ILPF 1999 Annual Conference - Transcript

INTERNET LAW & POLICY FORUM 1999 ANNUAL CONFERENCE
JURISDICTION: BUILDING CONFIDENCE IN A BORDERLESS MEDIUM
JULY 27, 1999 - CONSUMER PROTECTION
QUEEN ELIZABETH HOTEL, MONTRÉAL, CANADA

JEAN RIOPEL, O.C.R.

TABLE OF CONTENTS

• Consumer Protection
• Comparative Overview Of Consumer Protection Laws: Scope, Enforcement, Jurisdiction
• Choice Of Law For Consumer Contracts And Developments In The EU
• Luncheon With Speaker
• Protecting The Consumer Over A Borderless Medium
• Experts' Response

CONSUMER PROTECTION

Ms. RUTH DAY:

Good morning, welcome back to our second day.

You know, for at least the last decade, probably fifteen (15) years, twenty (20) years, the U.S. Department of Commerce has taken an activist role in fostering the growth of international trade. In the last maybe five years, a little bit more than that, the efforts have included international trade moving from technology into E-Commerce. So right now, the Department actively fosters that kind of growth of trade, and they're lucky to have Andy Pincus, the General Counsel, in the legal role to support that.

Andy is a graduate of Columbia University. He tells me he was safely and happily ensconced in private practice, at his desk, doing appellate work, when he received the call from Secretary Daley to serve as General Counsel at Commerce. And since that time, he's given Daley advice on the full range of issues that touch on E-Commerce, including E-Commerce itself, international trade, telecom, intellectual property rights and export controls and technology. We're very glad he's here to give us a key note this morning and to start our second day in Consumer Protection. Andy?

Mr. ANDREW J. PINCUS:

Thank you, thank you very much for inviting me here, it's a pleasure to see so many friends whom I've been with at other discussions relating to E-Commerce, and to meet a lot of new people who are involved in this very interesting issue.

I thought I would begin today by looking at the issue that's posed by the title for this conference. Building Confidence in a Borderless Medium, clearly, I think we all recognize that's critical for E-Commerce to realize its potential, and I think we all recognize the confidence as a two-way street. For buyers, they have to know that it's safe to engage in E-Commerce, that they will be able to get what they bargain for; for sellers, they have to know that it's possible to engage in E-Commerce legally, they have to know that the rules that apply are rules that allow one to do business, not rules that are so complex, so unknowable, so multi-layered that it's impossible to operate one's business in a practical way.

The part of the title on the other side of the column, Jurisdiction, seems to me to be one means to this end. As lawyers, we're always interested in it. I think it's the basis for application of a nation's rules, whether in the form of judicatory jurisdiction, whether one can be held before a court or legislative jurisdiction, what rules will apply when one is before that forum. And we're taught in law school, at least in U.S. law schools, that the first part of every legal problem is to answer the jurisdictional questions, that they have to be resolved at the outset.

But I think in this context, we have to ask some questions about whether the jurisdiction part of the title is the best way to answer the challenge that's posed on the other side of the title.

Are jurisdictional standards the most effective way to achieve the end of confidence, are they likely to be the fastest way of promoting confidence, and is pressing for speedy resolution of jurisdictional issues likely to lead to confidence promotion as a result? And I submit that at least in the short term, the answers to each of these questions is no.

As interesting as jurisdictional rules are for us as lawyers, they're not necessarily meaningful for everyone else, and I know it's often hard for lawyers to believe that other people aren't as fascinated with legal conundrums as they are. But as someone said yesterday, it's the rare consumer who buys a product or service knowing the jurisdictional rules that are associated with that transaction. The most the consumer wants to know is whether or not he or she is going to be safe; can they be sure that they get what they bargained for.

Also, going the jurisdictional route seems to me very unlikely to be quick. Someone who's been in the private sector, and now has been in government for approaching two and a half years, our governments don't move that quickly in adopting new rules, especially rules for a medium such as this, that have to be different if they're going to be effective. It's just hard for governments to grapple with that; it's hard for us to understand the realities of the technology, the realities of the market place and to translate that in a venue where one has to achieve consensus, at least in the United States, really, to move ahead with anything of significance in our legal system.

And I think it's also true that a fast solution is much more likely to be a conventional one. I guess a corollary of what I've just said is, if one is going to move ahead speedily, the easiest thing to do is to say: well, we'll just apply the same rules that we've applied everywhere else, and slap them on top of this new medium, and hope it all works out. It's much harder to quickly say we're going to trash or discard rules that have been developed over many many years and come up with an entirely new system, and to do that on anything that approaches the Internet time at which business is evolving on the Internet.

Ultimately, as people said yesterday, and I think will continue to say today, harmonisation is going to be a key element of the solution to the conundrums that we're discussing here, but that is going to be something that takes a lot of time.

The fact of the matter is, within the United States even, and certainly across the world, different solutions have been developed to the problems of consumer protection, privacy, and other things that go to consumer confidence. And those different solutions will take time - are routed in different countries' legal systems. And so, figuring out how to harmonise them in a way that's acceptable to people across borders is a project that will be quite a difficult endeavor. I think we just have to recognize that that will take time, not only to do as a matter of substance, but also to sell, if you will, to the governments and people of different countries as a reasonable solution to this problem because one part of the harmonisation is solving the substantive problems - how do we create rules that actually protect people across borders.

But another problem is convincing people that those rules should be acceptable to them in light of their very different cultural and legal traditions. And that, as I said, seems to me something that's going to take a lot of time.

I don't mean to say that the discussion of jurisdiction is unimportant. Ultimately, of course, it's very important. Ultimately we do have to resolve these legal issues. We have to have a bedrock of principle, legal principle on which this systems rests. And it's important to engage in the discussion from the beginning, to educate people about what the issues are, to begin to debate the issues, and frankly, to stop bad things from happening, because there is immediate reaction in governments across the world to regulate. There's a new thing, let's figure out what rules should apply, and apply them. And I think in our country, the President made a conscious decision in 1997 to take a different approach and to let the private sector lead, as we've said, to be minimalist in regulation and to stop, look and examine before going down the road of government regulation. But that instinct is not necessarily uniform around the world, and it's important to debate it.

But, as I say, I think in the short term the best way to build confidence is to live with some ambiguity rather than pressing hard for some solutions.

For example, I know there's a debate about across-the-board rule of origin rules, across-the-board rule of destination rules. It seems to me, and I think Bob Pitofsky talked a little bit about this yesterday; each of those extremes probably doesn't work, certainly in the consumer context, putting aside for the moment business-to-business transactions. I don't think it's possible for our government or any government to say everything should be governed by the rule of origin because that clearly is going to promote a race to the bottom. On the other hand, as a matter of pragmatics, a standard that says the rule of destination applies to everything creates something that an environment where doing business is probably impossible. So, we're to have to figure out something in the middle, and I guess figuring out what that something in the middle is, is going to take time.

But I think a key ingredient of reaching an acceptable solution is to have some real working models out there of what those alternatives might be because governments, like other conservative institutions, and they're basically conservative ,I think, are very reluctant to buy a pig in a poke, they're very reluctant to sign up to some system that they haven't seen working. I think one example of that may be, in another area of confidence, in the privacy area, when our discussions with the European Union started about how the United States would deal with the privacy directive, I think many commentators, and even many people in the Commission thought it was extremely unlikely that the Commission ever would accept a regime of self-regulation as something that was adequate in terms of satisfying the directive standards.

But we've clearly come a long way, although we haven't come all the way, we've come a long way toward that goal, and I think that's because self-regulation got up and running. In the United States it was really, you could touch it, you could see what the rules were. Companies were implementing it, and I think that gave some assurance to people on the Commission that this wasn't some kind of a dodge to avoid real privacy protection. It really was what we said it was, which is another method of having real privacy protection, but one that was more consistent with our legal traditions, and one we thought frankly would provide better privacy protection than simply passing a law.

So, I think here too, the discussion about jurisdiction is important and has to continue, we need an essential second track; we have to develop alternate means of promoting consumer confidence; we have to develop self-regulation, self-regulatory approaches and we have to show that they can work.

So, my basic message here is a simple one. There's been a lot of discussion here, and I think in other forums like this, about jurisdictional rules, self-regulation, what are the different possibilities, and I think it's important really to get on with the nitty-gritty, hard work of creating something that is self-regulation, really drilling down to the next level and constructing a system, putting them in place, having a level of detail so that as part of the continuing debate there's something concrete, real, that can be pointed to, that can be touched, that shows that self-regulation isn't just something that people talk about at conferences when it comes to consumer protection, but it's something that actually can be implemented, that can work, and that can provide consumers with real protection.

Let me suggest briefly a few elements of how such a system might be constructed, or at least some things that might be important to take into account.

The first step, it seems to me, in thinking about consumer protection, is to separate out the very different elements of what falls under the rather large umbrella that is consumer protection, and I know the next panel is going to talk a little bit about that. But it seems to me, advertising regulation, fraud prevention, disclosure rules, remedies, credentialing of people to provide particular kinds of services, all of those things fall under consumer protection, but different approaches may be appropriate for different elements of that. For example, probably ensuring a home court for real garden variety fraud for consumers is going to be important to consumer protection regulators around the world, and important to consumers too. On the other hand, in the world of disclosure, and there may be a lot of room for harmonisation.

I think another element that's very important in constructing a system like this is to show how the technology allows more protection for consumers, more real-life protection for consumers, because part of the debate is going to be about, caricatured perhaps, taking away people's remedies: why are you taking away the remedies that I have in the physical world? And while one answer to that is: it's not true, we're not taking away remedies, we're supplying different remedies in the self-regulatory system. But another answer is: in cyberspace we can do things differently. And differently means that, for example, with respect to disclosure, the ability to click continually and get more information means much more disclosure can be provided for consumers because the technology allows a multi-level disclosure system.

It means that you can create an online dispute resolution system that's quick and easy and cheap, and it allows through contractual obligations real remedies in a way that may not be possible for cross-border transactions in a world where all we do is rely upon courts.

And I think in that context it's important to look at advertising rules, disclosure rules, cooling-off periods, and try and come to some harmonisation of what are, call it best practices, call it good practices, but rules that provide an adequate level of consumer protection and not just adequate in terms of the lowest common denominator, but adequate in terms of something that everyone; governments, companies, consumer advocates can sign onto as something that provides real protection for consumers.

I think this two-track approach, continuing to talk about jurisdiction but really making a major push to develop a real-life self-regulatory system has two benefits.

First of all, I think it actually will promote consumer confidence, I think if companies that are doing business on the Web are in a self-regulatory system that consumers can identify through use of a seal or other kind of signal, consumers are going to be more willing to do business with those websites. And while brand name websites may not have a problem with consumer concern about safety, I think less well-known websites probably do, and to the extent they can be in a program that gives consumers confidence, that's probably going to enhance business.

