, Paterson (2001) asserts the need for the Australian government to develop a flexible regulatory environment that stimulates innovation, business usage and competition, and does not strictly favor certain particular technologies. Unfortunately, there is little agreement about certain specifics in relation to bilateral agreements. From a more broad perspective, it is important for the government to monitor if and how the generic consumer laws are adequate to deal with arising e-commerce issues, as well as check on which specific consumer laws, identity security and private matters may need further attention and decide what this ‘further attention’ really entails. These efforts may be significantly helped through international regulatory bodies, such as United Nations Commission on International Trade Law (UNCITRAL), the Organisation for Economic Co-operation and Development (OECD), the World Intellectual Property Organization (WIPO), the Internet Corporation for Assigned Names and Numbers (ICANN), the Asia-Pacific Economic Cooperation (APEC), World Trade Organization (WTO) and the Hague Conference on Private International Law (Geist n.d.). In relation to small businesses, the current regulatory and legal frameworks seem to group all businesses together, i.e. on the opposite side of consumers. In other words, the Australian has not yet acknowledged that some businesses are consumers, and whose problems require a different attention from the one given to individual consumers. But if it has, then it has not addressed the issue. Indeed, there is need for the government to consider this issue. In the end, these efforts can only bear fruits if the consumers are involved. It is also obvious that the current legal and regulatory framework seek to go about this issue alone, that is, not giving the consumers (enough) room to assist. In other words, the platform for such assistance is quite limited. There is need for the government and other regulatory bodies to encourage the involvement of consumers whenever possible. This consumer involvement could be: provided for in the legal framework, which may set out the responsibilities of consumers, such as reporting when things “go wrong” as stipulated in the Kenyan Consumer Protection Bill; through consumer support organizations, which could lobby on an issue, e.g. the Benin case of the League for the Defense of the Consumer; or through instant online messaging tools for consumers (such as the Ofcom ‘Tweets’), which could make it easy for regulators to be in touch with the consumers (Stevens, 2009). 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