Cyber Consumer Law and Unfair Trading Practices

Cristina Coteanu

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351946575
• Edition: 1
• Topic: Jura
• Subtopic: Verbraucherrecht

Of great interest to practitioners, policymakers and academics - as well as to consumers and traders in general - this timely work addresses all important legal and practical issues that arise in connection with online trading. This important work outlines the existing legislation and legal jurisprudence in the EU and the US and exposes the potential for unfair commercial practices to arise from online contracts, electronic agents, disclosure of information, online advertising and online dispute resolution in cross-border transactions. The continuing prevalence of unfair commercial practices will ensure this book remains in great demand.

Chapter 1

Infrastructure of the Electronic Marketplace

INTRODUCTION

So far we do not have any knowledge about the existence of an ‘architecture of cyber consumer law’ definition. In my view, it could be defined as a complex set of rules and principles relating to substantive legal areas such as electronic contracts, online privacy and advertising, online dispute resolution, and professional rules applicable in the context of the electronic marketplace.

The infrastructure of the electronic marketplace is used to support electronic commerce transactions and includes telecommunication networks, hardware, software and users involved in electronic commerce as well as the interrelations existent between all these elements. The infrastructure of the electronic marketplace is viewed from two perspectives: as electronic commerce and as a B2C commercial relationship. Through this twofold perspective, the chapter shows that the architecture for cyber consumer law depends on the infrastructure of the electronic marketplace and its legal taxonomy. It is argued that the legal taxonomy of the electronic marketplace infrastructure leads to a reconsideration of the way in which consumer protection rules are applicable in cyberspace. Identifying the architecture for the cyber consumer law taken as a starting point, the infrastructure of the electronic marketplace is aimed to set up a basis for an overview of the current rationales for cyber consumer law.

The chapter describes the infrastructure of the electronic marketplace as follows. It describes a basis for understanding the electronic marketplace, i.e. we set up a legal taxonomy that may lead to a reconsideration of the way in which consumer protection rules are applicable in the electronic marketplace. It outlines the potential obstacles or market failures that electronic commerce raises in connection with the conclusion of the contract, privacy, security issues and misleading advertising. The chapter provides a typology of the Internet services to consumers and their implications for consumer protection and it approaches the B2C commercial relationship from a legal perspective. Finally, it focuses on the legal qualification of ‘seller’ in the electronic marketplace.

1.1 Basis for Understanding the Electronic Marketplace

Since 1970, the traditional marketplace has experienced rapid changes: ‘from mass production for a homogeneous market to specialized products and services competing for segmented/targeted consumer and business markets; from brand loyalty, long product cycles to discriminating consumers shopping for quality, service and the best value for money from product development followed by market-testing to survey and other research to roll out innovations tailored to the preferences expressed by consumers; from arm’s length transactions, involving distinct roles and competing claims of producers and consumers to blurring of traditional distinctions between buyers and sellers, and increasing reliance on feedback from consumers; from focus on physical and financial capital to focus on information, innovation and human resources – the high performance workplace corresponding to the demanding, well informed consumer.’¹ On the background of these challenges not totally assimilated by the classical consumer law, the electronic marketplace is based on a new market that generates new transactions, involves new technological tools and services and brings a new layer of sophistication which requires consumers to deal with unexpected electronic market failures.

Infrastructure of the electronic marketplace, for the purposes of this study, is examined on the one side as a market that generates multiple electronic commerce transactions and on the other side as a commercial relationship between a consumer and a trader.

1.1.1 Electronic marketplace as electronic commerce

The electronic marketplace includes: players (market agents such as suppliers, marketers, electronic agents, brokers and consumers); products (goods and services); processes (supply, production, marketing, competition, distribution etc.).² In general terms, electronic marketplace refers to electronic commerce. The electronic commerce includes all aspects of commercial transactions involving both consumers and businesses, based upon the electronic processing and transmission of data including text, sound and visual images. The best-known use of ‘electronic commerce’³ relates to the context of retail consumer purchases, such as a CD or a book via a site on the World Wide Web.

However, electronic commerce encompasses a much broader field of activities. It covers activities such as banking and insurance services, ranging from account inquiries to loan transactions completed entirely on-line; information services for education or entertainment, whether for payment or free of charge; ordering tangible products such as computers or flowers for delivery locally or overseas; dealing with after sales service inquiries; twenty-four hour shopping; advertising; travel bookings; inventory control, ordering, invoicing and account management.⁴ Electronic commerce also concerns digital products such as: software, movies, music, books, and information services such as banking, insurance, consulting, etc.

