Substantive Mechanisms for Achieving Access to Justice

Yuthayotin, Sutatip

doi:10.1007/978-3-319-11131-5_5

Substantive Mechanisms for Achieving Access to Justice

Sutatip Yuthayotin²

Chapter
First Online: 01 January 2014

1387 Accesses

Abstract

Many consumer transactions are often characterized by unfairness for reasons including the use of misleading advertising, the provision of goods of poor or defective quality and the unauthorized use of personal data. Many laws and regulations have been introduced on the grounds of protecting consumers against these types of deceptive and unfair practices, requiring traders to treat all consumers fairly. As is the case with traditional transactions, consumers in the online market are also often faced with these unfair practices. However, there are other unfair practices in B2C e-transactions that are even more difficult for many consumers to deal with because of the associated advanced technology that created the transnational environment for such e-transactions. With its unique characteristics including the absence of national boundaries and the speed of communication, the emergence of today’s e-market has transformed the procedures and manners of conducting business and allowed unfair commercial practices to occur more easily as traders manipulate technology to their advantage. A question arises as to how well the existing consumer protection mechanisms can cope with advanced information technology and the fast changing environment of the online market. A lack of effective tools for dealing with these problems would lead a large number of consumers to refrain from participating in e-transactions, resulting in B2C e-commerce not achieving its full potential.

