Electronic Commerce and Consumer Protection Group

Guidelines for Merchant-to-Consumer Transactions and Commentary

INTRODUCTION

The Electronic Commerce and Consumer Protection Group ("E-Commerce Group") is composed of leading companies in the Internet, online, and electronic commerce industries. These companies recognize the importance of consumer protection in the Internet age and have chosen to affirmatively address these issues for the purpose of creating industry best practices and a predictable legal framework for consumer protection in global electronic commerce and transactions. Consumer protection, which generates consumer confidence, is as critical for the continued growth of electronic commerce as are traffic lights and rules of the road to traffic on a concrete highway.

The Group has established Guidelines for consumer protection to help establish an effective global framework that reduces the need for compliance with a multitude of differing laws. The Group hopes to receive further input on these Guidelines from interested parties. Likewise, the Group hopes to benefit from the experience of merchants and consumers with the Guidelines. As vendors follow these Guidelines, consumers will benefit from consistent consumer protection practices. Through this effort, the Group hopes to minimize the emphasis on the choice of law of the consumer or the merchant by following the Guidelines and adhering to a dispute resolution mechanism to resolve disputes. It is the intent of the E-Commerce Group that the Guidelines and dispute resolution mechanisms will resolve the great majority of disputes prior to the dispute rising to a level that requires formal legal action. The Guidelines will serve as the standard applicable to interpretation of the online transaction in dispute.

Companies that adhere to these Guidelines may require consumers by contract to participate in their dispute resolution mechanism. In such instances, merchants will provide consumers with notice of this requirement at the time of the transaction. Such dispute resolution mechanisms shall be expeditious. This process will not limit or hinder the rights of consumers under law, including without limitation, the right consumers may have to file a dispute with a credit or charge card issuer. This will help ensure that consumers have an easy to use and timely way to resolve disputes regardless of the payment method used. If resolution does not occur, both the merchant and the consumer shall retain whatever rights they may have.

As these Guidelines or others similar to them are adopted, it is intended that they will become industry standard in the private dealings between merchants and consumers. It is the hope that this will provide a base to develop consistent and predictable consumer protection law.

In terms of dispute resolution, the goal is to resolve these issues in a manner that reflects that the monetary values of these disputes, while important to individual consumers, are often small in amount. Therefore, traditional court-based solutions, including small claims courts, particularly for people who live in different countries, are by and large impractical. The Guidelines focus on alternative dispute resolution, which will better empower consumers to seek the correction of wrongs.

The E-Commerce Group has extensively discussed these issues with government officials, other companies, and consumers in seeking progress in these important areas. The work of the OECD has been of particular help in describing and sorting out these issues. Consumer protection, legal predictability, and continued growth of global electronic commerce are all addressed in the Guidelines for Merchant-to-Consumer Transactions ("Guidelines") and the commentary to accompany the Guidelines ("Commentary").

The Group recognizes that these Guidelines and alternative dispute resolution mechanisms will not resolve all conflicts. To this end, we intend to continue to work with industry, governments and consumers to develop a global jurisdictional framework with which governments of the world can agree, that will limit the potential application of different and inconsistent laws to this global medium. Additionally, we plan to actively participate in the global discussion and encouragement of effective alternative dispute resolution mechanisms for the online environment.


GUIDELINES FOR MERCHANT-TO-CONSUMER TRANSACTIONS

I. Scope and Definitions

These guidelines apply to Merchant-to-Consumer Transactions conducted online including through the Internet.

A. Merchant The term "Merchant" means any person who offers a Consumer good or service and accepts orders directly from Consumers.

B. Consumer The term "Consumer" means a customer, including a licensee, subscriber, or buyer, of any good or service acting primarily in a personal, family, or household capacity¾ other than for purposes of resale.

C. Transaction The term "Transaction" refers to any agreement for provision of a good or service between a Merchant and Consumer.

II. Accuracy and Accessibility of Information

All information required to be disclosed by these Guidelines should be clear, accurate, and easily accessible online. The information should either be posted on or accessible through a hyperlink that sufficiently describes the information being linked to from the Merchants homepage or entry point of the online site and at a place where the transaction is offered.

III. Merchant Contact Information

Consumers should have a prompt, easy, and effective means of contacting the Merchant. The Merchant should disclose its legal name; the name under which it conducts business; the principal physical address or an address of an agent for service of process for the Merchant; mail, and e-mail or telephone contact information; and a point of contact within the Merchant organization that is responsible for inquiries from Consumers.

