The Ministry of Consumer Affairs exists to promote a fair and informed marketplace for consumers and business. To stimulate debate and provide information about policies and approaches that can help to achieve this, the Ministry occasionally releases policy and discussion papers.

This discussion paper reports on the results of work the Ministry has done, as of August 1997, in respect to Electronic Commerce and the New Zealand Consumer. The paper will form the basis for the development of further work by the Ministry in this area over the next 2-3 years. I would like to thank Tony Leverton for the role he has played in leading the Ministry’s work in the Electronic Commerce area. If you wish to discuss anything in the paper, or simply provide comments about issues that you think need to be addressed, please do not hesitate to contact the Ministry. Keith Manch General Manger   EXECUTIVE SUMMARY INTRODUCTION The Ministry of Consumer Affairs works to ensure that there is a fair and informed marketplace. We provide advice to the Government on key laws, practices and policies affecting consumers, and develop information, education and advice programmes to enable consumers to function effectively and equitably in the marketplace. We are also responsible for the administration and enforcement of trade measurement legislation and for consumer safety functions under the Fair Trading Act. The Ministry has identified the development of electronic commerce as a key area of focus over the next three years and beyond, for a number of reasons.   It is changing the way consumers and business relate to each other domestically and internationally.   It can provide New Zealand consumers with opportunities to access a wider range of goods and services, potentially at cheaper prices, within New Zealand and across borders.   For New Zealand consumers to take full advantage of these opportunities, they will need to have confidence in matters such as the use of personal information provided, the security of transactions, the quality of goods and services available, and the availability of redress if things go wrong.   For the Ministry to fulfil its responsibilities to New Zealand consumers it is necessary to: understand the changes that are occurring; assess whether current consumer protection mechanisms are relevant to new and emerging ways of doing business (and take appropriate action where they are not); educate and inform consumers about relevant issues. INTERNATIONAL DEVELOPMENTS Recent international conferences and activities have aimed at identifying the issues raised by electronic commerce. Activities that the Ministry has been directly involved in are summarised below.   New Zealand and Australian consumer agencies have identified electronic commerce as a priority issue for action in the workplan of the Ministerial Council of Consumer Affairs.   The OECD: has released its draft guidelines on Chargebacks and Distant Selling. These set guidelines for standards by which codes of practice could be drafted to ensure international harmonisation;   is developing a project to generate consumer protection guidelines to be submitted to the OECD Council for approval as a council recommendation;   has been addressing issues such as the deregulation of postal systems and the efficiency and cost of customs procedures, both of which can create barriers to consumers taking part in the global marketplace;   is reviewing safety labelling in the global marketplace as a result of concerns that there is a proliferation of safety and conformity marks, and a lack of understanding by consumers and business as to what these marks stand for.   Consumers International has established a network of members to deal with consumer issues in the information society. The Ministry is part of that network. Consumers International recently held a conference in New Dehli.   The International Marketing Supervision Network (IMSN) is focussing on electronic commerce issues. All of the above serve to highlight that there is much work going on internationally to deal with electronic commerce issues from a consumer perspective. This list includes only the issues that the Ministry is involved in. One challenge is simply to remain aware of developments so that they can be built on appropriately for New Zealand consumers.   ELECTRONIC COMMERCE ISSUES - CONSUMER PROTECTION ISSUES, ANALYSIS AND STRATEGIES FOR THE MINISTRY OF CONSUMER AFFAIRS Consumer protection issues arise in respect to Internet and telephone technology, Internet payment systems, smartcards, creditcards and debit cards, etc. At a domestic level not much changes. Current laws and self regulatory frameworks in New Zealand tend to apply regardless of the way consumers relate to businesses. The real challenge is in the increased amount of cross border trade.   THE WAY FORWARD The Ministry's role is to promote a fair and informed marketplace, for the benefit of all New Zealanders. Where fair and informed markets do not exist, the Ministry is committed to examining all options, from education, through self-regulation, to formal government regulation, to find the most effective and efficient solutions to address consumer problems. There are a number of issues that suggest solutions to any problems in the electronic marketplace will stop short of developing formal government regulation. The issues are:   The electronic marketplace is in its early stages. Any problems may be described as potential or emerging to a large degree;   The electronic marketplace is a global phenomenon. Any solutions to problems will need to be global;   The electronic marketplace is developing rapidly. Legislation, even if appropriate for other reasons, could probably not be developed, modified or removed quickly enough to meet the needs of the marketplace;   It is in the interests of participants to work out ways around most problems. Every day news reports indicate a new development designed to increase security or confidence in the electronic marketplace.   The Ministry will therefore focus on four broad areas which are outlined below.   Consumer education/information activities Educate and inform consumers on their rights and responsibilities in electronic commerce. Inform consumers of the potential dangers in buying from traders who do not commit to accepted codes of practice. Monitor traders operating at a standard lower than code / regulatory requirements, and seek appropriate compliance action. Ensure consumer representation in the development of self regulatory mechanisms.   