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Notes

1.
See I. Ramsay, Consumer law and Policy, Text and Materials on Regulating Consumer Markets 268 (2007).
2.
This is true of various countries’ statutes. These laws require that sellers treat all competing consumers on the same fair basis. This fair trading requirement affects not only consumers but also eradicates the risk of unfair competition between different competing businesses. For a detailed explanation of the regulation of deceptive and unfair commercial practices, see ibid., at 267–77.
3.
See C. Coteanu, Cyber Consumer Law and Unfair Trading Practices 159 (2005).
4.
Among various unfair practices, an often found example in online transaction is the unauthorized use of identity and account information. With the advent of the online market, traders can easily collect personal data about the behavior of consumers without notice or consent and then use such collected data to maximize future sales and profits, thus bringing an unfair commercial practice into the online market. Price discrimination strategy is an example of the unauthorized use of personal data that constitutes an unfair commercial practice. This happens when a trader is charging different prices for the same goods or services to different groups of consumers based on the analysis of their personal data. Relating to this problem, Robert Weiss and Ajay Mehrotra have stated that, in traditional consumer markets, traders often segmented their consumers to charge them different prices. Customers of amazon.com who discovered that they bought identical DVDs at different prices are a clear example. See R. Weiss and A. Mehrotra, Online Dynamic Pricing: Efficiency, Equity and the Future of E-Commerce, 6 Virginia Journal of Law and Technology (2001), available at vjolt.net/vol6/issue2/v6i2-a11-Weiss.html (visited August 21, 2012).
5.
It is impossible to analyze all consumer protection mechanisms existing in the online market. Within the limited scope of this study, mechanisms that are recently developed and have been the subject of extensive discussions and studies are selected as case studies to reveal the difficulties that the existing consumer protection mechanisms are encountering because of the special characteristics of the online market.
6.
The US and the EU have long been considered the most advanced economies, with the highest level of consumer consumption. The emerging economies have recently exerted their influences because of their rapidly increasing rates of consumer spending in the global economy. However, e-consumption is still largely based in North America and Western Europe. In effect, the US and the EU have become the pioneers in introducing and developing consumer protection laws, including those related to online transactions. The laws of the US and the EU are always subjected to many international studies. Therefore, the study of the laws of these jurisdictions is indispensible to help analyze and compare the effectiveness of different consumer protection mechanisms in e-sales. See C. G. Christopher, Jr. and E. Johnson, Emerging Consumer Markets: The New Drivers of Global Economic Growth, 4 CSCMP’ Supply Chain Quarterly 2011 (March 18, 2013), available at supplychainquarterly.com/columns/201104monetarymatters/ (visited March 23, 2013).
7.
For instance, in browser wrap agreements, which are often found in e-sales, the terms and conditions of an e-sale are frequently provided in fine print at the bottom of the page, or hidden from plain view, so the consumers are required to scroll down the page or click a hyperlink to view them. It does not require consumers to click any button or type any words to indicate their assent to those terms and conditions. The offer and acceptance rules under the contract law require interpretation and analysis to determine whether (1) adequate consent has already been given and was made and (2) how to interpret the scope and extent of such assent in the e-commerce setting.
8.
See D. Horton, Flipping the Script: Contra Proferentem and Standard Form Contracts, 80 University of Colorado Law Review 431, 444–6 (2009). For a detailed review of the court roles in standard contract, see C. Edwards, Freedom of Contract and Fundamental Fairness for Individual Parties: The Tug of War Continues, 77 University of Missouri-Kansas City Law Review 647, 655–7 (2009).
9.
In the EU, this issue of recognition and validation of e-contracts clearly appears in the substantive law. Article 9 (1) of the European Directive 2000/31/EC on E-Commerce (ECD) confirms the validity of contracts concluded by electronic means by providing that the legal requirements applicable to contractual processes shall neither create obstacles for the use of e-contracts nor result in such contracts being deprived of legal effectiveness and validity on account of their having been made by electronic means. Various forms of contracts made exclusively by the exchange of e-mails or equivalent individual communications, or concluded through websites, are also legally certified by the ECD according to Articles 10 and 11. Due to the general recognition and validation of e-consumer contracts under this law, various forms of contracts made exclusively by the exchange of electronic means such as e-mail, e-chat, the world wide web and so on, are legally certified under the EU law. This helps assure merchants and consumers alike that electronically executed contracts are as legally binding and enforceable as traditional paper written contracts, supporting confidence among contracting parties that promissory exchanges through e-communication can be enforced. For a discussion of the typology of internet services to consumers, see Coteanu, supra note 3, at 53.