The second, and I think just as important a factor, is the creating of this kind of self-regulatory system that's up and running, as I said, will tremendously inform the jurisdictional debate. It will provide a real alternative to point to in discussing what rules there may be in the mid-point of that spectrum that I was talking about between complete rule of origin on the one hand, and complete rule of destination on the other.

Now, I recognize that going down this road and not having a clear concrete resolution to the jurisdictional conundrums does prolong uncertainty, and as some people were saying yesterday, lawyers don't like uncertainly. But I guess the short answer to that is it can't be helped, and I think since the alternative to uncertainly probably is in the short term bad rules rather than good rules, it seems to me uncertainty is definitely the lesser of two evils here.

So, I think it does require companies to take a leap of faith to go down this road, but I think it requires consumer advocates and governments to do the same thing as well and I hope that we're all willing to take that leap of faith together.

One question is where this kind of work can be done. There are some preliminary discussions in other places. It does seem to me, although as I said we believe in private sector leadership, that the ILPF, which is a neutral form, and a forum that's been committed to self-regulation, may have a real role to play in facilitating these discussions, bringing people together to, as I say, really begin to do the nitty-gritty work of putting these systems together.

So my message is simple. We have to get the second track moving and I think moving quickly. I think it's essential to building the kind of confidence in this medium that we all want and that will allow it to realize its tremendous potential. And I hope next year, at the third annual meeting, we'll be able to have some real systems under construction and we'll be able to debate the pros and cons of them together and continue to move this process forward. Thanks very much.

(APPLAUSE)

I think we have some time, I'd be happy to answer questions on this or anything else that people have questions about. We can actually be ahead as opposed to yesterday.

Ms. PHILIPPA LAWSON:

Hi, I'm Philippa Lawson with the Public Interest Advocacy Centre. I meant to ask you, and I can say right at the beginning, that one of the reasons I'm here is because I'm excited about the idea of trying to find some compromise to the issues where business and consumers are quite wide apart on. The key one versus the country of origin and the country of destination conundrum.

But I really have trouble with the idea that -- and a number of people suggested that it's just impossible for business to live with the country of destination rule. I mean, businesses are doing that to some extent right now, and it seems pretty obvious to me that you can limit your website, you can limit your business to the countries that you are comfortable doing business with. If you're interacting digitally with people, you can ask them where, for instance, you're not delivering the product to a geographic address, you can at least rely on the consumers' attestation of their location and you can see what is going on, and that's a different issue, we'll deal with that one when it comes up.

But it seems to me that business is going online, and this idea that suddenly they should accept to be able to sell in every country in the world, simply because that's what the Internet permits, is a bit much. I mean, you're already getting a tremendous increase in your coverage, in your marketing by going online, even if it's simply within the same jurisdiction that you started out in.

So I guess, I don't accept that it's impossible for business to live with the country of destination rule. I do accept that it's not the most desirable outcome from a business perspective, but I appreciate your comment.

Mr. ANDREW J. PINCUS:

Yes, I don't know that I can cast a vote between impossible or really difficult. It seems to be that one of the great potential benefits of the Internet is enhancing cross-border commerce. It really allows that to be done in a way it's never been done before, and especially allows it to be done by small and medium-sized companies which really before didn't have a real opportunity to trade outside their limited geographic area or certainly outside the borders of whatever jurisdiction they're in because they couldn't afford the distribution network, the outreach network and all the things that large companies had to promote that kind of distant trade.

So my concern is that for large companies, it probably is possible to figure out what the rules are in different jurisdictions to either tailor website so that you enter where you are and then various -- whatever the rules are for the country in which the consumer is located pop up, but my concern is that assuming for the moment that that's possible for large companies to do, it's probably not for small and medium size companies. And so I think we shouldn't be -- given the Internet's potential to really expand that commerce, and I think with those kinds of cross-border interactions come not just economic benefits, but all kinds of social benefits, and the benefits of having a world that's more closely tied together, we should really look closely at figuring out how we can promote that kind of trade.

And I think promoting that kind of trade requires that we figure out whether there's another way to deal with these issues. And I think, to me, that's part of the Internet realizing its potential, and we shouldn't, just at the outset, say, we're so committed to rules of destination that we don't even want to engage in the exercise. Because I think with respect to a lot of these rules we will find out, as I say, we have to start to do the work, but it seems to me that they're may be ways, relatively easy ways to harmonise them. And as I say, provide consumers with real remedies that may be much more realistic than just the disclosures with respect to doing business in country X aren't much good if you're a consumer in that country and you have no practical way to bring a lawsuit or to get redress if you're ripped off.

If someone is part of a contractual system, and you have online dispute resolution, that's a real benefit to consumers, and so, if you can construct a system that has those real benefits, getting them may be worth some trade offs on the other side because ultimately, not only are consumers better off because they actually have real redress, but we've gone farther to realizing the benefits of the Internet as a truly global medium for commerce.

Mr. BILL POULOS:

The GBD is discussing the very issues that you talked about, and we certainly see the value in quick, easy, cheap remedy, the focus on remedy for consumers. So we strongly support those views that you've just expressed.

Now, while we're trying to figure out how to do that, and the ILPF, and a number of other organisations are engaged into discussion about how to provide remedies to consumers, quick, easy, cheap from any place in the world, would you comment on how these private groups and business groups are going to be able to interact with governments and international organisations, some of which are moving to judgement to put in place laws and to put in place the results of regional conventions, which in fact have made the choice between country of destination and country or origin.

We're quite concerned about the quick implementation that is going on in a number of areas. Could you comment how are we're going to work with these organisations?

Mr. ANDREW J. PINCUS:

Oh, we're concerned also. As I said, we're very concerned about rushing to judgement in any of these areas, and I think what we can do is to, you know, use our seat at the table to say that studying these issues, looking at alternative solutions, makes a lot more sense than rushing down the road to put in place rules that may have quite a stifling effect, and in addition, as I said, may not be the best way to protect consumers.

I truly believe that one of the saddest things about a rush to judgement is that the technology provides a lot of new ways to protect consumers and dispute resolution is only one, and to put in place rules that just reflexively apply physical world standards to the Internet doesn't allow for the possibility of developing those, and I think that's a real loss.

So, all we can do is say, in our view, rushing is not the right result, that it's not the way to best protect consumers, it's not the best way to develop commerce on the Internet and try and convince other countries that going slow and looking at alternatives makes sense. So we're trying to do that. Anything else?

Okay, well thank you very much.

(APPLAUSE)

COMPARATIVE OVERVIEW OF CONSUMER PROTECTION LAWS: SCOPE, ENFORCEMENT, JURISDICTION

Mr. RONALD PLESSER:

We are two minutes ahead of schedule so far, and we will use it up in this extremely substantiative panel.

My name is Ron Plesser, and I'm with a Washington law firm, and I have a background in privacy and jurisdiction Internet issues, and have done a fair amount in self-regulatory activities, if that's the right word, for companies and organisations, and I've written several codes and enforcement schemes over the last couple of years, and it is just fascinating for me to be here at ILPF to work on these issues.

We really have an extraordinary panel, an international panel to talk about consumer protection laws and the kind of comparative analysis. I've asked each of them and including myself, to try to keep our initial comments somewhat limited. I know, everyone has come from far places and has a lot to say, but we would like to have a discussion among ourselves and with the audience at the end. We do have an hour and a half for this panel. I'd like to quickly introduce the panel. We have Roger Tassé, who's a partner with Gowling Strathy and Henderson in Ottawa, and he is, I think, a lawyer with much general experience but has worked a great deal with Industry Canada on electronic commerce issues and we look forward to his comment.

The second presentation is going to be very interesting, we're going to see two speakers work together. I don't know if it's going to be a soft shoe or go back and forth, but we have Sven-Erik Heun who's a partner with Clifford Chance, in Frankfurt, with wide experience in telecommunications and Internet law, and a main contact for telecommunications law. I've worked a great deal with the Clifford Chance office in London, and they certainly have a lot of expertise in this area. He's co-author of a standard legal treaty on cross-border data flows and published numerous articles on legal questions of telecommunications.

Kai Westerwelle is an associate in the Frankfurt office of the law firm of Bruckhaus Westrick Heller and Löber. He concentrates his practice in the area of intellectual property, in multi-media law, including Internet law, and has done a lot of publishing on those issues as well.

Ching-Li Liu is an assistant professor of law at the Graduate Institute of Industrial Economics at the National Central University in Taiwan. She is starting in the summer of 1999, so I guess congratulations are in order. Prior to joining the interdisciplinary institute, she has toured as an assistant professor of law at Tangshan University for two years.

And then finally, we have Michael Geist, he's a law professor at the University of Ottawa, specializing in law and technology area with a particular focus on Internet law.

One of the two things that I've been working on the last several months has been the ABA Project that's been mentioned a great deal, and some of the some work, some of the focusing that we do here will be from that. And also, we have been working with a group of eight multi-national companies in the U.S. that is trying to find the right answers and solutions to this, and let me say that I think that it's not just about industry self-regulation or industry action. This area is a little bit different than privacy and other areas, the mutuality of interest between the consumer and the company is very close. Companies will only do well on the Net if consumers have confidence in the Net, if they feel that they're protected on the Net, and so that Net activities. If you go back to the catalogue days, there was a lot of resistance and people did business by mail, and certain industry leaders like L.L. Bean took on policies that, if you're ever unhappy with the goods, you could return it. In fact, I think, you can even return a shirt five years later that you've worn once a week, if you think that it faded not quite the way you thought it should or are not happy with it. And that's a policy, that's the price of their doing business so the people have confidence in dealing with catalogues and buying through the mail. And it's worked. Catalogue sales, I think, are somewhere in the trillion dollar range in the United States, it's a major element of retail sales.

So consumer satisfaction, consumer protection,is very much in the interest of industry.

What we don't want to happen, and which we'll show a little bit is, in the early 1930's in the United States, there was some commerce clause cases where one state, North Carolina ,required different size mud flaps; as you drove your truck through the state, you had to stop, and truck drivers had to stop and change those mud flaps to a different size. There was no, the court felt, legal reason, there was no recognizable reason why the State of North Carolina could really do that other than to interfere with commerce, and under the commerce clause, the U.S. Constitution held those laws unconstitutional.

So, while we want to protect consumers, we want to resist the development of mud flap laws around the world so that commerce will be interfered with for non-legitimate reasons. States can enforce gross tonnage laws, they can protect their roads, they can do legitimate things in protecting traffic, but they can't do things that simply block trade. And that's what I think we want to focus on.

I want to acknowledge Stu Ingis who's worked with me at the law firm on all of these projects and has been very helpful in working with us. Again, he's learned under Hank Perritt, and he's continuing the process. What I also very strongly support what Chairman Pitofsky said yesterday. I think the idea that there are some alternatives here in the approach is not right. I think we have to look at legal convergence, we have to look at treaty possibilities, and we have to look at self-regulatory activities, and again, self-regulatory activities have to be done very closely with consumers to come up with a consistent approach.

