MICHAEL GEIST
Thursday, March 23, 2000
Provincial regulators charged with protecting consumers encounter tough choices when dealing with e-commerce.
Paving a clear path for e-commerce is a key goal, and a hands-off approach is often appropriate. Excessive regulation can stifle e-commerce growth, but laws must also be applied, on-line and off-line, to ensure regulatory fairness.
The key to it all lies in consumer education and fraud prevention -- providing people with the information and safeguards they need to make informed choices.
I recently completed a study for the Ontario Ministry of Consumer and Commercial Relations that addresses this policy dilemma. Consumer Protection and Licensing Regimes Review: The Implications of Electronic Commerce looks at the effects of e-commerce on several provincially regulated sectors, including automobile sales, travel, real estate and debt collection.
The study's main goals were to identify current e-commerce business models in these sectors, look at the rules governing them, and provide recommendations.
Most sectors use a variety of business models, each resulting in different legal implications. The motor vehicle sector, for example, features at least five different business models: on-line referral sites such as http://www.Autobytel.ca that direct prospective customers to dealers; reverse-auction referral sites that include an element of price negotiation prior to the referral (http://www.Priceline.com); private car sales (eBay); direct on-line sales through manufacturer referrals (Access Toyota); and direct on-line sales through third-party sites (CarsDirect.com).
Since several business models raise different regulatory concerns, a single legal solution for all would be unrealistic. Although on-line referral sites are currently unregulated, we could follow the lead of several U.S. states and adopt rules that would protect consumers from fraudulent referrals while ensuring marketplace fairness for motor vehicle dealers.
Existing legislation already covers private motor vehicle sales, since the law permits sales of personal motor vehicles without a licence. However, the ability to use on-line sites such as eBay to sell large numbers of vehicles without a licence (a practice known as curbsiding) is of real concern to regulators.
Direct on-line motor vehicle sales are causing the biggest regulatory headache. Current Ontario legislation features several provisions that require a physical office and the use of paper-based signatures for a valid sale. As on-line motor vehicle sales grow in popularity, the ability of regulators to enforce these laws -- and ensure that Ontario consumers enjoy equivalent protections on-line and off -- becomes very doubtful.
These challenges are by no means limited to motor vehicle sales. The travel and real estate industries also expect the Internet to play a key role in transactions in the near future.
For these reasons, changes may be needed to existing regulation. Regulatory change is a challenge, however, since it must be balanced with the competing interests of maintaining consumer protection and facilitating e-commerce.
The cornerstone of the changes would be a seal-of-approval program sponsored by the semi-private regulators that govern each sector.
This program would require provincially regulated businesses to display an icon on their sites (dubbed a Trillium Trust mark) that would provide consumers with an easy method of identifying local businesses, together with the assurance that they still enjoy regulatory protection. Unlike other seal-of-approval programs such as TRUSTe and BBBOnline (two private sector U.S.-based programs that have been criticized for their lack of regulatory muscle), this program would carry legal weight by becoming North America's first regulator-backed seal program.
Although first envisioned as an Ontario-based program, the seal program could be extended to out-of-province businesses. Regulatory co-operation across Canada and the United States would be essential.
Michael Geist is a law professor at the University of Ottawa School of Law specializing in Internet and electronic-commerce law. He can be reached at mgeist@uottawa.ca and on the Web at http://www.lawbytes.com.
