18 June 2008

Governments Give Consumers Boost at High-Level OECD Internet Meeting

Stepped up actions to (i) combat online identity theft, (ii) strengthen mobile commerce business practices and (iii) promote more transparency and consumer flexibility in communication services were highlighted by Ministers and senior officials participating in a high-level OECD meeting in Seoul, Korea, on 17-18 June. Policy guidance was announced in each of the three areas to encourage countries to put in place effective regimes for protecting and empowering consumers who buy products and services on-line. Efforts to protect consumer rights and build trust in e-commerce were two of the key themes addressed at the Ministerial meeting.

“These are important initiatives which aim at effectively empowering consumers in the Internet Economy.” says Michael Jenkin, Chairman of the OECD’s Committee on Consumer Policy and Director General of Consumer Affairs at Industry Canada. “The guidance draws on the experiences that OECD member countries have had in the three areas. Sharing and discussing these experiences have helped to determine the more effective and promising approaches that governments, business and other stakeholders can use to address emerging concerns.” Jenkin went on to note that the Committee will continue to work on Internet issues in 2009. Next year, the Committee will conduct a comprehensive review of the 1999 OECD Guidelines on E-commerce to assess how their effectiveness could be strengthened.  

Combating online identity theft

A 2008 OECD analytical report indicates that ID theft, which some cite as the fastest growing crime of the 21st Century, is holding down growth in e-commerce. The report cites statistics that say that more than 40% of Internet users refrain from buying products on-line for fear that their personal information could be misused.

Drawing on the findings of the report, the OECD’s Committee on Consumer Policy agreed on policy guidance that identifies a series of preventive actions that could be taken to combat the problem more effectively. Four key recommendations are:

• To improve the quality and quantity of information collected on ID theft. Available information is fragmented, often contradictory and overly reliant on complaints filed by consumers (which leads to understatements). Approaches to improve information through enhanced co-operation with business are outlined.
• To expand campaigns to educate consumers about (i) the different forms of online ID theft, (ii) how to protect their identities more effectively, and (iii) what to do when they have become victims of ID theft. Some governments and businesses have provided a good deal of information to help consumers fight online ID theft. Efforts need to be broadened, however, and initiatives taken to increase consumer awareness of the resources that are available.
• To strengthen deterrence and enforcement initiatives across borders. Two actions could be taken to increase deterrence: ID theft could be made a specific offence, which is currently true in only a handful of countries. Sanctions could be increased to become more dissuasive across jurisdictions, which would discourage fraudsters from forum shopping (i.e. from evading regulatory compliance by locating in one country where sanctions would be low or inexistent and targeting consumers in another).
• To increase efforts to develop effective electronic authentication practices, and to promote their use. Identity management through, for example, effective authentication practices is one of the more promising ways to tackle ID theft. Progress has been made in this regard, but needs to be reinforced.   

Strengthening mobile commerce business practices

Communication technologies are rapidly converging. Mobile devices, for example, are increasingly used to connect to the Internet. In some countries, consumers can already use their mobile handsets to make payments in stores, contract instant loans, or bank on-line. They can even use it as a ticket for transport. And with the development of 3G technology, promising new opportunities are on the way. The situation is examined in detail in a 2007 OECD report on mobile commerce.

Based on the report, the Committee on Consumer Policy developed a set of more than 50 suggestions for strengthening mobile commerce. The policy guidance focuses on three areas: (i) the small-screen and related technical limitations of mobile devices, (ii) protection of minors and (iii) issues concerning privacy and unauthorised use. Three key recommendations are:

• To ensure that the technical limitations of mobile devices do not result in consumers being inadequately informed about the transactions that they make. The OECD’s 1999 ecommerce guidelines set forth the types of information that businesses should provide to consumers about their online transactions. The policy guidance provides specific ideas on how these guidelines could be observed when mobile devices are involved – through more structured and deliberate transaction and confirmation processes.
• To protect children from using mobile devices excessively to buy products, and to protect them from inappropriate content or illegal transactions. Aggressive marketing practices can easily entice children into over-consumption of goods and services. The guidance encourages mobile operators to set up technical tools aimed at blocking marketing messages or children purchases themselves. Such technical tools, in addition to education and awareness initiatives from both parents and operators, should also prevent children from accessing adult oriented content. Effective age verification procedures are seen in this regard as helpful means to ensure adequate minors protection against inappropriate transactions.
• To ensure that consumer privacy is protected, especially when location-based services are involved. A new range of services are now offered on smart mobile devices, which, for example, allow consumers to know where their friends are located. The problem is that such information can be transferred to third parties without the data owner’s authorisation, which raises privacy issues. The guidance encourages business to provide consumers with clear information on personal data disclosure and with the ability to limit such disclosure at any time.