IV. Marketing Practices

Merchants should not make any representation or material omission or engage in any practice that is deceptive, misleading or fraudulent. If a representation about a good or service or the Merchant is likely to be relied on by Consumers engaging in Transactions, Merchants should take reasonable steps to ensure that such information is current, accurate, and not deceptive or misleading to Consumers and that the truthfulness of objective claims are substantiated.

V. Information About the Goods or Services

Merchants should clearly disclose the basic features of the good or service that they offer using terms that Consumers can understand.

VI. Information About the Transaction

A. Terms and Conditions Merchants should make available to Consumers the terms and conditions applicable to the Transaction.

B. Opportunity to Review the Transaction Merchants should provide Consumers an opportunity to review and not proceed with the Transaction prior to its becoming a binding obligation and disclose to Consumers at what point the Transaction will be final.

C. Language Material information about the Transaction should be provided in the same language in which the good or service is offered.

D. Record of the Transaction Merchants should make it possible for Consumers to access and maintain an adequate record of information about their Transactions.

E. Costs Merchants should disclose the entire price, type of currency, and expected costs of the goods and services to be collected by the Merchant. A general description of routine costs and fees not collected by the Merchant that will likely be incurred by the Consumer also should be provided.

F. Shipping and Payment Merchants should disclose to Consumers when the Merchant will be able to ship the goods or provide services, and the time when a Consumer will be charged for a Transaction. A consumer should not be charged for a product or service unless shipment of such product or service is expected within a reasonable period of time.

VII. Cancellation/Return/Refund Policies

Merchants should provide information to Consumers about their cancellation, return, and refund policies, including: the length of time after entering into a binding obligation which an available cancellation, return, or refund may be made; the process that should be followed; and any costs that may be incurred. If there is no cancellation, return, or refund right, this should be stated prior to completion of the Transaction.

VIII. Packaging

Tangible goods should be shipped in packaging that can reasonably be expected to protect the goods in transit.

IX. Security

Merchants should make reasonable efforts to ensure the security of a Consumer. s Transaction information. Security protections should be consistent with current industry standards. For data containing credit card information being transferred from the Consumer to the Merchant, Merchants should take steps such as the use of password protection, encryption, or similar technologies to protect information about the Transaction.

X. Customer Service and/or Support

Merchants should disclose to Consumers basic information regarding customer service and/or support for goods or services purchased online from the Merchant. If no customer service and/or support is available from the Merchant, this should be stated.

XI. Warranty

Merchants should disclose to Consumers applicable warranties or limited warranties that they offer regarding the products or services sold or made available to Consumers. Such information should include the scope, duration, and means of exercising rights made available in the warranty or limited warranty.

XII. Privacy

Merchants should adopt privacy policies that are consistent with existing industry standards and existing legal requirements. At a minimum, such policies would provide for notice to a consumer as to what type of information is to be collected and how it will be disseminated. Merchants also should provide Consumers with choices as to the dissemination of information to third parties for marketing purposes. Merchants should provide Consumers with reasonable access to the records of the individual Consumer. s Transactions with the Merchant upon request.

XIII.Self-Regulatory Programs

Merchants should disclose and provide contact information for any self-regulatory programs in which they participate and applicable dispute resolution processes.

XIV. Dispute Resolution

Merchants should provide Consumers with fair, timely, and affordable means to settle disputes and obtain redress.

A. Internal Mechanisms Merchants should establish internal mechanisms to address Consumer complaints. Merchants should encourage Consumers to take advantage of such internal mechanisms as appropriate.

B. Third-Party Dispute Resolution Merchants are encouraged to participate in reputable, independent third-party dispute resolution programs to assist Consumers in addressing complaints arising from Transactions. When available, third-party dispute resolution programs should encourage Consumers to seek redress through a Merchant. s internal complaint mechanism prior to being granted access to third-party dispute resolution programs. Similarly, the Consumer and the Merchant may agree that the Consumer. s claims will be submitted to third-party dispute resolution.

XV. Effective Enforcement

Merchants should participate in effective self-regulatory enforcement programs to provide validation that Merchants adhere to these or equivalent guidelines. Validation of adherence can be demonstrated in a number of ways, including the use of a seal or other recognizable symbol. Organizations that administer seal programs must be easily available to consumers, competitors, and others to accept complaints and to act on them. Such seal organizations shall deny the continued use of their seals by any organization that is not in material compliance with the Guidelines. Companies that are signatories to the Guidelines should encourage companies with which they conduct business to adhere to the Guidelines and participate in seal programs.