10.
See ibid.
11.
For instance, in the US case, Groff v. America Online, Inc., the plaintiff claimed that he “never saw, read, negotiate for or knowingly agreed to be bound by the choice of law…” present in a click wrap method. The court rejected the claim and explained that, by clicking an “I agree” button located next to a “read me” button or an “I disagree” button at the end of the online merchandise ordering process, the plaintiff as the subscriber is deemed to have agreed to have been bound by the contract terms and conditions displayed on the website including the forum selection clause. The court further concluded that by placing an online order, the plaintiff could not claim that he is not aware of the contract terms that are presented on the website in the form of click wrap agreement and therefore a binding contract should not have been formed under contract law. See Groff v. America Online, Inc. 1998 WL 307001, R.I. Sup Ct., May 27, 1998. In another case of privacy litigation, the court’s ruling confirmed that a click wrap agreement is binding on an online user, including the arbitration clause contained in the final paragraph of the click wrap agreement under a “miscellaneous” heading which also contained the choice of law and forum clauses. Also, the US court is of the view that the arbitration clause was in the same font and size as other contents of the contract. The online user had full access to read, inspect and review the click wrap agreement without any time restriction. See Real Networks, Inc., Privacy Litigation, 2000 WL 631341, N.D. III May 8, 2000, available at internetlibrary.com/pdf/In-re-RealNetworks-N.D.-Ill.-May-8-2000.pdf (visited April 12, 2013). See also Moore v. Microsoft Corporation, NY Sup Ct App Div 2^nd Dept, April 15, 2002. The ruling states that the use of an “I agree” button could be legally binding and creates enforceable legal obligations.
12.
Today, the US is not the only country that recognizes click wrap agreements (as evidenced by the above court judgments). The laws of many other countries have also adopted the click wrap method of contract formation to keep up with the advancing electronic communication technology. The UK is an example. Although there is no case law confirming the validity of click wraps in the UK, the click wrap method for the ordering of goods and services via website is well accepted and is regarded as equivalent to the contract terms made under the parties’ signatures. See C. Riefa and J. Hörnle, The Changing Face of Electronic Consumer Contracts in the Twenty-First Century: Fit for Purpose?, in L. Edwards and C. Waelde (eds.), Law and the Internet 89, 110 (2009).
13.
See Coteanu, supra note 3, at 53.
14.
Depending on the circumstances, the US courts have reached divergent opinions regarding the enforcements of the browse wrap agreements in form of hypertext links. See T. Tasker and D. Pakcyk, Cyber-Surfing on the High Seas of Legalese: Law and Technology of Internet Agreement, 18 Albany Law Journal of Science & Technology 79, 83–4 (2008). One example is that a court confirmed that a browse wrap agreement can be valid and enforceable if the terms of the agreement can be viewed on the homepage or a different web page that is linked to the homepage. See ProCD Inc. v. Zeidenberg 86 F. 3d 1447 (7th cir.1996). Another example is Ticketmaster Corp. v. Tickets.com, Inc. ^, the US District Court clearly established a guideline that for the terms and conditions in a browse wrap to be legally binding and enforceable as a contract, they must also display a prominent notice on the homepage stating that if the user wishes to continue to use the website, he or she must agree to be bound by such terms and conditions of use as set out in the browse wrap. See Ticketmaster Corp. v. Tickets.com, Inc., C. D. C. a., March 7, 2003, available at internetlibrary.com/cases/lib_case25.cfm (visited January 12, 2013). By contrast, in the EU, there is very little judicial guidance concerning the browse wrap method. The focus is placed on different strategies, including an explicit registration of e-merchants and monitoring of unfair terms. See Riefa and Hörnle, supra note 12, at 111.
15.
See Coteanu, supra note 3 at 49. For a detailed analysis of shrink wrap agreements in mass market software, see J. K. Winn (ed.), Consumer Protection in the Age of the Information Economy (2006).
16.