International networking activities Participate in discussion and development of international codes, bi-lateral and multi-lateral mutual recognition, harmonisation of rules, and enforcement activities. Participate in discussion and development of international agreements, guidelines and standards relating to electronic commerce.   Business self-regulatory activities Liaise with industry groups, business and government agencies to establish or improve industry codes of practice. Assist industry in the promotion and awareness of codes to consumers. Encourage the use of seal-of-approval schemes.   Monitoring market developments, market solutions and international activities We will formalise our monitoring processes for gathering information about developments in the international marketplace. Maintain an up to date understanding of developing issues so that they can be appropriately addressed. Undertake market research on consumer responses to electronic commerce over a period of time.   The Ministry of Consumer Affairs works to ensure that there is a fair and informed marketplace. We provide advice to the Government on key laws, practices and policies affecting consumers, and develop information, education and advice programmes to enable consumers to function effectively and equitably in the marketplace. We are also responsible for the administration and enforcement of trade measurement functions under the Weights and Measures Act 1987, and for consumer safety functions under the Fair Trading Act 1986. The Ministry has identified the development of electronic commerce as a key area of focus over the next three years and beyond, for a number of reasons. It is changing the way consumers and business relate to each other domestically and internationally. The emergence of an electronic marketplace in recent years has brought goods, services and information from across the country and around the world at the click of a button.   It can provide New Zealand consumers with opportunities to access a wider range of goods and services, potentially at cheaper prices, within New Zealand and across borders. There is no doubt that an on-line marketplace brings benefits to businesses and consumers. These benefits include the consumer convenience of round-the-clock access from and to almost anywhere, rapid communications, world-wide linkage, search and evaluation ability, personalised attention, greater innovation, minimised handling, and reduced costs. The convenience for businesses includes ready, constant access to a global marketplace, customer and product information management, instant funds/information transfer, and savings in a wide range of overheads (rental, wages, security, warehousing etc).   For New Zealand consumers to take full advantage of these opportunities they will need to have confidence in matters such as the use of personal information provided, the security of transactions, the quality of goods and services available and the availability of redress if things go wrong.   For the Ministry to fulfill its responsibilities to New Zealand consumers it is necessary to: understand the changes that are occurring; assess whether current consumer protection mechanisms are relevant to new and emerging ways of doing business (and take appropriate action where they are not); and educate and inform consumers about relevant issues.   In 1996, the Ministry of Consumer Affairs commenced a project entitled "The Electronic Consumer". The objective of this project is to assist New Zealand consumers by: providing greater publicity about, and knowledge of, the consumer perspective in electronic commerce; improving business understanding of consumer issues; informing the policy advice given to Government on key national and international consumer policy issues in electronic commerce; and identifying education priorities on electronic commerce for consumers. Initially the Ministry held two workshops to identify issues, both domestic and international. A paper was released outlining the consumer and business issues identified by these workshops: ‘The Electronic Consumer - Issues for Businesses and Consumers into the Twenty-First Century’. Following these workshops, and building on the issues identified and discussed, the Ministry, in conjunction with the Institute for International Research, organised a two-day public conference in Wellington. ‘The Electronic Consumer’ conference was held on 17 and 18 March 1997, with delegates attending from the commerce, industry and government sectors. This conference followed an international OECD conference on similar issues, that was attended by the Minister of Consumer Affairs, and at which she delivered a key- note paper calling for a self regulatory approach to ensure consumer issues were dealt with appropriately as electronic commerce developed. The Ministry has also been involved in a range of international developments, and is now in the process of developing a plan for action over the next 1-3 years. This will draw from and build on work already done. This paper: reports on international developments that the Ministry is involved in; identifies some of the main issues raised by electronic commerce that the Ministry will work on; provides a brief analysis of those issues; identifies strategies for dealing with them; and reports on the proceedings of the Ministry’s conference - the speakers’ addresses have been summarised and are attached as an Annex to this paper. In identifying and analysing the issues, and setting out strategies for dealing with them, the paper provides more ideas for action than it does answers. This is deliberate as, given the pace of change occurring in this area, the paper can provide little more than a resource for reference in the development of strategies, at this point in time. Additionally, the issues are broad and many fall outside of areas that the Ministry can directly impact upon. Further, many issues, and particularly those raised by the increased ability to undertake transactions internationally, cannot be dealt with by action just within New Zealand, such as the introduction of a new piece of domestic legislation. The development of electronic commerce calls for integrated action by a mixture of government and non-government agencies, domestically and internationally; a careful balance between protectionism and progress; and a clear focus on education and information as a means of assisting consumers to take full advantage of the changing marketplace.     