James Love on Mon, 22 Mar 1999 20:02:09 +0100 (CET)

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<nettime> The World Consumer Protection Organization

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Info-Policy-Notes | News from Consumer Project on Technology 

             The World Consumer Protection Organization

       Paper presented at European Commission meeting on 
     Political Institutions and Democracy in an Information

                           Rome, Italy
                        March 19-20, 1999
                           James Love
                 Consumer Project on Technology
                         Washington, DC 
              voice 202.387.8030; fax 202.234.5176


         It is a pleasure to have the opportunity to address 
the topic of political institutions and democracy in an
information society.  I work at the Consumer Project on
Technology (CPT) an organization created in 1995 by the U.S.
Consumer Advocate Ralph Nader.  CPT's focus is on
information technologies, telecommunications regulation,
electronic commerce, intellectual property rights, and
essential health care research.  We are a non-profit
organization located in Washington, DC.  Our work is
detailed on our web page at http://www.cptech.org.  I also
serve as the US Chair of the working group on electronic
commerce for the Trans Atlantic Consumer Dialogue (TACD).  
My comments today are my personal views.

         There are three important challenges for electronic
commerce that CPT is working on.  They are;

1.       How do we create democratic and accountable mechanisms
         to resolve inevitable cross border disputes regarding
         consumer protection?

2.       What systems to protect intellectual property are
         compatible with the public interest in free speech,
         privacy, innovation and the free flow of information?

3.       Can we protect the Internet from predatory and
         monopolistic practices by giant software, computer 
         and telecommunications companies?

         Because of limitations on time, today I will only
address item 1, the issue of how we can create democratic
and accountable mechanisms to extend necessary consumer
protection to cyberspace.  I will explore the difficult
jurisdictional problems presented by global electronic
commerce and propose the creation of a new World Consumer
Protection Organization (WCPO) to play a role similar to the
World Intellectual Property Organization in developing
consensus for global norms for consumer protection.


         Consumer protection programs in any country are an
extensive array of laws, regulations and practices that
touch on practical problems in commerce.  No single
government agency is responsible for consumer protection. 
In the United States, regulators of banks, insurance
companies and public utilities have responsibilities to
protect consumers, as do state attorney generals, the
Federal Trade Commission, the Food and Drug Administration,
and countless other agencies.   We have laws to protect
personal privacy, fight fraud, provide consumer information,
and lots and lots more.

         Other countries have their own laws and regulations 
on all of these matters, and here is the problem.  Internet
commerce is able to transcend borders.  Consumers who
receive services over the Internet can establish virtual
residents anywhere in the world, and sellers of services or
products can ever more easily shop around for the most
permissive regulatory home.  Any regulatory scheme that
depends upon the location of the "seller" is necessarily
limited by the ability of a firm to arbitrarily choose its
virtual nationality.  For years corporations in the United
States chose Delaware as the most friendly place to
incorporate, in part because of the lax regulatory
environment.  In the new world of Internet commerce, there
are more than 200 possibilities for nationality, and any
system that relies upon the jurisdiction of the seller will
likely lead to competition for the most anti-consumer haven
for commerce.  This is happening now on issues such as the
sale of unregistered securities, unethical sales of
prescription drugs, off shore gambling and many other areas,
and it could easily become the norm for more traditional
forms of commerce.

         There are obvious practical problems with rules 
based upon the destination of the buyer.  With hundreds of
nationalities and countless local subnational governments,
it is difficult and in many cases impossible for a seller to
comply with all of the rules offered by governments that
claim jurisdiction in cyberspace.  For an important set of
consumer protection issues, it seems obvious that we need to
develop uniform global rules.

         The development of uniform rules is an extremely
difficult proposition.  Not only are the rules themselves
often controversial, but the social, economic and cultural
context is different for every country.  Indeed this is in
many respects a far more difficult task than many of the
harmonization efforts within the EU, because the differences
among countries are larger.

         Despite these difficulties, it is possible to develop
new global rules, and the clearest example of this is
intellectual property.  There are many treaties on various
aspects of intellectual property protection.  The World
Trade Organization (WTO) TRIPS accord provides mechanisms to
enforce an extensive set of global standards for trademark,
copyright, patent and other forms of intellectual property. 
The TRIPS has real teeth behind it, through the WTO dispute
resolution mechanisms.  In 1996 the World Intellectual
Property Organization (WIPO) adopted two new treaties of the
new  digital agenda" that set new global standards for
protections of copyrights and performances on the Internet. 

         In the area of consumer protection, there is no 
similar initiative, and indeed, one is hard pressed to 
identify international bodies that would be appropriate 
for this task.  

         The WTO's role in consumer protection is essentially
negative.  Countries can challenge various consumer
protection rules on the grounds that they represent barriers
to trade.  There is no mechanism in the WTO to challenge a
country for not having a consumer protection measure.  This
is in contrast to the situation with Intellectual Property,
where the TRIPS is used to raise levels of protection
globally, and countries face sanctions for not having
adequate protections.

         One USTR official explained the difference as one that
is due to the lack of an international body that sets global
standards, a role that WIPO had performed in some measure
for IP protection.    The WTO is not an appropriate standard
setting body for consumer protection", he said, and most
consumer groups agree.  But it is easier to say that it will
not be the WTO than it is to say where this standard setting
should be done.