The scope of consumer protection (Andy did some of this that we're talking about), is fraud is at one end, and we'll talk about that a little bit, advertising which has some fraud elements in it, but also has trade and fairness issues; disclosure, billings, chargebacks are all consumer protections. We'll talk about the chargeback process, but how you can use the credit card company or your payment mechanism, in the nature of this dispute is something that I think has not been spoken about and which is a consumer protection law worth talking about.

Other regulated services, professional licences is perhaps the most important in this area. A major element of consumer protection is professional licences and you know, the obvious, the question that many people have been discussing is, you know, can an architect in New York deliver plans through the Internet to a client in Istanbul? Now, this is not consumer protection -- well, it is consumer protection, the licensing laws apply for everybody. It doesn't make any sense to say that architects have to be licensed always in the place of residence. You have to get a building permit so that at some point those plans will have to be acceptable, but if an architect is sending renderings or plans to a client, do they also always have to be licensed by the law of residence of the recipient?

In the U.S., there's state licensing of doctors, doctors are tested on a national basis but licensed on a state basis. Does the Internet force us to look at such fundamental issues as state licensing of doctors?

Traditional Bases of Personal Jurisdiction in the U.S., and I want to go through this extremely quickly, because I think a lot of this has been touched yesterday.

Two-step analysis; is defendant amenable to suit under state's law long-arm statute? Is exercise of jurisdiction consistent with the constitutional due process requirements?

They have a concept of minimum contacts which essentially get into the area of fair play and substantial justice. Certainly the purposeful availment of privilege of conducting business in a forum gets you there immediately. The problem sometimes relates if you're dealing in a forum in the related activities but not the direct activities, and of course the nexus between the acts and the forum such as the exercise of business in a particular state.

The Sliding Approach in Internet Jurisdiction, it's interesting to me, yesterday these two words passive and active have, really didn't come up much in the conference. But when we're talking about jurisdiction, often the word, particularly in Internet application, is that passive activity; simply having a website there often is not enough to bring in the jurisdiction of the recipient. But certainly active, as you go into actively conducting business in the jurisdiction, it gets you over and there's always the grey area of intermediate.

This, I think is the framework that I'd like to talk about and maybe have some questions on for the panel. We have strong argument for the law of the consumer, and then we have the weak argument for the law of the consumer. And I think fraud is a strong argument, and I think the discussion before of, is it always one way or is it always the other, is neither helpful nor realistic because I think there's gradations here of the interest.

So if we look at fraud, I think we would all agree that the local jurisdiction of the recipient of the consumer almost would always have a jurisdiction if they can pass those active passive thresholds we discussed, that I just discussed. Not only theoretically, but politically, we're never going to get attorneys general at the state and federal level to agree that they can't protect their consumers against fraud. I think it's an issue that we live with, and probably will be fine.

Then we have the issue of disclosures which, after all, is somewhat related to fraud. When you have a disclosure requirement like cigarette notice or security disclosures, that's really a regulation that's making sure that the consumer kind of knows everything that the consumer needs to know. It's kind of prescriptive anti-fraud, it's preventive, so make sure that things have to be disclosed so that argument kind of goes a little bit toward a strong argument.

As you get into advertising and particularly issues of advertising that deal with things like comparative advertising we heard about yesterday, that has very little to do with fraud or disclosure, it has maybe more to do with protecting markets. And so, if you prescribe comparative advertising which is truthful, comparative advertising is legal in the United States, it's not legal in the UK and Germany. What happens to a website that says that the Chevy, the Chevy website that says: we have a better engine than the Ford car; that's certainly legal in the United States. There are some rules that they have to demonstrate that they tested it, that they looked at it, that there's a substantiation for those claims, but as long as they can do that, it's not only legal, in fact I think it's somewhat encouraged by public policy. But it's illegal in another country. Does Ford not put that website up knowing that a German or somebody from the U.K. can get access to it? I think that's where the argument gets weaker for the law of the consumer. And then I think as we get into content, professional licensing and other activities, indeed we get weaker still.

This slide I want everybody to look at, because this is what this whole discussion is about, this is done with the permission of IBM, but this is a very good, a very reasonable approach by IBM under current law. If you want to go on to IBM home site to buy products, you have to identify your region and country of origin, you then click that -- I'm not, this is Powerpoint, I'm not, can't go through it, but you then click on and they will talk to you in the consumer protection language of about 20 countries, the compliance costs are very expensive. So here's a very well-known product the company that is selling, but they are selling strictly to the country and region.

We had a discussion over this the other day, the ABA project and the security lawyers in the group thought this was great, and said: "You know, if you're going to sell securities, this is the way it should be."

Well maybe that's true, maybe if you're going to sell securities, this kind of approach is good. I think, to me this is a nightmare if you're talking about global and economic commerce. I think this really destroys the promise and technology of the Net, and this is what -- I don't say that in negative -- IBM, I think IBM did the right thing in terms of its compliance, but if all of these discussions in five years forces everybody doing business on the Net to have a screen like that, I think we've lost the battle, in my view.

I've just put up some websites, here's the Amazon in the U.K. with a 50% discount on U.K.'s best sellers. Whose rules apply in terms of how that 50% issue is determined; here's the Drugstore Online which Professor Geist wrote; we talk here about some pornography online, and you can see my associates who helped put this together did a little censorship of themselves on this. We were somewhat humored by that and leave the screen in.

In the ABA project, and this is a work in progress, this is not in any sense finished, we're talking about consumer variables, merchant variables in making a jurisdiction issue, this goes to -- we just collapsed here in the electronics.

Anyway, let me finish in saying that we have hand outs. I've some copies of this and it will be on the website. But if you look at the variables on the left and the variables on the top, the merchants, and then we're trying to develop a system of grading the answers from a scale of one to five or maybe from color, somebody made a suggestion, colors from blue to red to get a sense of the intensity of the answer. I think we all go into this knowing that there's no kind of ultimate answers but there are gradations that we have to deal with.

One of the last consumer protection laws that I had up on the screen, and somehow I can't, is the Fair Credit Billing Act, and I wanted just to talk about that for a second because it talks about a concept of chargeback which we really have not talked about before. The Fair Credit Billing Act in the United States requires prompt written acknowledgement of billing complaints, investigating billing errors by the credit card or payment mechanism; prohibits creditor action adversely affecting consumer credit standing until completed investigation. It requires creditors to promptly oppose payments to consumer's accounts and refund or credit overpayments, and it also has global applications.

This is not a system that is in place, really, I think any place other than the United States. Sally can correct me, Cowan, from American Express, but I think chargebacks is really kind of a unique U.S. consumer protection issue, but I know American Express, and I think other card companies, Visa, they're structured slightly different, but are extending this to Internet sales globally so that if a consumer has a complaint, if they haven't gotten a good, if the good wasn't described correctly, there is a mechanism to go back and to challenge that. They don't have to go to court, they don't have to go to seek law enforcement, the charging mechanism itself gives them some opportunity.

Well, I'm going to complete on that conversation and hear the panel, and hopefully we'll have a little time left for some questions. Thank you. Roger?

(APPLAUSE)

Mr. ROGER TASSÉ:

Thank you very much, Ron. Let me first say how much I'm grateful for the opportunity come and speak to you on some aspects of Canadian law relating to advertising on the Net. But before I do, I have a little story that I want to tell you, it's a lawyer's story.

There was a man in a hot-air balloon who had lost his compass, and he didn't really know where he was. So he climbed down, if I may use that expression, and there he saw a man working in his garden and he said: "Hey man, I have a question for you." - "Sure, please, ask your question, I'll see whether I can help." - "Well, would you please tell me where I am?" And the man said: "Well, you're in a hot-air balloon." The response was: "Well, you must be a lawyer." - "Well how come, how would you know that I am a lawyer?" - "Well, you're absolutely right, and too, you're absolutely useless."

I don't pretend that I'll be absolutely right, but I hope that my remarks will be helpful, of interest in your consideration of some of these issues.

I think that Ron has provided the conceptual framework that will suit well the remarks that I'm about to leave with you. I propose first to discuss the substantive provisions of the Competition Act dealing with false or misleading advertising. The Act is not the only one that we have in Canada relating to false and misleading advertising, there is legislation as well at the provincial level, but that will not be the focus of my remarks this morning.

Looking at the substantive provisions of the Competition Act, I will examine whether these provisions apply to Internet service providers. I will first deal with the prescriptive jurisdiction that Dean Perritt referred to yesterday. And then I will, in the second part, deal with the conditions under which our courts will affirm their jurisdiction with respect to those provisions. That's the adjudicative jurisdiction, or the courts jurisdiction.

So the provisions of the Competition Act, as I said, prohibit advertising that is false or misleading, as well as a number of other marketing practices, for example, pyramid selling. Now, pursuant to amendments that were adopted by Parliament in March of 1999, the Act now contains two streams by which to combat misleading advertising. There is first the traditional criminal misleading advertising provision. The second stream, which is new, creates reviewable matters by which the Competition Bureau, that's the equivalent of the FTC in the USA, can counter misleading advertising by requiring corrective action without criminal sanction. I underline that this is the exclusive prerogative of the Commissioner to enforce.

Now the first stream creates an offence for anyone who, for the purpose of promoting directly or indirectly the supply or use of a product or for the purpose of promoting directly or indirectly any business interest by any means whatever, knowingly or recklessly - these are the words that make it a criminal offence - do make a representation to the public that is false or misleading in a material respect.

The second stream contains the same description of reviewable matters, except that the reviewable conduct need not to be engaged in knowingly or recklessly.

Now, there is a section in the Act that provides that the making of a representation includes 'permitting' a representation to be made in the case of both criminal or civil matter. I'll come back to that question of 'permitting' and try to see what consequences of that new provision might be for ISPs. Advertising is not otherwise defined in the Act. As you can see, the provisions address the substance of advertising and not the means by which advertising is carried out.

The March amendment was specifically meant to apply to electronic commerce; it was meant to apply to general misleading advertising - I'd say - in the paper world. The question I would like to discuss is whether these provisions are likely to apply to the Internet.

First, let me note that there's nothing in the Act that limits the application of these provisions to persons located in Canada. A plain reading of the Act suggests that these provisions apply to anyone, whether located in Canada or not. I'd add, subject to adjudicative jurisdiction rules that I will deal with later. In the result, foreign vendors that come to Canada and make representations in Canada about the products they sell in Canada would be caught by these provisions.

Are ISPs covered by these provisions? In general, as we all know, there are two types of ISPs, those hosting contents and others acting merely as conduits, basically allowing customers or consumers to access content.

In Canada, the Criminal Code supplements the Competition Act by virtue of the offence of aiding and abetting the commission of a crime, and in addition, as I've just mentioned, the Competition Act provides that making a representation includes 'permitting' representations to be made.

So the question arises as to whether an ISP by providing online access could be viewed as permitting a vendor to engage in misleading advertising. The answer to that question I must say, is not clear although a more plausible interpretation of "permitting" in the context of the provisions I've mentioned, would rather cover a situation where it is the vendor that permits, not an intermediary like an ISP.