There is no single accepted definition of electronic marketplace as electronic commerce. The reason for that consists in the fact that new forms of electronic commerce are emerging every day. The OECD defines electronic commerce as ‘all forms of commercial transactions involving both organisations and individuals, that are based upon the electronic processing and transmission of data, including text, sound and visual images. It also refers to the effects that the electronic exchange of commercial information may have on the institutions and processes that support and govern commercial activities. These include organisational management, commercial negotiations and contracts, legal and regulatory frameworks, financial settlement arrangements, and taxation, among many others.’⁵

Other definitions state that the electronic commerce is a broad concept that covers any commercial transaction that is affected via electronic means and includes such means as facsimile, telex, EDI, Internet and the telephone.⁶

Faced with this diversity of electronic commerce forms, it is difficult to know how to apply a consistent treatment with regard to the protection of consumers in the electronic marketplace. Any discussion of consumer protection would normally require a legal taxonomy that classifies electronic commerce into identifiable categories. A legal taxonomy⁷ of the electronic commerce is illustrated in the table below:

Table 1.1 Current legal taxonomy of electronic commerce

Electronic commerce	Online contract	Online performance	Physical performance
Goods (books, CDs, food, clothing, cars)		–
Services (banking services, database access, education, legal services etc.)			–
Digital products (software, music, movies etc.)			–

Such taxonomy may well lead to a reconsideration of the way in which consumer protection rules are applicable in the electronic marketplace. For example, it can lead to the conclusion that into a specific online consumer transaction where the product is physically delivered, the consumer protection should be considered under the traditional national consumer law. Would this criterion of classification of electronic commerce according to the means of performance (online or physical performance) offer better criteria for consumer protection in the electronic marketplace? That means that consumers would be obliged to assume the particular risks of the electronic marketplace on the basis of traditional consumer principles that probably are not adequate for the new environment. As it will be observed in the following chapters relating to the unequal bargaining power and asymmetry of information, sometimes the application of traditional legal principles can be insufficient for effective protection of consumers in cyberspace.

A narrow interpretation of electronic commerce might be a key inhibitor for consumer protection in the electronic marketplace. In my view, the electronic commerce taxonomy should be broadly architected. It should not exclude from its field of application, transaction processes online that include off-line orders, ‘non-transactional’ elements arising in pre-contractual and contractual aspects such as the provision of information about products and services, distribution of ordered products or orders placed over a network, regardless of whether or not the payment and the delivery took place online.

Nevertheless, before approaching the issue of consumer risks in cyberspace, the following section briefly describes the technical aspects of the services offered to consumers by the electronic marketplace.

1.1.1.1 Typology of Internet Services to Consumer

Cyberspace is becoming a real space, which is no longer the privilege of universities, research or military institutions. The statistics shows that by 2005, one billion people will be connected to the Internet with more than 75% of them outside of North America.⁸ These figures show the magnitude of the impact of this new market for consumers in the near future.

In evaluating the impact of online services for consumers it is important to learn about the particularities of the Internet as a new consumer medium. As Judge Preska noted in American Libraries Association v. Pataki,⁹ ‘the Internet represents a new consumer medium. The Internet is different from anything consumers have used in the past. Due to the Internet’s unprecedented speed of communication, consumers can interact with businesses virtually instantaneously. In addition, consumers can access products and services throughout the world with the click of a mouse. Thus, the Internet’s speed and interconnectivity present new challenges to a legal system designed to protect consumers.’¹⁰

The growth of the electronic marketplace is explained by the variety of the services that it offers, which facilitates the exchange of information at global level. The consumer is able to exchange messages in various ways such as:

1 One-to-one messaging (such as ‘e-mail’);

2 One-to-many messaging (such as ‘listserv’ or ‘mail exploder’);

3 Distributed message databases (such as ‘USENET newsgroups’);

4 Real time remote computer utilization (such as ‘Internet Relay Chat’);

5 Real time remote computer utilization (such as ‘telnet’); and

6 Remote information retrieval (such as ‘ftp,’ ‘gopher,’ and the Web).¹¹

This typology demonstrates that the online medium ‘offers several different facilities through which commercial activities may be conducted. Given the variety of these forms of communication, the online medium may be more properly viewed as a collection of several different media, united by their common use of computer-to-computer communications at a distance.’¹² The variety of online services, ranging from networks and websites to listserv and chat rooms, is not only public networks but also the place that creates a tremendous risk for online consumer protection.

1.1.1.1.1 Electronic mail and Listserv Electronic mail is one of the most popular and simplest forms of communication in cyberspace. E-mail is not an instantaneous form of communication. The sender does not normally receive immediate feedback concerning the delivery of its message. The message, which can contain text or images, sounds or entire computer programs, is sent into the Internet and routed around by various computers until it reaches its destination.¹³ By using a piece of software called ‘mailer,’ the e-mail can be sent into cyberspace. The mailer then breaks the message down into smaller pieces known as packets. The packets travel separately across the networks but are ultimately recombined at the destination. During the trip, the packets bump along from router to router through bridges and switches. Each r...