 


COMMENTARY TO GUIDELINES FOR
MERCHANT-TO-CONSUMER TRANSACTIONS

The commentary set forth here describes the Guidelines for Merchant-to-Consumer Transactions. Global Merchant-to-Consumer Transactions are expected to be a large area of commercial growth in the Internet era. The Guidelines are intended to apply solely to Transactions between Merchants and Consumers that are conducted online, including through the Internet. While Merchant-to-Merchant transactions also are expected to experience tremendous growth, a well-developed international framework already exists for Merchant-to-Merchant transactions that is based largely on contract. Likewise, the Guidelines are not intended to apply to Consumer-to-Consumer transactions.

Merchant

The term "Merchant" is defined as any person who, directly or through an agent or business partner, offers a good or service and accepts orders directly from Consumers. The Guidelines apply only to Merchants who both make available a good or service online and accept the order online for the good or service. Thus, the Guidelines would not apply in a situation where a product is made available online and the Transaction occurs offline.

Consumers on the Internet may interact with more than one Merchant in a Transaction for a particular good or service. Portals, malls, and auctions present the most common occurrence of the multiple-Merchant situation. In these situations, the Guidelines would apply to each Merchant solely for the goods or services that it provides and not for the entire transaction. For example, the Guidelines would not apply to a portal, mall, or auction site, as to a good or service, that facilitates the transaction without offering that good or service. The Guidelines would apply to the facilitator only for its facilitation services. Thus, the host of an auction site would not be subject to the guidelines for the products and services that are auctioned from its site. For example, if a Merchant other than the auction site offers a computer for sale from the site, the Guidelines would not apply to the auction site. The Guidelines would apply to the auction site, however, to the extent that it provides services such as insurance, warranty, or security.

Consumer

The term "Consumer" is intended to apply to individuals acting in their personal, family, or household capacity. The Guidelines are not intended to apply to individuals who engage in transactions in their professional capacities.

The term "Consumer" is intended to apply broadly to include the buyer of any good or service as well as an individual who licenses a product or subscribes to a service. The Guidelines are not intended to apply to Consumers when in their individual capacity they engage in a Transaction for purpose of reselling the good or service.

Transaction

The term "Transaction" refers to any agreement for the provision of a good or service between a Merchant and Consumer. This would include leases, licenses and purchases. Consumer-to-Consumer sales, such as those that occur on an auction site, would not be covered.

Additionally, the Guidelines are limited to Transactions that occur between Merchants and Consumers and are not intended to apply to the passive browsing of Web sites. The Guidelines do not apply to situations where no Transaction occurs, such as when a Consumer only views an advertisement at a site. Advertising per se is not covered by the Guidelines. However, Merchants must describe their product in a clear and accurate manner.

Accuracy and Accessibility of Information

All information that is required to be disclosed by the Guidelines must be clear, accurate, and easily accessible online. Transparent, clear and accurate information posted by the Merchant is key to Consumers making choices about conducting transactions online. Information is clear and accurate if it is understandable to Consumers and provides them with correct information about the Transaction. Likewise, for Consumers to be able to benefit from the information posted, it should be easy to find. This can be accomplished by making the information available through a hyperlink from the Merchant. s homepage or entry point to the site and, if technically possible, at a place where the Transaction is offered. The Transaction is offered where an individual can place an order for the good or service. The hyperlink should describe the information that is being linked to so that the nature of the information that will be linked to is readily apparent to consumers.

Merchant Contact Information

Merchants should provide a prompt, easy, and effective means for Consumers to contact them. The Merchant should disclose its legal name so that Consumers are aware of who they are doing business with. This Guideline is intended to assist Consumers in knowing the ownership of the business. The principal physical address of the Merchant or its agent for service of process also should be provided. This will allow Consumers to contact and locate Merchants in case a dispute arises. Merchants also should disclose either their mail, e-mail, or telephone contact information. The Guidelines allow flexibility and allow the Merchant to determine the means by which Consumers can contact them. Finally, Merchants should provide a point of contact within their organization for Consumers to direct their inquiries. It is not necessary that a specific individual be designated; however, at least a point of contact that will address inquiries should be provided.

Marketing Practices

Merchants should not make any representation or material omission or engage in any practice that is deceptive, misleading or fraudulent. If Consumers are likely to rely on a representation by a Merchant regarding a good or service that is offered, the Merchant should take reasonable steps to ensure that such information is current, accurate, and not deceptive or misleading to Consumers.

A marketing practice is deceptive or misleading to Consumers if it is information that will be relevant to the Consumer. s decision to enter into a Transaction and is misleading and is harmful to the Consumer. For example, if a site claims to independently evaluate goods or services, when in fact the evaluation of the good or service is paid for by an advertiser, this practice, without further disclosure, would likely be misleading to Consumers.

