Federal Forum Tackles E-Commerce Regulation

The U.S. Federal Trade Commission (FTC) opened debate Thursday on possible new e-commerce regulations, specifically whether existing laws should apply to software and other types of Internet downloads.

According to an FTC advisory, the two-day forum will consider how “government, private industry and consumer advocates can work together to ensure that consumers receive adequate information when shopping for software and other computer information products and services.”

The conference’s program will be largely concerned with the level of consumer protection afforded by “clickwrap” warranty agreements, where a consumer “clicks” to assent to a warranty agreement before downloading a piece of software.

In the real world, a consumer agrees to the provisions of a warranty by breaking the shrinkwrap seal on a package.

Speaker Imbalance

While the forum is intended to focus on consumer protection, some observers have noted that the speaker’s list is heavy on lawyers and industry representatives and light on consumer advocates.

Part of the concern among consumer advocates is that an attempt by the computer and software industries to implement legislation called the Uniform Computer Information Transaction Act (UCITA) — designed to normalize regulations from state to state — will weaken consumer protections.

In public comments submitted for the forum, Jean Ann Fox of the Consumer Federation of America expressed concern that the industry practice of disclosing warranty and contract terms using the shrinkwrap or clickwrap methods after a sale would be sanctioned legally.

“Instead of selling software and computer services as ‘goods and services’ subject to traditional laws,” Fox wrote, “the ‘licensing’ of intellectual property is an attempt to fundamentally rewrite the rules that have determined the balance of equities and power between sellers and buyers in order to give more power to sellers at the expense of buyers for electronic commerce.”

Debate on Uniformity

However, industry leaders point out that the uniform laws do provide consumer protections, not only by making laws and rights consistent between jurisdictions, but also by adding a requirement for a full refund or replacement of a software purchase if it is returned.

America Online vice-president and associate general counsel A. Brian Dengler expressed guarded support for the government’s potential regulatory participation.

“Public policies should be market-driven and industry-led,” Dengler wrote in public comments filed before the hearing. “Policies should be developed collaboratively, with input from industry leaders, government officials and perhaps most importantly, consumers and other stakeholders.”

“Where government involvement is determined to be necessary,” Dengler added, “policies should be technologically neutral and non-discriminatory, to ensure that the Internet enjoys the same potential for growth as any other medium.”