In any event, in light of the high degree of intent envisaged under the Criminal Code and the criminal deceptive marketing provisions of the Competition Act, it seems unlikely that a passive ISP that acts as a mere conduit of information would be caught by these provisions.

The position of the ISP that hosts the content is likely to be different. In hosting a representation an ISP might become a party to the prohibited conduct depending on its role in the development of the information.

In the case of a reviewable conduct, it's interesting to note that an ISP would benefit from a publisher's defense which provides that the reviewable conduct provisions do not apply to a person who prints or publishes or otherwise disseminates a representation on behalf of another person in Canada, if the publisher obtained and recorded the name and address of that other person and accepted the representation in good faith in the ordinary course of the business of that person.

That defense would likely apply to an ISP if they complied with the provisions I've just mentioned. However, this defense only applies in relation to information received from a person in Canada, thus placing a higher onus on the publisher of the ISP to ensure accuracy when the information is received outside Canada.

So thus overall, I'd say that there are a number of issues that remain unclear and will need to be addressed eventually by our courts, particularly as to how these provisions would apply to ISPs. Judicial developments in other jurisdictions particularly, but not only, in the USA are likely to influence jurisprudential developments in our country.

There are questions as to whether our courts will, or under what conditions will our courts affirm, assert their jurisdiction in cases involving a vendor from another country.

In the case of penal legislation, our courts have adopted what I would call a relatively liberal approach to asserting their jurisdiction. For example, in the context of the application of the Criminal Code, there is a section, Section 6(2) that provides that subject to the Act, or any other Act, no person shall be convicted of an offence committed outside Canada.

Well, that needs to be better circumscribed, what is an offence committed outside of Canada, and where will an offence be committed in Canada?

These questions have been the subject of an important decision of the Supreme Court in 1985. The accused had been charged with fraud. Persons located in Ontario phoned residents of the United States and under false pretences induced them to send money to addresses in Panama and Costa Rica. The accused argued that Parliament could not have intended the Criminal Code to apply to an activity that occurred primarily outside the country.

Well, the court didn't agree, didn't accept that argument and I quote here from Mr. Justice La Forest, he said that: "(...) all that is necessary to make an offence subject to the jurisdiction of Canadian courts is that a significant portion of the activities constituting the offence took place in Canada. As it is put by modern academics, it is sufficient that there be a "real and substantial link" " - or connection - "between an offence and this country, a test well known in public and private international law (...)"

And later he said: "(...) in considering whether a transaction falls outside Canadian territory, we must (...) take into account all relevant facts that take place in Canada, that may legitimately give this country an interest in prosecuting the offence."

The application of this test to the Internet would, in appropriate circumstances, allow for the assertion of our courts' jurisdiction over a foreign vendor. This test, by the way, has also been accepted in contract and tort cases by other Supreme Court decisions. Would mere access by a Canadian resident to a foreign website not conforming to the provisions of the Competition Act be sufficient for the purpose of meeting the real and substantial connection test? I wouldn't think so. But the test might however be met, for example if the vendor's goods were sold or were serviced in Canada or if the vendor had a physical presence in Canada. So it's not entirely clear how our courts will apply these provisions to the Internet.

So my conclusion is that generally speaking, the Competition Act will not generally present significant problems in its application to online transactions where the vendors or the websites are located in Canada. And the effective application and enforcement of these provisions in Canada will bring benefits both to Canadian and foreign consumers when transacting with Canadian vendors as it would help to create an atmosphere of confidence. Problems would occur however with respect to our courts' jurisdiction and enforcement when the vendors are located outside Canada.

I hope that these remarks will be helpful, of assistance in your deliberations. Thank you.

(APPLAUSE)

Mr. SVEN-ERIK HEUN:

Thank you very much, Mr. Chairman, as we said before, we are drawing together, this is not a law firm merger. Nevertheless, we will revert back and forth, hopefully create an atmosphere of movement. What we'll be trying to do is talking a little about consumer protection laws from Germany, in particular from two angles, one from the contractual side and mandatory laws from Germany as well as the tort law side on the other hand. And that should be it for the beginning, and I'd like to correctly move over to Kai to go on.

Mr. KAI WESTERWELLE:

Yes, thank you for inviting me to this conference, and I'd like to take a word from Agne Lindberg, he said yesterday that Europeans love regulations, and he said: "What truth is not very good to repeat." Let me show you why.

So, consumer protection laws in Germany, what you see in red is mandatory law. I'd like to just fly over the laws to give you a brief overview. First of all there's the General Civil Code which is interesting for us in the electronic commerce case, the requirement of the statutory written form, which of course the electronic commerce did not meet because it's requiring a signature which we cannot do. But right now there is a draft of the "Adjustment of Form Requirements in the Civil Code to the Modern Legal Transactions", this is the name of the law.

Our Ministry of Justice of May 19 this year to prevent the electronic forum which will be the electronic signature, that we don't know when that will be law in Germany.

The second part is the Section 138 saying that unlegal activity which highlights general stand truth (...) of policies is void on business activity, the strongest in consumer protection you have in the Civil Code.

The second part of the General Civil Law is the Act on Standard Terms, and you will find in Section 10 and 11 of the (?) of Germany, along with clauses which are void within German law. And if all those clauses are not enough, we have Number 9 which is the general clause saying that clauses not abetting loyalty and good faith are void and null.

So there's a very long list of laws on activity to offer freedom such as EC directives, but there will be, I guess, a speech afterward on these developments.

The next part is Consumer Credit Act. Consumer Credit Act is not only for loan agreements but also for periodically delivering of goods of the same kind which is for example newspapers, online newspapers delivery.

And also for any contract obligation that the consumers buy regularly if the value is more than 400 DM, which is not very much.

If this law is applicable, you have to face a right to withdraw for the consumer for one week, as well as some disclosures: you have to inform the consumer of any substantial facts of the deal, including his right to withdraw. And again if a problem, the consumer has to countersign that information. And that again does not meet the requirements of electronic commerce, but it's a mandatory law.

The next one is the Act on Door to Door Transactions which I wanted to show you, but I'm not too sure, and to solve an ongoing argument I'm going to show you, whether this act is applicable to electronic commerce because the scope of that law is to prevent the customer from being taken by surprise by typical door to door protections.

We need to look at the electronic commerce, the consumer is going to pay any time he wants to have to look at the page, to look at the offer which is not comparable to the classic door to door selling. Nevertheless, there are policies in Germany saying that this is applicable to electronic commerce as well, and again, the consumer has the right to withdraw within one week, and he has to be informed of a lot of details on the contract.

The next is the Competition Law, and that's all about advertisement. I have prepared, I'm just going through that, Section 3 of this Unfair Competition Act, and that's what Roger just told us about Canada. It's the same in Germany: any person who, in the course of business activity for purposes of competition makes deceptive statements, and there's a long list right now, may be enjoined from making such statements.

This is a very wide range you have in Germany to forbid any advertisement, false advertisement or misleading advertisement.

May I just correct one thing. We've just heard that, in Germany, comparative advertisement is not allowed. We just changed that or we're about to change this according to EC Directive, to start two months ago. We are inventing it in Germany because the Federal Court of Germany, ruling out that even though EC Directive is not valid, is not chanceworthy to German law until now. We have to obey it. So if you want to comparative advertise in Germany, you're allowed to if the advertisement is true, and you have to give the consumer any details allowing him to make his own comparison. So it's not just to compare one point of the advertisement, you have to give all details of the deal.

And, I'll just go back. We have as well the Data Protection Law, as you see on the right side, I don't want to talk a lot about it because it's a public law, but if you collect consumer data, you have to obey very strict rules especially when you pretend to transfer the data from a German collector to outside the E.U., but that's again a point, we will hear about it later in the day.

Last but not least, I want to show you the EC Directive on the Protection, just to tell you that this will have a big influence on German law as well, that since we've got, I think, the most very strong protection of consumers in Germany, we don't have to change a lot. But there is the Long Distance Selling Act, right now we have a draft from February this year, I guess, or March, changing some laws. But basically the laws we have will stay the same and that should be it about an overview, and I give the ball back to Sven-Erik.

Mr. SVEN-ERIK HEUN:

Thank you very much. We have seen the acts which are mandatory law, now what does that mean when it comes to German territorial jurisdiction and when it comes to the issues of choice of law. With regard to consumer protection, it actually means a lot. Even though there's a principle, when we look at the jurisdiction rules as to what law is applicable, we would have the laws of the seat of the supplier, which usually where, that's according to the German law of conflicts, and that is more or less the general rule as far as I know. And we even have the possibility of a choice of law including a choice of law in consumer contracts and even in general terms and conditions. You have heard that our German law and German terms and conditions are very restrictive.

Just to give you maybe a very short idea of how restrictive, but I don't want to elaborate on that too much, is you have, for example, no right to any price increases whatsoever; and what is even worse, and that's most of the time very surprising for Americans, there's practically no limitation of warranties or liability in general terms and conditions. Which means that if you actually want to sell your goods, and that is applicable under German law, if you do have a problem, you cannot really restrict your liability.

So coming back to what that means for the mandatory law question, it is pretty clear that even though we may have the possibility materially of a choice of law, it does not work when it comes to consumer contracts. You clearly have the country of destination rule for the choice of law question in Germany, which means that wherever the consumer lives and has received an offer, and wherever he ordered basically, so more or less the clicking in front of his screen, that's where the Consumer Protection Law of Germany, whenever it's mandatory, will apply. And it's easy to say, being a maximum regulation country as has been said before, that almost the entire set of consumer protection laws in Germany apply. No matter what choice of law has been taken, the law is mandatory and therefore we don't really have a choice, in that case, those laws have to be obeyed, and if not, then these clauses will be void and there will be other kinds of remedies.

And before we talk about choice of law issues, I'd like to give you Kai again, to talk about the side of the Tort Law.

Mr. KAI WESTERWELLE:

Yes, thanks. What I'd like to show you is the enforcement of the German law, especially the example I'd like to choose is the Unfair Competition Act. And that's the Personal Class Action, that's what I want to show you.

It's not only the consumer to claim violation of his rights, it's also different organisations. And as you may see here is, the possible claims are any person who violates can be, may be enjoined from violation acts. And what you have first of all is any competitor can claim for violation of Section 1.03 of the Unfair Competition Act, which is for example false advertising. So you see, Number 1: "By business persons distributing goods or promotional services of the same or similar type that can claim for infringements."

And the same holds true for associations having legal capacity, whose purpose is to "promote", and I choose the word "promote", commercial interests. These private organisations to prevent unfair competition, we call them "Wettbewerbszentralen" are very busy in here. If you have any false advertising, you will face claims of them, I guess you will, if not the competitor is being the first to claim you. So these are special private organisations, these are not public organisations like FTC, as far as I understood the principle of FTC.