 

Merchants also should be able to substantiate the truthfulness of objective claims. Thus, if a Merchant makes a claim about the fitness or quality of a product, such a claim should be able to be supported by the facts.

Information About the Goods or Services

Merchants should disclose the basic features about the goods or services they offer. Such features that describe the good or service could include whether the good or service is new or used, the quality or grade of the good or service, and other relevant information that Consumers can use in evaluating the Transaction.

Information About the Transaction

The Guidelines set forth information about the Transaction that Merchants should incorporate into their sites. Merchants should make available the terms and conditions applicable to the Transaction.

Merchants also should provide Consumers with an opportunity to review the Transaction prior to its becoming final. For example, if the Merchant allows Consumers to place products into a "virtual" shopping cart, the Merchant should allow Consumers to review and not proceed with the Transaction prior to its becoming a binding obligation. A Merchant could, for example, provide a check-out screen that indicates to Consumers that by proceeding through the check-out by clicking on an icon the Transaction will be complete. This does not mean that a Consumer can rescind or terminate a transaction that has been entered into by the Merchant and Consumer. In addition, if a purchase is on a pop-up screen or other similar device, the fundamental elements of the transaction should be apparent to the Consumer.

The Guidelines state that material information about the Transaction should be provided in the same language in which the good or service is offered. Material information is information that is likely to affect an individual. s decision to engage in a Transaction. This would include information about the goods and services, information about the Merchant, costs, and terms and conditions.

Merchants also should make it possible for Consumers to access and maintain an adequate record of information about their Transaction. A record is adequate if information about the Transaction is readily available to Consumers. This could be done in the form of a web page that the Consumer could print to maintain information about the Transaction. Merchants also could maintain an electronic record of Transactions that Consumers could reference from the site at a later date. The record does not necessarily need to be provided to the Consumer in a paper format or maintained for an unreasonably long period of time.

Merchants also should disclose the entire price, type of currency, and expected costs of the goods and services that the Merchant will collect. Included in expected costs would be those costs associated with shipping and handling. Merchants may be unable in advance to determine the specific shipping costs associated with Transactions. In these instances, Merchants should state the expected costs of shipping. In addition, Merchants should provide a description of the routine costs and fees that are not collected by the Merchant that may be incurred by the Consumer. These costs may include tariffs, routine subscription fees, or other fees that may not be collected by the Merchant.

Merchants also should disclose to Consumers when they will be able to ship the goods or services. As the delivery of the goods may not be controlled by the Merchant, the Guidelines do not extend to cover the delivery date. Merchants should inform Consumers of the time when they will be charged for a Transaction. For example, if a product is back ordered and the Consumer. s credit card will not be charged until the order is shipped, this should be stated. Merchants should not charge consumers for products or services unless the delivery of such a product or service is expected to be performed or delivered within a reasonable period of time.

Cancellation/Return/Refund Policies

Merchants should provide information to Consumers about their cancellation, return, and refund policies. Merchants are not required to offer such policies, but if they do not have a policy, they should inform Consumers of this fact prior to completion of the transaction. This will provide Consumers with information that they can take into account in determining whether to engage in a Transaction.

Packaging

If the Merchant ships tangible goods to the Consumer, the goods should be shipped in packaging that can reasonably be expected to protect the goods in transit. Thus, if a tangible good is fragile, the Merchant should take steps such as providing extra packaging that would be expected to protect the product from breaking in transit.

Security

For information that is transferred from a Consumer to the Merchant, Merchants should take reasonable steps to help ensure the security of a Consumer. s Transaction information. These security efforts should be consistent with current industry standards. For data containing sensitive information such as credit card numbers, Merchants should use passwords, encryption, or similar measures to help to protect such information.

Customer Service and/or Support

Merchants should disclose to Consumers information regarding customer service and/or support of the goods and services that Consumers purchase online. If the Merchant provides customer service and/or support, this basic information may include the length of time the customer service and/or support is available, the costs associated with obtaining the customer service and/or support, and who the Consumer should contact to obtain the customer service and/or support.

Warranty

Merchants should disclose to Consumers warranties or limited warranties that are offered regarding the products or services made available to Consumers. If the warranty or limited warranty for a good or service is not offered directly by the Merchant, but rather by the producer of the good or service, the warranty disclosure would not extend to the Merchant. For example, if a product were made directly available online by its manufacturer, the warranty should be disclosed. If, however, a third-party vendor Merchant makes the product available, there would be no requirement that the third party provide the warranty.