Promoting more transparency and flexibility in communication services 

Liberalisation of telephone and related communication services has led to dramatic price declines and provided consumers with opportunities to choose from an expanding range of service offers. The complexity of contracts and offers and the costs incurred in switching from one provider to another have, however, meant that consumers are not fully benefitting from more open competition. The situation is examined in an analytic report published by the OECD in 2008.

Building on the conclusions of the report, the OECD’s Committee on Consumer Policy and the Committee for Information, Computer and Communications Policy developed policy guidance which identifies more than 20 principles for providing consumers with the information they need to make well-reasoned choices, and for making it easier for them to switch providers. Three key proposals for governments and business to consider are:

• Lower barriers to switching from one service provider to another. Consumers should not bear excessive costs which, in practice, may discourage them from changing provider. Notice or lock in periods preceding the termination of contracts should be minimised so as to facilitate switching and enhance competition in the market.
• Easy comparison of price and quality of services. Consumer information about contract terms and conditions is a key and necessary element in consumer decisions on switching. Even though considerable information about price and quality of services is available to consumers, such information is often complex making it difficult to compare products and services. The guidance encourages service providers to provide consumers with clear and accurate information about the terms, conditions and costs associated with their services.
• Number portability. By removing the costs and inconvenience of having to change telephone number when switching provider, number portability is a helpful tool for consumers to make informed choices. 

Copies of the reports and guidance mentioned above are available at www.oecd.org/sti/consumer-policy or at the following download links:

• Scoping paper on online identity theft (English) (French)
  OECD Policy Guidance on Online Identity Theft (English)
• Mobile commerce (English) (French)
  OECD Policy Guidance for Addressing Emerging Consumer Protection and Empowerment Issues in Mobile Commerce (English)
• Enhancing competition in telecommunications: protecting and empowering consumers
  (English) (French)
  OECD Policy Guidance for Protecting and Empowering Consumers in Communication Services (English)

Further information

Information presented at the Ministerial meeting indicates that the Internet is opening up new and exciting opportunities for consumers. Some 58% of households in the OECD area had home access to the Internet in 2007 (see Figure 1 below) and some 26% of adult individuals in the OECD area ordered or purchased goods on the Internet in 2007 (Figure 2). Source: OECD (2008), The Future of the Internet Economy; A Statistical Profile.

While more choice and lower prices are tempting, many consumers are still hesitant to purchase items on-line as they may (i) not have sufficient knowledge about, and trust in, the firms that are selling items, (ii) be concerned about the security and protection of personal information provided over the Internet, and their ability to successfully resolve problems with the goods and services that they acquire.

Over the past decade, governments, the business and consumer organisations have worked together to find ways to make ecommerce safer and more reliable. The Committee on Consumer Policy has played a key role in this regard, developing three important multilateral policy instruments: 

• OECD Guidelines for Consumer Protection in the Context of Electronic Commerce (1999), which establish a blueprint for conducting business on the Internet and protecting consumer interests.
• OECD Guidelines for Protecting Consumers from Fraudulent and Deceptive Commercial Practcies across Borders (2003), which are becoming increasingly important, given the global dimension of e-commerce; and
• OECD Guidelines on Consumer Dispute Resolution and Redress (2007), which identify key elements for resolving disputes at both domestic and international levels.

Press releases on consumer issues following the Seoul Ministerial on the Future of the Internet Economy

For further information, journalists are invited to contact Peter Avery (+ 33 1 4524 9363; peter.avery@oecd.org) or Brigitte Acoca (+ 33 1 4524 9365; brigitte.acoca@oecd.org) at the OECD's Directorate for Science, Technology and Industry (www.oecd.org/sti).