And the next one is by association having legal capacity, whose chart of purposes includes safeguarding and so on. This is about the same, this is also private organisations which have been built up in Germany especially by lawyers, I'm pretty sorry for that, just to sue and to get fees. It can't sell wares, it's just a combination of lawyers to make money in some parts. Which is more interesting is the private organisations to safeguard the fair competition.

So what remedies are you facing? The same holds true for the enforcement Class Action on standard terms, also the same organisations have the possibility to claim against invalid clauses.

The remedies of this, I call them Class Actions, I don't know whether I can choose one word to work with it because I'm not very familiar with American law, are, first of all, the elimination of clauses, for example in standard terms, which is very important. When you have important standard terms of banks for example, it's almost the private organisations to claim them against it because it's just a question of how much money are you able to spend in the claim. And if they have the possibility to get your claim up to the Federal Court, this clause will be invalid in any conflict of any bank. So anyone, any consumer can claim based on this decision of the Federal Court.

The same holds true for elimination of misleading advertisement. There are many lawsuits, as I've told before, and in the future it's planned that protection of consumers should be in other legal areas so there's more class action in Germany, but I can't tell you how that works in the future, especially when it comes to civil law issues.

So I can just go through Territory Jurisdiction in Class Action. As you see "Applicable Law" I'm not sure, I'm really not sure about that. I guess if, this is law of tort, so if it comes to Germany and advertisement in Germany, for example, I guess German Law will be the applicable law if the German customers are the target of the advertising.

There's some indications, and I was very surprised yesterday hearing about these aspects which are exactly the same German courts are now ruling out, which is the language, for example, the German language, to order possibly from Germany, or is it not possible to order from Germany, is there a delivery into Germany, and so on. But I guess you've heard about that yesterday, in the Asahi case, or I may refer to that.

Let me just say one word for this Class Action applicable law because it is the link. We have a very interesting court ruling of the Regional Court of Munich saying that German advertisement, advertisement law, is applicable because of a link on the home page of a German subsidiary of a Japanese company to the home page of the sister company in America, which had comparative advertising, which was not allowed two months ago or three months ago. So they said just to have that link on your home page through your sister company is that you have incorporated the advertisement of your sister company in America to your German home page, so German courts can rule this out by German law, which is strange in my opinion. But I don't know, it's just a regional court, there's lot to do.

And the place of jurisdiction poses the same problem. I guess that will be the place of tort, the locus delicti, that's wherever the offence against the Unfair Competition Act takes place within Germany. We can't be sure, right, that this is if you infringe something on the Internet, wherever you are in Germany, wherever the terminal is, or wherever you have the possibility to go to the Internet, that's everywhere.

I'm not pretty sure what it will be when it comes to international cases because there's no court rulings on this subject right now. So this again is mandatory law, and now is time to go back.

Mr. SVEN-ERIK HEUN:

As you can see, it's really fun doing business in Germany, especially going to courts. What does that look like from a contractual point of view?

Now, to make it very short, we have statutory laws possible in contracts; however, when it comes to consumer contracts, particularly when you also look at choice of forum, which is the question of how you actually get your remedies and enforce it, the rule usually says that, well, this is all fine, but when already this creates a legal position for the customer which is not that good then it won't work, and that is ,of course, when you look at German customer protection laws is usually the case.

Which means that from the point of view of the venue again, you would look at jurisdiction and being in Germany, and the court being able to have jurisdiction over consumer protection issues whenever a consumer contract is involved; from the European side, you have that principle laid down in the Brussels Convention anyway, so you end up with the domicile of the consumer. However, if you're not in the area of application of the Brussels Convention, like in the example of the U.S., it looks a little bit different but also very interesting when it comes to the concept of mandatory law.

Now, what the customer can do on his side is pretty clear. He can sue at the court of his domicile or abroad, of course if he wants to do that, or he simply doesn't pay, which is the easiest way of remedy if he actually ordered something over the Internet. It does not, however, solve the problem if payment has already been made, for example, through a credit card or even through electronic payment systems. Here there is some kind of a blank also on the German legal system.

Whenever this is done in Germany, of course, you have enforcement through the international instruments, which is also not necessarily very helpful for the customer, given the fact that everything that crosses has to be served abroad, for example in the U.S., it takes quite a while and is not very helpful.

The customer, of course, on the other side may be sued always at the court of his domicile, and the question of what's going to happen if he's sued abroad is more a question of how do you enforce foreign judgements in Germany, which is again quite difficult because what we need to have is, we have to have a judgement in Germany which would be called something like an Enforcement Judgement of the judgement that has been obtained abroad.

And for that judgement, another test is being run by the German courts which is that there has to be proof of jurisdiction of the foreign court under German law, including German law of conflicts. That's one thing. So we would be looking at German law of conflicts for a judgement that has been obtained, applying the rules of long-arm statute for example in the U.S.

And secondly, we have what we call an Ordre Public reservation which is again the mandatory law issue, and even though formulated slightly different in our Classes Law, it basically means, and there's a very common opinion on that, that all consumer protection laws will have to be observed to any judgement obtained abroad against a consumer in Germany that violates consumer protection laws, for whatever reason, is not going to be enforceable under German law. Thank you. (APPLAUSE)

Mr. RONALD PLESSER:

That was extremely well done and exactly on time. When I heard that there was -- the German Minister of Industry several years ago said that the electronic commerce is great and they wanted electronic commerce but they had to figure out how to apply the Sunday closing laws to the Internet, and I just wanted to make sure if you guys had any further intelligence on that. Professor Liu?

Ms. CHING-YI LIU:

Good morning. I'm from Taiwan, but I'm not going to speak in Taiwanese or Mandarin, don't worry.

It's a great honor to speak at the conference. I would like to thank Chairman, Mr. Katoh's invitation to the conference, and help offered by Ruth and the conference staff. In this presentation, I would like to offer a comparative brief from the perspective of some Asian laws and then maybe a quick policy overview on international harmonisation.

E-Commerce has become one of the most topical consumer protection issue in the late 90's. As increasing number of people around the world are using the Internet, many companies have utilized the Internet as a venue for advertisement and sales. It seems clear that all online entities hope to profit from E-Commerce. However, it's also true that E-Commerce won't realize its full potential until consumers have confidence in its efficacy.

In many aspects, I think the issues raised by E-Commerce are not different from others, from those for any other forms of commerce. On the other hand, some distinctive characteristics of the online environment indeed complicate consumer protection issues. As the electronic marketplace is a place where a wide range of industries can do their business at great speed and operate with a much greater degree of anonymity. I believe informed decision-making, security, reliability, and the protection of online process to help consumer confidence would be indispensable.

It's also noticeable that although there is a great increase in the use of the Internet in Asia, the uptake of E-Commerce in these regions seems much more limited while the development of E-Commerce in North America is very speedy. As a matter of fact, the number of online users engaging in E-Commerce in Asia is only a very small percentage. It might have something to do with the customers' buying habits, and might have something to do with the consumer protection concerns we have just identified a moment ago.

Generally speaking, in traditional consumer protection laws we have minimum safety standards, minimum information standards and requirements, and a minimum standard for data privacy. We have an extensive range of laws and regulations and there's no single government agency responsible for consumer protection. Most local consumer protection regulations have been tailored to address national concerns. In the States, the consumer protection laws is the Common Law of Contract, the U.C.C., they afford traditional safeguards to consumers. In addition, many specific consumer protection statutes supplement the general protection offered by the common law and U.C.C.

For instance, both federal and state legislation prohibit unfair trade practices. Furthermore, Congress has enacted a number of statutes addressing specific consumer protection concerns. Both in the States and in Taiwan, regulators of banks and insurance companies have the responsibility to protect consumers. In addition, regulators in the field of consumer protection arrange from FTC, FDA and countless other agencies in the States. Similarly, the scope of government agencies responsible for consumer protection matters covers many different governmental entities from, in Taiwan and China, as well as many other Asian countries, as I believe so.

The Application of laws rooted in the real space to online transactions would be treated as a process of translation. In translating real-space laws into the virtual space, several factors should be considered very carefully to help us determine whether more regulations, or even more new laws are indispensable. First, why is it necessary to regulate online entities? Second, how different is the online industry to be regulated from the traditionally regulated industries in the real space? And what would the result of the regulation be and therefore to what extent would the application of the real-space laws become appropriate?

As far as consumer protection is concerned, it seems fair to say that online businesses should not be treated differently from other entities in the real space. Furthermore, online consumers do not deserve less protection than they have in real space. Also, it is noticeable that how everyone will benefit from application of real-space consumer protection laws is crucial. In other words, an optimal regulatory model is the key to the future of E-Commerce in cyberspace.

To have a better idea about how difficult it is for an optimal regulatory model of consumer protection to emerge, I will offer some Asian prospectives, and here following are some general descriptions of consumer protection regulations in Taiwan and in China, two nations.

Both Taiwan and China have consumer protection statutes for only a short period of time compared to western countries. In Taiwan, Consumer Protection Law is the major consumer protection statute; and in China the law of the People's Republic of China on Protecting Consumers' Rights and Interests, it's called PCRI, governs most of their consumer protection issues.

First, fraud. In Taiwan, Consumer Protection Law does not address consumer fraud issues specifically. If a specific fact pattern was not covered within the articles of Consumer Protection Law, the general default rule in the Civil Code of Taiwan would apply. According to the default rule, the defrauded party will have the right to rescind the contract.

In China, business operators would be fined in the amount of the doubling prices that consumers paid for the goods and the services. It's in PCRI, Section 49. If the specific conduct constitutes any of the items listed under PCRI, Section 50, it's called the "Law of the People's Republic of China on Qualities of Domestically Produced Products" and other relevant laws and regulations will apply. Otherwise, the business operator would be fined, confiscated or suspended.

Second: "Advertisement". In Taiwan, Fair Trade Law, Section 21 regulates the conduct of business. If a business falsely advertises its products and the services, it will be fined successively until the conduct is discontinued. According to Consumer Protection Law, Section 22, the content of the advertisement will constitute part of the contract. If not specified in the contract, the protection to consumers shall not be lower than the content of the contract. The advertisement agent will be jointly or severally liable with the business if the agent knowingly places untrue advertisement, it's in the Consumer Protection Law, Section 23. Matters regarding commodity labelling is governed by Consumer Protection Law, Section 24, and other specific laws and regulations.

In China, PCRI, Section 19, requires business operators to provide truthful information regarding their products or services. Business operators will be punished according to the "Laws of the People of China on Qualities of Domestically Produced Products" and other relevant laws. Similar to Taiwan's Consumer Protection Law, PCRI, Section 22, requires business operators to guarantee the products and services they provide are compatible with what described in advertisement. As for who shall be liable for untrue advertisement, the advertising agent will not be liable for the losses that consumers suffer unless they cannot provide the true name and address of the business operator. The ad agent will be punished by the administrative agency if such a complaint is brought by a consumer.

