FTC Sees Room for Improvement in E-Commerce Sites

The U.S. Department of Commerce wants electronic commerce Web sites to do a better job explaining to consumers who the companies are and reassuring them their online transactions are safe.

At a Federal Trade Commission Workshop on Consumer Protection in the Global Marketplace Tuesday, Secretary of Commerce William M. Daley said all of the bullish predictions about e-commerce’s future will be off target unless online shoppers feel more secure about making large or frequent purchases.

“Industry and consumer groups have to work together to set the floor on consumer protection so that consumers gain the same confidence in cyberspace as they have on Main Street. If this happens, it would be a win for the private sector and prevent unnecessary government action,” Daley said, hinting that Web businesses can control their regulatory future by cracking down on Internet fraud and other security problems.

Worldwide e-commerce is expected to grow from about $70 billion (US$) this year to about $1.4 trillion by 2003, the FTC estimates, with American consumers spending $18.1 billion this year and increasing to about $108 billion by 2003.

In an informal survey of 100 U.S. Web sites and 100 from 17 other countries, the FTC said it found that “most companies provided helpful general business information but did not provide important contract-related information such as refund policies, cancellation terms and warranty information.”

Noting the variations in trade law from one country to another may have a significant impact on consumer protection, the FTC lamented that only 21 percent of the U.S. Web sites it visited noted any geographic restriction on sales and only 11 percent disclosed the applicable currency. Only 9 percent of all sites visited provided cancellation terms, and 26 percent offered refund policies. About 38 percent of all sites disclosed the applicable currency.

Improving these statistics is critical to the growth of worldwide e-commerce, FTC Chairman Robert Pitofsky said. “The informal nature of the medium, the lack of personal contact between buyer and seller, the geographic dispersion of sellers, create new and unprecedented opportunities for consumer abuse through fraud and deception — opportunities so great that, if not effectively addressed, they can undermine the full development of global competition itself.”

The picture is not all bad, though. Online companies have made significant improvements in ensuring privacy protection, Secretary Daley said, noting approximately two thirds of U.S. Web sites provide privacy statements online. He also praised the Online Privacy Alliance, the Better Business Bureau’s BBBOnline and other organizations that help companies develop and implement privacy policies.