         The Organization for Economic Cooperation and
Development (OECD) is struggling to adopt a modest set of
rules for consumer protection, but so far it has not
demonstrated an ability to stand up to business lobbies. 
The recent OECD meeting in Ottawa on electronic commerce
appeared to many observers as more like an industry trade
show rather than a serious discussion of the profound
difficulties of providing consumer protection in cyberspace. 
The United States delegation included dozens of corporate
executives and lobbyists, but not a single US consumer or
privacy group.  The ultimate authority of the OECD is also
limited by its role as a club for the rich countries.  It is
possible that consumer groups will be more sympathetic to
the idea of the OECD setting initial standards, and then
seeking global acceptance, than has been the case for the
much criticized proposal for a Multinational Agreement on
Investments (MAI), but much will depend upon the substance
of the OECD work and the willingness of the OECD to become a
more forceful advocate for consumer protection measures.  It
will also be necessary to begin to engage governments and
NGOs in developing countries on these issues. 

         It is possible that there will not be a single
international body that coordinates consumer protection
rules.  After all, consumer protection covers so many
different issues that are administered by so many different
agencies, there is no reason to assume that they could or
should be addressed by a single body.  For example, in the
US, the Federal Communications Commission regulates junk
faxes, the FDA regulates marketing of medicines, the Federal
Trade Commission regulates deceptive advertisements, banking
authorities enforce consumer protection rules on lending and
credit practices, and the Securities and Exchange Commission
(SEC) regulates the marketing and trading of securities, to
mention only a few federal examples.  Each of these areas is
highly specialized, and it seems difficult for a single
agency to develop the expertise to set standards or provide
enforcement of such disparate problems. 

         Thus, it might be the case that there would be many
independent efforts to set global standards on particular
consumer protection issues.  Banking agencies, for example,
might undertake an effort to discuss minimum disclosures for
terms of credit and lending, securities agencies might have
their own world congress to struggle with issues relating to
marketing of securities on the Internet, and the World
Health Assembly might get the courage to undertake serious
proposals for the regulation of marketing of pharmaceutical
products and medical devices on the Internet.  This is a
more decentralized approach that would also build upon
existing international bodies to include ecommerce consumer
protection on their agenda.

         On the other hand, it may be beneficial to create a
body, like WIPO, that facilitates treaties and harmonization
efforts on ecommerce consumer protection issues.  Indeed, we
are quite interested in such an initiative.  If one looks at
WIPO as a model, you have a body that is accountable to the
member countries, and has a mission to promote global norms
for the protection of intellectual property, some of which
are now enforced by the WTO, and some of which are
implemented by countries independent of the WTO.  Some
consumer groups are critical of WIPO for a variety of
substantive reasons, and have expressed concern that WIPO
has become excessively influenced by large commercial
interests.  These are important and real concerns.  However,
the structure of WIPO seems to be a good starting point for
a model for a new global effort to deal with consumer
protection issues related to electronic commerce.

         In keeping with the conventions for naming the WHO, 
WTO and WIPO, all of which start with  world" and end with
 organization," I would call this the World Consumer
Protection Organization (WCPO).

         The role of the WCPO would evolve as it gained
experience in addressing ecommerce consumer protection
issues.  There would seem to be no shortage of issues that
could be discussed  -- regulation of unsolicited commercial
email, marketing of pharmaceutical and medical products on
the Internet, standard disclosures for credit terms, privacy
protections, and countless other items. 

         To the degree that existing international organization
have an interest in developing global norms on these issues,
they could work together, as WIPO now cooperates with dozens
of pubic and private groups that are stakeholders in IPR

         It is always possible, and indeed likely, that such 
a body will be heavily lobbied by business interests.  That
happens now with national governments.  However, the very
name and mission of the WCPO would be a magnet for consumer
and privacy groups, just as the World Health Organization
has attracted the interest of public health groups.

         There is, of course, a plethora of private sector  
self governance" efforts underway for electronic commerce.  
This can be viewed as a positive development, and we all 
look forward to whatever new voluntary consumer protection
measures giant corporations like Disney, Microsoft, America
Online and IBM propose.  However, unless one assumes that
these voluntary efforts will solve all consumer protection
problems, it is clear that there will have to be something
else done to address the very real and very important
problems that governments have been struggling with for
years.  In the end, this is the main issue.  Do we want
governments to have practical ways to extend consumer
protection measures to the Internet?  

         For some persons the idea that the Internet should 
be  a hands off zone for governments appeals to utopian
libertarian impulses.  And for utopian libertarians, the
WCPO is a bad idea.  I am not a utopian libertarian.  I
think the world has a lot of rough edges, and that
governments should play a limited but important role in the
economy.  For electronic commerce, I expect the government
to perform some functions in the areas of antitrust,
consumer protection, and intellectual property.  Most large
businesses say they support limited government action some
of these areas.  We support limited government action in all
three areas.

         Thank you for the opportunity to visit Rome, and to
discuss these important issues.

INFORMATION POLICY NOTES: the Consumer Project on Technology 
http://www.cptech.org, 202.387.8030, fax 202.234.5127.
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