Third, Dispute Resolutions. In Taiwan, a special consumer dispute resolution procedure is provided under Consumer Protection Law, Sections 43 to 46. The procedure includes three steps: complaint, reconciliation, and administrative dispute resolution mechanism. The final ruling delivered by the administrative agency shall be approved by the court, and Consumer Protection Law, Section 47 introduced consumer class action.

In China, PCRI, Section 34, does not provide special consumer dispute or mechanism. Consumers can utilize various procedures such as reconciliation, consumer association mediation, litigation, arbitration, or administrative procedure.

Now, I would like to do a summary.

First, Structural Differences. There are some structural differences between local regulations on consumer protection. Unlike the States, Taiwan and China apply a more centralized approach and incorporate a general consumer protection law into their legal systems. And the many other consumer protection regulations supplement the general consumer protection law. Viewed from this perspective, the consumer protection regulatory approach adopted in the States seems more decentralized.

Second, Fraud. Even in the centralized legal system, different types of default rules in fraud regulation still exist. In China, a fine with a sum doubling the prices paid by consumers is used to prevent fraud, but in Taiwan, the default rules in the Civil Code regarding fraud only involve cancellation of contracts.

Third, Liability Allocation Between Business and Agents. The allocation of liability between the agent and the business also presents some differences. In Taiwan, the ad agents will share the liability with business operators if it knowingly publishes untrue advertisement. In China, the agent would be fined by the administrative agency and would only share the compensation when it cannot provide the identity of the business operator.

Four, Administrative Dispute Resolution Mechanism. Several alternative dispute resolution mechanisms are available leverages at least in Taiwan and China for consumers to resolve their disputes against businesses with which they transact. This approach for consumer protection disputes might not be available in some other countries.

The fifth one is Enforcement and its Future. It's noticeable that the general consumer protection laws both in Taiwan and China were not introduced until very recently. It's only five years old in Taiwan and six years old in China, I think. Also, their enforcement, in my opinion, is weak. The reasons why the enforcement seems not quite effective include the immaturity of the laws, the lack of experiences of the regulatory agencies, as well as other cultural and social factors. This aspect of consumer protection regulatory schemes in Taiwan and China adds some uncertainties to the future of E-Commerce in this region.

We have some difficulties about consumer protection here, and to save some time I just skip.

And most legal systems protect consumers in many different ways as we have seen before. Most countries have their own laws and regulations on many consumer protection matters. However, this does not eliminate the lingering consumer protection problems. Online entities can shop around for the most permissive regulatory scheme while consumers who conduct online transactions can establish virtual residents anywhere in the world. For local governments, how to make cross-border enforcement for consumer protection effective seems a mission impossible. And on the other hand, there are a lot of discussions about whether current consumer protection laws are out of date.

For example, in Asia, there are almost no special rules in their legal systems to regulate online transactions although I think Singapore has an Electronic Transaction Act passed in 1997, '97 or '98. As a matter of fact, people are beginning to debate about whether it's necessary to create more consumer protection laws for E-Commerce. And it seems impossible and an undue burden for online entities to comply with all the potential consumer protection regulations enforced by many different local governments.

In this sense, I think that the development of internationally uniform rules seems to be one of the potential propositions for consumer protection in cyberspace.

Consumer protection issues are complicated by the Internet, but in my sense, the Internet should facilitate the globalization of consumer protection. In addition, it should be a key issue for accountable Internet governance and the empowerment of Internet users. Therefore should identify general principles and should make international coordination possible seems to be a critical step for consumer protection in the regulation of cyberspace.

And as for the choice of regulatory approach, and the discussion about self-regulation and identification of key principles, I just skip and give it through the speakers for the rest of the filing.

The Development of Uniform International Rules for Consumer Protection. On the level of international norms, there should be a set of core protections for consumers. In this sense, government cooperation in enforcement and information sharing among consumer protection agencies globally seems very necessary.

On the other hand, it's also undeniable that the development of globally uniform rules for consumer protection would be an extremely difficult process. First, we can predict some controversies brought by the conflicts of different social, economic and cultural contexts. And because we, as an international community, have very limited experiences in the internationalisation or harmonisation of Internet regulatory schemes, it might be more difficult than any other harmonisation of legal rules. However, we do have some models to follow in this respect. We have witnessed the achievements of WTO in the enforcement of intellectual property rules through TRIPS and we have seen some transnational effort to resolving difference of privacy protection rules between Europe and the States. More importantly, we could also learn from some existing models of organisation or organisations made by WIPO, OECD or APEC in similar regulatory matters.

Okay, some concluding remarks.

For a better consumer protection scheme to emerge for a transnational cyberspace, we need more in-depth comparative studies on local rules of consumer protection, which is only in its very beginning stage right now. Second, we'll need a set of global standards for consumer protection. And third, more efforts both in the private sector and the public sector are required in the harmonisation process. The fourth point is we need an efficient and accountable mechanism for dispute resolutions and, of course, finally, international cooperation on enforcement is critical for a proper consumer protection scheme in the E-Commerce age.

Thank you for your patience.

(APPLAUSE)

Mr. MICHAEL GEIST:

Good morning. Ron opened this morning's panel by noting the issue of licensing within states, and he particularly noted the issue of licensing with regard to the medical profession, and so I'm going to spend a couple of minutes talking about where things stand in one jurisdiction, that is the United States. I'm a law professor here in Canada, but I come to this issue through the American Bar Association's Internet Jurisdiction Project, I am Chair of the Sale of Services Working Group. And what our group quickly realized as we embarked on this issue about one year ago, was that Sale of Services as a sector is rather a huge sector and that the prospect of analyzing each and every service simply wasn't going to be feasible. And so what we sought out was to find a service that might provide a model for many other services, so that if we could find something that was highly regulated and already on track with regards to the issue of electronic commerce in the Internet, it might well provide the model we were looking for, for assessing issues in other services which might not be quite as regulated.

The group has quickly evolved into the telemedicine group as we found that it was in fact telemedicine that was perhaps the most regulated of the services, and provided a really good example of where things are going in this area and where some of the issues arise.

Our analysis actually developed into three different types of services. There was the no-regulation services which of course don't mean no regulation, they just don't mean a lot of regulation, I suppose. We considered business consulting one such service where there certainly is regulation if you're consulting particularly in an international framework, but there is little regulation in terms of who can be a business consultant, and what exactly they can do.

The next sort of service that we identified was the Certifying Only, and the Certifying Only services were services that regulated who could practice but they didn't really regulate much about what you could do. And so in the engineering context for example, many states include provisions which stipulate who can become an engineer, or who can hold themselves out as an engineer, but once you've met the standard, usually some educational and testing requirements, what you do after that is largely your own business. The ongoing areas were the areas that were of most interest, law and medicine were the two areas that really covered, that were most interesting there. There are of course some services which fall into all three. Education was an area that we started to look at and found that depending on what sort of education you're talking about, it might well cover any of these issues.

Onto telemedicine though, and let me just very quickly note that from a adjudicative jurisdictional perspective, things pretty much follow on the same lines that Professor Gedid covered yesterday so effectively. There are not that many cases involving Telemedicine along the Zippo line of cases yet, but the Mayo Clinic v. Jackson case was one case involving at least the health care profession: the Mayo Clinic had a website or has a website, and that factored into the overall analysis as to whether or not there would be jurisdiction but didn't play a key role in the overall analysis.

There's actually a couple interesting cases in the legal field in this area where there is actual practice taking place and the courts have said: listen, we can still assert jurisdiction over you, even if you are not within our jurisdiction physically.

The Birbrower case is a California case in which California courts quite clearly stated that practice of law within the State of California does not require physical presence. And so, if you're doing it electronically and you meet the standards of the practice of law, they can assert jurisdiction over you for those purposes.

The Parsons case is the case that attracted quite a lot of attention earlier this year. It involves Parsons' Technology which is a software maker and the distributor and manufacturer of the Quicken Family Lawyer program. It's one of the software programs that allows you to replace all of us supposedly by creating your own wills and other sorts of documentation. The Unauthorized to Practice Committee in Texas brought an action against Parsons suggesting that the software program itself was violating the law as a means of practising. And the committee there actually ruled that yes, it did violate the standards that were in place at that point in time, and sought to ban the program from the state.

Within the last month or so there's been a reversal of that position, both the case itself was appealed and the decision was vacated in a large measure because Texas passed an amendment to the legislation in which they stated that for this sort of electronic type of practice, if there's a disclaimer that suggest that this is for information purposes only it won't qualify under the Act. In some respect, that may be going too far.

There is an attorney out in British Columbia here in Canada who has established a virtual law practice and he will incorporate a company for you in BC, he will do an assortment of other legal services for you, and he has no physical place. If he puts up a mere disclaimer, I don't know that he should be able to contract out of other jurisdictions from a practice perspective.

But in any event, from an adjudicative perspective, there is ample reason to believe that, that the same sorts of analyses will apply.

The prescriptive jurisdiction perspective is where things get most interesting. What I'm going to do is take you through how the analysis at the moment plays out within several states because what we find is that there are some states in the United States that have actually addressed the issue and provided for the issue of telemedicine within their licensing statutes. Others have not addressed it within the licensing statutes but have addressed it within their practice of medicine definition and as such are well positioned to, or at least somewhat positioned to deal with the issue. Yet, other states haven't dealt with it at all. And so, what it falls to is an examination of the actual activity that's taking place online to gauge whether or not it might fall within the language of the statute unless jurisdiction might be applicable.

There are some states, and it's rather difficult to see here, but there are some states that require regular contact within a telemedicine venue for jurisdiction. Indiana, Oklahoma, South Dakota are three examples, and this is an excerpt from the Code which discusses the fact that as used in this article, the practice of Medicine includes medicine or the practice that is transmitted through electronic communications and, and this is important, or on a regular routine or non-episodic basis or under an oral or written agreement.

And so here they're looking for some sort of regular contact. So for those that might be practising telemedicine on a very sporadic basis, you just happen to do it, to provide some sort of telemedicine service to a person within that state on an occasional basis. At the moment, those states seem to have opted out regulating that sort of activity.

It's also worth noting there is a provision also in here that deals with the issue of consultations by a non-resident physician to another physician. Ron, on the spectrum of where licensing falls, placed it at the sort of far end of less compelling. I don't know that I'd agree with that, but I can recognize the fact that there is a concern that we don't want legislation to block the possibility of having an important doctor or a well known doctor in one jurisdiction providing his or her advice or a second opinion on a matter.

And some states have recognized that, and the way to do that is not to say that we don't need any legislation at all, the way is to simply provide an exception for that sort of activity as these states have done. So they say, if you're providing that sort of a second opinion to another physician, so not to an individual who isn't in a position necessarily to be the best judge of what's taking place, but to another physician. They exempt that from their jurisdictional reach.

Other states have taken a somewhat broader play. Nevada and Texas for example don't require that regular contact and so they've provided that services that are provided through an electronic medium will constitute the practice of medicine within the state, and those people who do so need to meet the licensing requirements.