See e.g. Specht v. Netscape Communications Corporation, 150 F. Supp. 2d 585, S.D.N.Y. July 5, 2001, Hill v Gateway 2000, Inc., 105 F. 3d 1147 (7^th Cir.), cert. denied, 522 U.S. 808 (1997) and Brower v. Gateway 2000, Inc., 246 A.D. 2d 246, 676 N.Y.S. 2d 569 (N.Y. App. Div. 1st Dep’t 1998).
17.
In ProCD Inc. v. Zeidenberg, the U.S. Court of Appeals opined that the terms of the shrink wrap agreement are enforceable if such agreement is formed based on certain criterion set out in the judgment. The judge gave his view, which was focused on how and when the contract was made, that in forming a contract the merchant may specify the sales contract is to be formed in the store or thereafter, as in the case of a telephone order where the contract formation can be delayed to the time the customer makes payment, the time the customer has inspected the product or has reviewed the terms of contract. In this case, the merchant invited the customer to indicate acceptance by a specific kind of conduct that can be considered an acceptance. Therefore, the contract was formed when the purchaser accepted or implicitly indicated his acceptance by using the software product after he had the opportunity to learn the terms on the shrink wrap. In other words, the consumer’s act of software purchasing was not tantamount to his acceptance but instead his use of the software was. In addition, the facts in this case indicated that the plaintiff, a software company, provided a conspicuous notice that the license terms were in the product package and, at the time of software start-up, the user had to proceed with the “I agree” routine that was splashed out on the monitor. Finally, the user was also provided with an option to return the product within 30 days, thereby providing the opportunity to decline to be bound by the terms of use. See ProCD Inc. v. Zeidenberg, supra note 14.
18.
However, the question remains as to whether these three prerequisites really protect consumers from possible risks because the consumers could not see or review the terms and conditions of the shrink wrap at the time the products were ordered. For a detailed discussion and recommendations on shrink wrap agreements, see e.g. Coteanu, supra note 3, at 52–3. See also Winn, supra note 15.
19.
See OECD, OECD Conference on Empowering E-Consumers, Strengthening Consumer Protection in the Internet Economy, Background Report’ Washington D.C., 8–10 December 2009 (2009), available at browse.oecdbookshop.org/oecd/pdfs/free/2498011e.pdf (visited June 21, 2011).
20.
The users were no longer able to use the internet services of non-AOL service providers or to run non-AOL programs. They could not access their e-mails and various personal files provided by non-AOL providers. The court ruled such way of presenting wrap agreements shall not be binding. See Williams v. America Online, Inc., 2001 WL 1356825 (Mass. Supr., February 8, 2001).
21.
This affirmative action of clicking the relevant button in a click wrap agreement is usually deemed to be an express declaration stating that the user has assented to the terms and conditions of the agreement. Unlike the click wrap agreement, the browse warp, web wrap and shrink wrap do not require any active action to indicate assent, bringing about a crucial issue on consumer assent. In one case, the US court stated that the browse wrap agreement was not incorporated and thus unenforceable, because the terms were displayed on the website without any clear indication of intent to be bound by the browse terms. See Specht v. Netscape Communications Corporation, 150 F. Supp. 2d 585 (S.D.N.Y. July 5, 2001). A similar direction was also found in a shrink wrap agreement case. A shrink wrap agreement offered by a software vendor was not enforceable because there was no required action that was equivalent to expressly assenting to the terms contained in the shrink wrap standardized contract from the user. See Step-Saver Systems, Inc. v. Wyse Technology 939 F. 2d 91 (3^rd Cir. 1991). See also Arizona Retail Systems, Inc. v. Software Link, Inc., 831 F. Supp. 759 (1993).
22.
For instance, in America Online, Inc. v. Superior Court, the California Court of Appeals also refused to enforce a click wrap contract on the grounds of public policy concerns and promoting social justice. In that case, the court established that the forum selection clause in a click wrap contract that was executed or displayed to the user during the installation process on a CD-ROM constituted an unfair contract making process on the user for the following four reasons. First, there were no negotiations. Second, the terms and conditions of the contract were prepared in a standardized form. Third, the clause was in small text and located at the very end of the contract, rendering it difficult for the user to read. Finally, the contract was contrary to California public policy that encourages and promotes appropriate and fair legal remedies for its citizens. Any restrictions on consumers’ legal rights are not viewed favorably under California public policy. See America Online, Inc. v. Superior Court, 90 Cal. App. 4^th 1 (2001).
23.