Privacy

Merchants should adopt privacy policies that are consistent with existing industry standards and existing legal requirements. The privacy provision in these Guidelines is not intended to supersede those standards, but is stated in general terms so that Merchants will include privacy protections in Transactions with Consumers. At a minimum, such policies should provide notice to consumers in terms of what type of information is to be collected and how it will be disseminated. Merchants also should provide consumers with choices as to the dissemination of information by Merchants for marketing purposes. Thus, if a Merchant intends to transfer Consumers. information to a third party for marketing purposes, the Merchant should provide the Consumer with the ability to opt out of such transfers.

Self-Regulatory Programs

Self-regulatory programs and any applicable dispute resolutions processes in which the Merchant participates should be disclosed.

Dispute Resolution

Merchants should provide Consumers with fair, timely, and affordable means to settle disputes and obtain redress. The ability to effectively address complaints will contribute significantly to Consumer confidence in online Transactions. Dispute mechanisms should be affordable, and should not, for example, generally cost more than the amount in dispute. Likewise, dispute resolution mechanisms should not be designed in such a way that the length of time involved in disputing a Transaction would serve as a disincentive to Consumers to use the mechanism.

Merchants are encouraged to provide Consumers with internal mechanisms to resolve complaints and are encouraged to participate in third-party dispute resolution programs including online dispute resolution processes. Third-party dispute programs may encourage Consumers to exhaust any potential remedy through a company. s internal complaint mechanism prior to taking the complaint to the third-party dispute resolution program. Experience has shown that most complaints can be best resolved internally between the Merchant and Consumer. Similarly, the Consumer and the Merchant could agree that the Consumer. s claims will be submitted to third-party dispute resolution. Contract clauses may require consumers to use alternative dispute resolution prior to seeking court relief where such relief is available. ADR procedures as described herein should be deemed to be in furtherance of, and not to interfere with, the ultimate rights of Merchants or Consumers.

Effective Enforcement

Merchants should participate in effective self-regulatory enforcement efforts to provide validation that they adhere to the Guidelines for Merchant-to-Consumer Transactions. Validation of adherence to the Guidelines can be demonstrated in a number of ways, including through the use of a seal or other recognizable symbol. Such seal programs have been developed in the area of online privacy and provide Consumers with an easily recognizable means of knowing that Merchants adhere to responsible business practices. The use of seals can serve to provide Consumers with comfort that there is independent oversight of Merchants. representations of compliance with the Guidelines.

Seal programs should include a system by which companies could lose their seal for not following the Guidelines. Seal programs should provide a means to address consumer complaints. Additionally, seal programs should require organizations that participate in their programs to undergo periodic review of their practices in order to help maintain adherence to the Guidelines. Seal programs also should engage in random reviews of seal recipients. Companies that are signatories to the Guidelines should encourage companies with which they conduct business to adhere to the Guidelines and participate in seal programs.

The Guidelines state that Merchants should provide consumers with fair, timely, and affordable means to settle disputes and obtain redress. The seal program can provide a means for addressing consumer complaints through an alternative dispute resolution mechanism. The placement of the seal can provide an easy means for Consumers to contact the seal provider to address complaints. Seal programs should be able to handle the number of inquiries that may occur and have an established means of addressing the inquiries. Such an ADR program should provide adequate means of due process. Such process should include:

  • Independence/impartiality
    • decision-maker possesses the abilities, experience, and competence required to carry out his/her function;
    • decision-maker has a right to stay in his office or position so as to ensure the independence of his/her action, and is not liable to be removed from this office or position without just cause.
  • Transparency
    • participants are provided a description of the types of disputes which may be referred to the forum, as well as any restrictions on the geographical scope of the forum and/or monetary limitations on the scope of disputes it is permitted to hear;
    • participants have notice of the procedural rules for the forum and the possible costs of the procedure (including the rules regarding any award of costs);
    • participants have notice of the substantive rules to be applied by the forum;
    • participants have notice of the manner in which decisions are made by the forum;
    • participants have notice of the binding/precedential effect of any decision by the forum, together with the penalties for non-compliance with the forum's ruling;
    • written decisions are communicated to the parties concerned as soon as possible, stating the grounds on which they were made;
  • Adversarial
    • procedure allows parties to present their arguments and facts to the forum and to hear the arguments and facts of the other party.
  • Effectiveness
    • consumer is not obliged to hire a lawyer in order to use the process (but is not precluded from doing so);
    • procedure is only moderately costly;
    • decision is made promptly;
    • forum is allowed to take into consideration factors that might assist in settlement.