And as I mentioned, some other states don't provide for it at all. For those states that don't provide it within the licensing portion of their statute, we often take a look at the practice of medicine definition because if they provide it specifically for telemedicine with the context of practice of medicine well then you're covered that way, so that if you're practising medicine clearly you need to be licensed because the statutes provide that practising medicine needs a licence. Colorado, for example, includes telemedicine under its practice of medicine definition and as such is covered that way.

For those states that don't provide this sort of language, and for even states that do generally, it still raises the question, well what exactly is practice of medicine online? And to speak to the futurists about this issue, they talk about surgeries that are taking place jointly between people in different jurisdiction and things of that nature. That's a bit too far in the future for me, but what I wanted to do was focus on some things that are taking place on the Internet right now through, you know, more simplistic websites, and just to get a sense of would these websites fall under the current statutory framework.

Probably the most obvious one that might would be actual diagnosis online, and interestingly there are sites that will now provide you with diagnosis online.

This is Mediconsult.com and they have a service called Mediexperts in which they have lined up a series of experts in a wide range of fields and can scroll down. There is no, they know the field, but interestingly they don't know which jurisdiction these various physicians are from. And what a person can do is provide a history, provide their own history and indication of what their symptoms are and what sort of resolution they're looking for, and within two to five days, they say they receive a completely confidential and private correspondence from the physician in their area which provides some advice and the language they use here is some treatment recommendations. At the same time, you fork over $195 dollars for the consultation.

Now, if this network managed to establish physicians in every state so that the person providing the advice was located in the same state as the individual, that doesn't really raise some significant jurisdictional problems. But of course, there's no indication here that they're doing that, and so, once you start getting physicians who are providing advice from their home state, from their home jurisdiction into another state, they would probably run into these various jurisdictional statutory provisions.

Ron alluded to pharmaceutical sales as well at the beginning of the presentation, and that's become one of the hotter areas on the Internet. Some statutes provide for, most statutes provide for some language in terms of prescribing pharmaceuticals. This is the Oklahoma statute and it provides prescribing or administering a drug or treatment without sufficient examination and the establishment of a valid physician/patient relationship would be seen as a violation of the Act.

Of course, the question on the Internet becomes what does sufficient examination mean and what is the establishment of a valid physician/patient relationship.

The American Medical Association has said they'd like to see face-to-face prescribing. So they haven't completely banned the practice, they're in no position to do so, but it's their view that it should only be face-to-face prescribing, and the online prescribing that's taking place shouldn't be taking place. Some states, Connecticut and Nevada and several others have actually tried to ban online prescriptions.

To give you a sense of what they're concerned about, these sites are very easy to find. This is Netdoctor.com or Net-Dr.com and it allows you to buy Viagra, Propecia and a couple of other drugs directly online, they suggest with a consultation, but all it really -- there doesn't seem to be much here about a consultation other than you need to pay $50 for the consultation, and that they'll provide you with free overnight delivery.

You can see that this is all about price, and there are no shortage of sites that are selling these sorts of pharmaceuticals online, and it's all a matter of who's selling it for the cheapest. This raises obviously issues beyond just in-state, it raises international concerns. Here in Canada, Viagra was not approved at the same time that it was approved in the United States, but there was a rush of Canadians anxious to get it, and many were going about trying to buy it through the Internet. This became a regulatory issue in California. This is Dr.Propecia.com, and Dr.Propecia.com part of the Harman Group was selling Propecia online, it's a baldness drug, and was ordered in June of 1999, you now see that he's got a little note, this is going to be very difficult to see, a little note that he has been told that don't do that. And so, he stopped selling it through the online forum, but now requires face-to-face prescriptions.

Of course, there are no shortage of people that are not complying with these sorts of issues and from a jurisdictional perspective, it certainly raises issues and would in all likelihood under the current statutory framework.

Even further along the spectrum is the issue of advertising. And here you find a lot of statutes which haven't yet contemplated the issue of advertising medical services online, and there's certainly a lot of relevance for this in the legal field as well, where a lot of law firms have gone and established websites and the lawyers may participate in chat room and things of that nature, and the question arises, well, are they violating the relevant statutes.

In Oklahoma for example, there is a requirement, unprofessional conduct includes any advertising other than in a newspaper. Well, there is A, the question as to whether an online newspaper would qualify, and B, the question as to well, does a website then violate these provisions. Texas, on the other hand, just deals with the issue of false or misleading information, they don't actually cover the problem that there is going to be some restrictions on the actual advertising itself.

And so this is one area where clearly some of the statutes are in need of updating.

To just conclude then, so we'll have a couple of minutes for discussion. The area of telemedicine is clearly and very rapidly evolving one and what's interesting is that some states have recognized the issue and taken steps to try to bring their statutory framework into the Internet age as it were; many others have not, and what, regardless of whether they have or haven't, we're clearly heading for a situation whereby multiple jurisdictions are going to be looking to regulate the same sort of activity. On a personal level, I don't that that's, certainly in a medical context that that's so bad. But nevertheless, that appears to be where we're headed.

Thank you very much.

(APPLAUSE)

Mr. RONALD PLESSER:

Well I just feel like I've been to Epcot Centre and if any of you have been to Epcot, you know, you go around that big lake and you kind of go from country to country to country and get a little cultural fix, and then you kind of, you've done your hour and a half at Epcot and you've become global. And so I feel we've had this wonderful survey and I think it really, Ruth has done just a terrific job in getting this variety together, and when I went and consulted with Ruth on the time she said: "Well, this is really good because it just shows how difficult harmonisation really is going to be."

But the question I'd like to ask the panel is, you know, I was very happy to be educated on the developments in German comparative advertising law, and maybe that shows, maybe that is a good example of maybe there's some convergence and these issues are focusing some reexamination of laws.

Without taking the mud flap metaphor too far, I mean, obviously there are laws that states or countries need to do to protect their highways, they can't allow trucks to go on the highways that are too heavy and that will crumble those highways, and so we accept that there are restrictions. But we also understand that there are states that may put mud flaps regulations in and make people change them and customize them, and there's no real interest being served.

And I guess the first question or the way to get around that, it seems to me in this environment is a discussion of safe harbor, and this is where, I don't think we're just talking about industry self-regulation because we're talking about government, we're talking about consumer and we're talking about industry coming together to develop a set of best practices or a set of safe harbor practices, that if people follow them they can have some legal certainty, some assurance that they're not going to be in violation of a series of country laws.

And I'd like to kind of go down the panel and just get a comment on whether or not you think a safe harbor approach working together would be a fruit in your particular jurisdiction or is the rule so rigid and so set that that kind of approach may not be effective. Roger, can you start?

Mr. ROGER TASSÉ:

I think that as insofar as fraud is concerned, I think that this is a different category of fish, but with respect to reviewable transactions, yes, the kind of false and misleading advertising I was talking about, I think that it's to be remembered that the enforcement of these provisions is in the hands of the Commissioner. I think the Commissioner - one can expect - would use his wisdom and - you know - his good wits to enforce and really in situations where it matters I think it might have an influence on him if in effect there were general principles, broad principles agreed to by the private sector and companies that are potentially of interest to him, and that could show that in effect they are complying with broad principles to which hopefully Canada would have subscribed.

So I think that a safe harbour approach might influence the way that these provisions would be enforced as they leave great discretion in the hands of the enforcer.

Mr. KAI WESTERWELLE:

Yes, very interesting is the safe harbor approach because it's very -- in my country when it comes to terms of the print media, we have the print media relation with Germany which is pretty strong, and it takes part of the unfair competition, that means violating the self-regulations, it's also violating the Unfair Competition Act. So there is the possibility to get through that difficulty in Germany by self-regulation but let me say that we have a new approach from the European Community. We're not in America, we have smaller countries in a big continent.

So, the first step that we are taking, and I think you will hear more later is to have a consensus within the European Union over the nation states of Europe, so that's the first approach they're right now taking and maybe the second step will be all over the world.

Mr. SVEN-ERIK HEUN:

Well, I think I agree. I believe it's all about harmonisation again, particularly when you look at the issue within the European Union, that's where the regulatory aspect will have to be resolved, instead of having a common set of rules that are applicable.

Safe harbor altogether is also something that raises concerns on the German side because we'll... Here we have all these nice laws, and now we start the race to the bottom. What's the safe harbor going to be? Is it a safe harbour for the German consumer? The German government has very often taken the position, particularly within the European Community, that this is not an approach it would like, that it is not harmonisation again on a certain level which is certainly not the bottom level you could possibly have.

Self-regulation is something that is not commonly used yet in Germany, and we have seen the first aspects of it, maybe it's something that's going to become law. However, I don't think it will work in the framework of consumer protection because the legal structure that we have here is too much developed already, we can't turn off the clock on that, unfortunately, in order to move away from that.

Mr. RONALD PLESSER:

Let me just add that the EU Directives, particularly in privacy and other areas, do call for the acceptance and development of industry codes to supplement. So it's a concept that I think at least has gotten some application. Professor Liu.

Ms. CHING-YI LIU:

Yes. The idea might work in some areas, but maybe in privacy or content regulation - I'm not quite optimistic about that.

Mr. RONALD PLESSER:

Good. Michael.

Mr. MICHAEL GEIST:

I would just echo some of the same comments that you're making. Certainly looking -- fraud is probably the easy one, it's probably the equivalent in consumer protection of the child pornography that was referenced yesterday in terms of there's an area that we probably could come to some agreement. But the mud flaps issue that you raised earlier, it's one person's issue that seems to be just a trade blocking mechanism; it's another person's important issue that they feel is an integral part of their consumer protection framework. And looking at how difficult it's been to come to agreement just between, on a bilateral basis, between the EU and the United States on a privacy safe harbor proposal, to extend that worldwide on issues where again there's going to be widely different perspectives on the level of importance for these sort of things, strikes me as difficult as the same approach to harmonisation on a treaty basis.

Mr. RONALD PLESSER:

Well, thank you. I think my view of privacy is somewhat different because I don't think, at least I think industry is not, there's some provisions of privacy that it's been resisting, I think, in consumer protection, maybe that's not case so much, but I think it's a very interesting debate.

I'll take one question from the floor, I don't want to keep people from the coffee break, but if there's a question, we'll certainly entertain it. Oh, my wishes have been met.

Mr. ANDREW PINCUS:

I'm going to follow up on the harmonisation point because a lot of people have raised it. What, the OECD, we all know, is working on consumer protection principles, but beyond the OECD, if we want worldwide harmonisation to the extent that we can achieve it, what is the appropriate forum?

I mean, we established WIPO to deal with the intellectual property issues as Jenny mentions, I think some people have talked about trying to raise this issue within the WTO, maybe along the same track as the multilateralisation of competition policy more generally. I've read in two places it calls for a new world organisation, a world consumer protection organisation, WPCO. I don't know, that's just totally a pie in the sky. But what is the appropriate forum for these kinds of efforts involving governments?

