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October 2000
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Toward a Global E-Commerce Clause
Producing consumer protection results-not jurisdictional disputes-for the global network

By Susan P. Crawford <scrawford@wilmer.com> and David R. Johnson <djohnson@wilmer.com>

Merchants and consumers now do business with each other on a global basis. It is impossible for the entrepreneurial small businesses that are flocking to the Internet to comply simultaneously with inconsistent local consumer protection laws in the multiple jurisdictions where their customers may be located. At the same time, consumers will remain unnecessarily uncomfortable with shopping online if they do not know where the merchant they are dealing with is located and if they cannot be sure whether there is some reasonable prospect of obtaining relief should something go wrong.

The answer to this problem is to establish baseline responsible practices that online merchants should follow. Such practices should include clear disclosure of the local laws under which the merchant is accountable, as well as provision of online dispute resolution mechanisms that ensure convenient, fair, and enforceable resolution of any disputes. Once such guidelines and dispute resolution procedures are in place, consumers can choose to deal only with reputable merchants, under rules with which they are comfortable, and with the assurance that any disagreements can be promptly and reasonably resolved.

Adhering to such practices should produce satisfied consumers. It should also lead local governments and consumer protection groups to moderate their calls for continued application of their conflicting, geographically based regulations and procedural remedies.

Most of the existing laws and remedies were developed at a time when convenient dispute resolution meant going down to the local courthouse and when consumer trust meant dealing only with the vendor down the street, who was subject to regulation by local authorities. To get beyond the unworkable hodgepodge of local regulations and idiosyncratic, expensive, and unenforceable local remedies, consumer protection advocates must be as innovative as merchants have been in bringing new products and services to an expanding global marketplace.

Local regulatory authorities and consumer protection groups must join in a constructive and creative dialogue with business. The discussion should focus on how best to ensure the desired result of increased trust and consumer satisfaction, rather than on assertions that e-commerce cannot be allowed to deprive consumers of theoretical rights to obtain the same legal remedies against foreign merchants that they have against their own nation's merchants.

Local authorities should not assume in the end that local legal doctrines and procedural remedies ought to apply to transnational e-commerce, as if consumers were walking down their local streets. We have a new, global street, and it has many more shops and offers greater choice and more effective price competition. All concerned want consumers to be able to stroll in comfort down that street. This global electronic street cannot prosper if it is subject simultaneously to thousands of legislatures and courts. It is time to realize that responsible baseline practices, coupled with convenient and fair online dispute resolution, will do more to protect consumers than any amount of hand-wringing about legal jurisdiction or calls for some idealized harmonization of local laws that might be hoped to occur in the distant future.

A key prerequisite to building trust in e-commerce is to make sure that all law enforcement authorities can collaborate effectively, on a global basis, to attack fraud and deceptive practices. Legitimate businesses recognize the right of every local jurisdiction to protect its citizens against such wrongful, universally condemned practices. There is also a need to protect consumers by preserving the free flow of commercial communications, which make the global marketplace more efficient and informative, and to allow new, small shops to come online without being crushed by compliance costs. The best practices being adopted by online businesses should be viewed as an opening attempt to define the core principles that could prove acceptable on a global basis and be applied in the context of local laws that merchants already must obey.

Over time, as more and more consumers and governments become comfortable with the results produced by this approach, we hope to see the development, in effect, of a global e-commerce clause. Local regulations that are not needed to attack fraud should not be allowed to clog the free flow of responsible electronic commerce, preservation of which is very much in the interest of all consumers and is favored by virtually all governments. And local procedures should be replaced by online remedies that are even more convenient, fair, and enforceable.

It must become easier for consumers to determine the identity of the merchant with whom they are dealing and to confirm that the merchant operates under a legal regime that results in effective consumer protection, even if the regime is not identical in all respects to the consumers' local laws. It must also be demonstrated that disputes can be heard more quickly and disposed of more effectively online than either by relying on the consumers' local courts or by attempting to enforce judgments against foreign parties. Once these things happen, consumer trust will increase and consumers will be better protected. Consumers want results, not legal rights.

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