INTERNATIONAL DEVELOPMENTS Recent international conferences held in Ireland , New Delhi and Paris have aimed to identify the issues raised by electronic commerce. In addition, the United States Government has released a draft paper which proposes five fundamental principles and a strategy of government action , the OECD and the European Union are actively studying the issues, and the Australian Federal Bureau of Consumer Affairs released an Issues Paper in March 1997 . There have also been other international developments in areas directly affecting electronic commerce. Those that the Ministry has been directly involved in.are summarised below.   New Zealand and Australian consumer agencies have identified electronic commerce as a priority issue for action in the workplan of the Ministerial Council of Consumer Affairs - a Council which includes the New Zealand Minister of Consumer Affairs and Australian Federal, State and Territory Ministers, and their agencies. The Ministry will work on a number of issues in this forum.   The OECD has released its draft guidelines on Chargebacks and Distant Selling. These set guidelines for standards by which codes of practice could be drafted to ensure international harmonisation . The Ministry circulated these draft papers at its March conference, has provided comments on the draft to the OECD (including feedback received from people who attended the March conference) and will be actively promoting the guidelines in New Zealand when they are completed.   The OECD is developing a project to generate consumer protection guidelines to be submitted to the OECD Council for approval as a Council recommendation. These guidelines could serve member through: promoting the development of industry-driven initiatives on electronic commerce; providing governments with instructive principles for both applying existing laws and developing new ones, if necessary, as they work to establish consumer protection mechanisms for electronic commerce; harmonising approaches to consumer protection in electronic commerce, both at national, regional, and global levels; creating a consumer protection information network, comprised of government officials, consumer and private sector representatives, and academics, enabling them to exchange information within the scope of the guidelines; fostering international co-operation in the enforcement of laws against fraudulent and misleading conduct. The Ministry of Consumer Affairs will be actively participating in these developments.   The OECD has been addressing issues such as the deregulation of postal systems and the efficiency and cost of customs procedures, both of which can create barriers to consumers taking part in the global marketplace. The Ministry has facilitated the involvement of relevant New Zealand agencies in these projects.   The OECD is reviewing safety labelling in the global marketplace as a result of concerns that there is a proliferation of safety and conformity marks, and a lack of understanding by consumers and business as to what these marks stand for. This is one activity designed to assist consumers around the world to understand the quality, safety and appropriate use of products they might buy across borders. The Ministry has contributed to this project and will continue to do so, with a view to promoting its results in New Zealand and helping to develop a greater understanding amongst consumers of the meaning of various marks.   The Internet Industry Association of Australia has drafted an Internet Industry Code of Conduct .   Consumers International* has established a network of members to deal with consumer issues in the information society. The Ministry is part of that network. Consumers International recently held a conference in New Delhi. One of the primary goals of the conference was to adopt a model consumer law for the Asia Pacific region. The principles for this were drawn largely from the Australian Trade Practices Act and New Zealand Fair Trading Act. They also reflect New Zealand’s Consumer Guarantees Act which was described by a respected commentator at the conference as "state of the art legislation" in providing guarantees in respect of the supply of goods and services. Another goal was to develop a network of government agencies in the Asia Pacific region. A network was established that will be co-ordinated in its inaugural year by the Indian Government. The purpose of the network is to share experiences and co-ordinate approaches to issues affecting consumers across the region. Both of these actions are relevant to the development of electronic commerce in the Asia Pacific region.   The International Marketing Supervision Network (IMSN) is focusing on electronic commerce issues.¨ Its relevance to New Zealand is that it provides direct access to consumer enforcement agencies in a range of countries from which businesses that operate, but are not resident in New Zealand, might be situated. This is particularly important with the development of electronic commerce.   The Uniform Commercial Code of Conduct (UCC), which codifies state laws, has been developed in the United States of America . * Consumers International is a global organisation of consumer organisations whose objectives in the Asia Pacific region are to: consider trade and economics, food and health issues, as they affect consumers; provide support for consumer organisations in the region; influence global policy institutions to develop policy taking account of the interests of consumers in the region. ¨ The IMSN is an informal network of consumer enforcement agencies that works to deal with international marketing problems. It might be more correctly referred to as a consumer protection network. All of the above serve to highlight that there is much work going on internationally to deal with electronic commerce issues from a consumer perspective. This list includes only the issues that the Ministry is involved in. One challenge is simply to remain aware of developments so that they can be built on appropriately for New Zealand consumers.

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