Mr. RONALD PLESSER:

Well, I'm not sure there's an answer to that, Andy. And Andy, do you have the answer? I think we're going to have to really find our way, but I think it's true efforts like ILPF and Ruth Day who's done a fabulous job in pulling this together, that I think we'll come to the answer. Maybe we ought to do an organisation, maybe there becomes a virtual coming together that other organisations pick up the idea. I mean, I don't think we always have to think about a new organisation, but we have to think about new ideas in trying to solve these issues with ideas and maybe the organisations will come.

Anybody else have a response, I don't want to necessarily take the last word.

Mr. SVEN-ERIK HEUN:

I think there's very good point to that. Apart from all these international organisations that already exist, I think this is particularly the businesses to take the lead, not necessarily to achieve self-regulation or only self-regulation, but actually to make a proposition to ask all the governments whenever they are facing the issues, ask them to try to give some guidelines on their side, and one of them is for us to make the transnational business dialog who's actually doing this at the moment.

I've been looking at electronic commerce issues and I've been trying to see what kind of trade barriers are there and what is justifying consumer protection because we should never forget, and let me a little provocative here, when we talk about these trade barriers, it's basically, or sometimes it very often boils down to the issue that there are some countries that want to have completely free trade without or with as little rules as possible, and there are other countries that come from a more different legal and regulatory approach where they say: well, there are some issues of protection on the customer's side but not necessarily only on the customer's side.

And these approaches have to be discussed and have to be harmonised, and I believe as using terms and business dialog, specifically the North American approach and the European approach which is going to be quite different.

Mr. RONALD PLESSER:

Well, that is the last word, I want to thank this panel for, I think, an excellent survey of laws, and we look forward to the rest of the conference. Thank you.

(APPLAUSE)

CHOICE OF LAW FOR CONSUMER CONTRACTS AND DEVELOPMENTS IN THE EU

Mr. MATTHEW YEO:

We have the agreeable task of holding on the panel challenges. So if you could kindly return to your seats we'll get started and try to keep Ruth somewhat content.

There has been a slight change in the line up here. We've decided to blend the next two panels together, that is, the panel concerning Choice of Law and whether or not jurisdictions recognize choices of law in consumer contracts, and the panel on Recent Developments in the EU. As we'll see shortly, those two topics are very closely interrelated.

I'm Matthew Yeo. I'm a lawyer with the Washington law firm of Steptoe & Johnson. I work in the E-Commerce area generally. Our panellists today are Susan Crawford and Scott Blackmer who are partners at this law firm in Washington, I've just heard of its name, Wilmer, Cutler & Pickering; then we have Mike Pullen who is an associate with the Brussels' office of Dibb Lupton Alsop. He's been very active in EU electronic commerce matters; then we have Mark Bohannon who is the Chief Counsel for Technology and Counsellor to the Under Secretary at the United States Department of Commerce, he's been active in a wide array of matters at the international level and within the U.S. relating to electronic commerce and policy initiatives of the United States in that area.

One of the interesting things about being an American lawyer practising in the area of electronic commerce is, and particularly in the area of electronic commerce policy, is the extent to which so much of our focus right now is on developments in the European Union. It seems like we spend a lot of our time thinking about developments there and how those developments will affect things at the broader international stage.

I think there are a number of reasons for this. The first, as several people have alluded to, is simply that I think the Europeans have a penchant for regulation that is perhaps not shared by some of their major trading partners, and so it means that there's a lot of regulatory activity over there that we have to keep our eyes on for better or for worse.

But I think the second and somewhat more charitable explanation is that, because of the imperative of creating internal market because there are fifteen member states with different languages and different legal traditions, they've had to address a lot of these jurisdictional issues much earlier on, even in the sort of pre-cyberspace world, and so have had some greater experience in thinking about how to address conflicts of law issues; how to address harmonisation of substantive principles in consumer protection laws; how to think about different kinds of jurisdictional principles. And in that respect, I think we can perhaps draw some lessons both positive and negative from the European experience and think about how those lessons might address efforts at the broader international level to address some of these problems.

I think there are both positive and negative aspects of that. As I've alluded to, I think the positive aspect is simply that Europe has a lot of experience in this issue, has numerous conventions and directives, including the Brussels and Rome Conventions which we'll hear about; the Distance Selling Directive; the proposed Financial Services Distance Selling Directive; a variety of other directives in this area. They've had a lot of time to think about this, and we can look at some of those ideas.

I think the negative concern, though, is simply that, as Europe goes forward to address some of these issues, I think there's a risk that they will create an immovable baseline that will make it difficult in some respects to address these problems in the broader international context, and I think what's going on over there, we should watch with concern, lest it create a list that preclude certain kinds of resolutions at the international level, particularly of a self-regulatory nature to the extent that some of these proposals and some of these directives and conventions provide for certain non-waivable rights, or certain kinds of provisions from which there are no derogations. I think there's a risk that that's going to foreclose the range of possibilities at the broader international level.

So with this sort of preparatory remarks I will hand it over.

Mr. SCOTT BLACKMER:

Thank you, Matthew. Ron Plesser and the last panel gave, by the way, a very good introduction for this one and so gave us an idea of the range of consumer protection sorts of issues that are controlled by law, and now we want to focus on what if anything we can do about selecting consumer protections or remedies for consumer questions contractually. Ron gave a good description of that panel as having taken you to Epcot Centre, travelling from country to country, and I think we're going to take you now over to the Magic Kingdom where we're going to visit Tomorrow Land. And I just hope by the end of the panel you haven't decided it's Fantasy Land, because something must be done.

If you look at what kinds of -- and the circumstances in which we make contracts between consumers and businesses that are selling things in the offline world, it's important to remember that an awful lot of consumer transactions are not with written contracts at all and are not legally required to be. There may be some consumer protections that apply as a matter of law, but when I walk down to McDonald's and order a hamburger, I'm usually not engaged in extended negotiation with the young person behind the counter. There are posted terms, there's a picture of a hamburger up there, there's a price posted and if I go -- that's treated traditionally in Common Law countries as an invitation to trade -- and if I go in there and say: "I'd like to order one cheeseburger", then I'm taken legally as offering to buy a cheeseburger at the posted terms for the described product.

When we get into certain kinds of contracts or above a certain monetary value, then it's wise for the parties that want to do it as a matter of their own prudence but also often required (and typically required according to the category of goods or services that are being purchased or the monetary value of them) that there must be a written agreement or there must be a signature. And that usually is going to include either stated or statutorily provided default terms with respect to warranty, liability, payment terms, et cetera.

And then we have to remember that so many consumer transactions offline and the majority of consumer transactions online are handled with a form of payment other than cash, so that often the rules that apply through a credit, the use of a credit intermediary, credit cards or debit cards, stored-value cards, smart cards, whatever is being used, often there will be an intermediary involved, and there are agreements between the intermediary and the merchant, and between the intermediary and the person who holds the card. So that often there are additional procedures, and Ron alluded earlier to the chargeback investigation procedures in the credit card industry in the United States, and increasingly in other countries. So that even if it's a low dollar value transaction, very often the method of payment brings with it ways of resolving disputes and basic provisions that make it difficult for someone to engage in transactions in a way would be considered unfair or deceptive in the offline world.

The last panel, and I'll just go quickly through this, because the last panel really talked about quite a number of public law constraints. The general principle of course is the freedom to contract, but freedom to contract in the consumer sales context is always going to be subject to additional public law constraints -- first of all, with respect to the legality of the transaction itself, and probably a good example of that is Internet gaming sites.

In addition, there is fraud, which may be treated -- in fact, in most jurisdictions seems to be treated -- both as a matter of living up to contractual promises or advertised promises but also potentially as a tort or a crime. And so those are public law constraints where it's not possible, for example to have consumers waive their protections against being deceived and entering into the transaction itself.

In the United States under the UCC, there's this notion that unfair or unconscionable terms, especially in contracts of adhesion which are directed by one party and not really negotiated between the parties, will be unenforceable. And then, there are often rules of the sort which say: we won't tell you what the term has to be, but we will tell you that it must be disclosed. And in some cases -- think of interest rates, for example, on credit arrangements or instalment sales, we'll tell you that it must be disclosed in a particular way, and with rules of conspicuousness.

We haven't talked much about conspicuousness, but that's been quite an issue in several legal areas where disclosures are required and there is a conspicuousness requirement. It almost always has been stated in terms on how conspicuous terms must appear on a written contract. It's very hard to translate onto the presentation of webpages to people's own PCs, Internet screenphones, or kiosk terminals where you don't know exactly how it's going to appear in the final version.

And then, finally, there are public law constraints as to what kinds of remedies are allowed or must be allowed, and that includes in what sort of courts they must be enforceable, what sort of regulatory agencies may be able to step in and offer -- as in the United States the consumer protection agencies at state level often provide for -- additional procedural remedies.

And then there's the separate issue of the regulated industries and the professions that require licensing because they often bear with them their own minimum standards, ethical codes of conduct and regulatory bodies.

So those are all public law constraints on the freedom of contract. Just so we're clear, there's only a certain range of activity that is going to be possible to determine by contract between consumer and vendor in any event, and that essentially has to do with the commercial nature of the dispute. In choosing the law that will apply and the forum in which the law will be enforced, there are a couple of general constraints. The concept which we'll discuss a little bit later -- the choice of law, choice of forum even in contracts of adhesion in the United States -- there's the possibility of that application, but there are still some rules that courts tend to look at. They still want to see a nexus of the forum to the transaction and to the parties, and they want to see that the choice of law and the choice of forum are not going to be contrary to notions of fundamental fairness. And as Susan will explain in the adhesion contract context, that that brings with it even more constraints.

And to the extent that the terms are being enforced through public law -- consumer protection acts are consistent with the principle of anti-fraud -- then the choice of law and choice of forum between the parties is probably not going to be respected.

In the case of the regulated industries and professions, and we had the good example of telemedicine a few moments ago, those laws themselves will often import their own jurisdictional concepts so that they will define the territory in defining the acts to which they apply. And to the extent that the jurisdiction can claim that those acts are within its jurisdiction and there are no limiting constitutional principles or international comity that apply there, again, that's not something that can be altered by contract.

Another good example related to consumer protection is privacy, where one of the issues with the Data Protection Directive in Europe is whether Article 4 creates a separate jurisdictional basis for asserting that European privacy rules apply to people outside of Europe who are using facilities in Europe to collect data, even though they're not established there in the regular sense for business.

And finally, there are mandatory consumer protection laws. You had the example from China and Taiwan and Germany in the last panel, where there are fairly comprehensive regimes, centralized regimes, for consumer protection law, in which many of the provisions on their face are mandatory within the territorial scope of the jurisdiction.

The kinds of consumer protection laws we're talking about, and that are being discussed in the OECD context now - I will just give a few examples. At the federal level in the United States, the Magnuson-Moss Warranty Act, and there are several other federal acts especially with respect to investments and depository institutions.