See M. E. Budnitz, Consumers Surfing for Sales in Cyberspace: What Constitutes Acceptance and What Legal Terms and Conditions Bind the Consumers?, 16 Georgia State University Law Review 741–87 (2000).
24.
Technological display of the terms during computer use without any required action of consumers or delayed terms can demonstrate a lack of reasonable notice to establish any clear or implied manifestation of assent. See i.e. Hill v. Gateway 2000, Inc., 105 F. 3d 1147 (7^th Cir. 1997), ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1452 (7^th Cir. 1997) and Brower v. Gateway 2000, Inc. 246 A.D. 2d 246, 251 (NY App. Div. 1998).
25.
According to the reasonable notice rule, consumers must be given reasonable notice of contract terms for unsigned contracts (e.g. tickets or other commercial materials) to constitute or indicate their assent. The rationale for this rule is that consumers might negotiate the contract terms or decide to walk away from the unfavorable terms of contracts. See Ramsay, supra note 1, at 167.
26.
See Tasker and Pakcyk, supra note 14, at 91.
27.
On one hand, one judge held that the consumer did not agree to clauses that looked like a posted internet advertisement. See Jones v. Tread Rubber Crop., 199 F. Suoo. 2d 539, 544 (S.D. Miss. 2002). Another has involved the placement and the obviousness of a hyperlink where it was “inconspicuously located at the bottom of the internet page”, thus providing insufficient notice. See DeFontes v. Dell Computers Corp., No. PC 03-2636, 2004 (R.I. Super. Ct. Jan. 29, 2004). On the other hand, a court found that posted content resembling an advertisement was a sufficient contractual offer that was able to lead to acceptance. See Lim v. TV Corp. Int’l., 121 Cal. Rptr. 2d 333, 336–7 (Cal. Ct. App. 2002). See also Register.com v. Verio, Inc., 126 F. Supp. 2d 238, 248 (S.D.N.Y. 2000).
28.
See Register.com, Inc. v. Verio, Inc. 356 F. 3d 393, 403 (2d Cir. 2004). For further refined direction, the repeat consumers to web site are likely to notice the posted terms, being subject to enforcement of browse wrap agreements. See Druyan v. Jaggar, 508 F. Supp. 2d 228 (S.D.N.Y Aug. 27, 2007) (holding that where a party repeatedly visited a website for 5 years, the link to the terms that was placed above the link leading to the web page was sufficient notice).
29.
See Tasker and Pakcyk, supra note 14, at 83.
30.
The UTD is one of the Directives of consumer acquis that is currently under review. See J. Stuyck, Unfair Term, in G. Howells and R. Schulze (eds.), Modernizing and Harmonizing Consumer Contract Law 115, 115 (2009). See also European Commission, Unfair Contract Terms (July 4, 2007), available at ec.europa.eu/consumers/cons_int/safe_shop/unf_cont_terms/index_en.htm (visited 28 June 2012).
31.
See Article 3 (1) and (2) of the UTD prescribe general criteria of contracts that are subject to this Directive as: A contractual term that has not been individually negotiated.
32.
According to Article 6 of the UTD, the rules of the UTD always apply to contracts of adhesion that are presented by a “take it or leave it” means, which is in contrast to negotiated contracts. See Riefa and Hörnle, supra note 12, at 111–2.
33.
See Article 3 (1) of the UTD. In Austria, Finland and Luxembourg the fairness test is focused solely on the imbalance of rights and obligations between parties. Differently, in Denmark and Slovakia, this test is limited to moral and honest trading practices. For the further discussion of the fairness test and the scope and meaning of good faith under this Article, see Stuyck, supra note 30, at 123–4.
34.
See Article 4 (1) of the UTD.
35.
See Article 4 (2) of the UTD.
36.
See Article 3 (3) and the Annex of the UTD.
37.
See Article 5 of the UTD.
38.
See ibid.
39.
See J. K. Winn and B. H. Bix, Diverging Perspectives on Electronic Contracting in the US and EU, 54 Cleveland State Law Review 175, 186 (2006) and Riefa and Hörnle, supra note 12, at 111.
40.
See Article 6 of the UTD Today, the provisions of the UTD highlighted above have been proven to perform their duty in protecting consumers in e-sales in the EU. A leading example of this occurred in France, when over 30 clauses in a pre-drafted internet access contract of American Online, Inc. (AOL) were found to be unfair and thus unenforceable as they violated the provisions of the UTD. The clauses of AOL’s standard contract breached the French domestic law of consumer contract implementing the UTD and AOL was subject to a 30,000 Euro fine and ordered to remove the unfair clauses within one month. In addition, AOL agreed to no longer use the nineteen unfair clauses in its standard contract offered to consumers in Germany. AOL also promised to pay 2,000 Deutsche Marks if it included any unfair terms in its pre-drafted contracts in the future. See M. L. Rustad and M. V. Onufrio, The Exportability of the Principles of Software: Lost in Translations?, 2 Hastings Science & Technology Law Journal 25, 21 (2010). See also Riefa and Hörnle, ibid., at 113 and J. R. Maxeiner, Standard-Terms Contracting in the Global Electronic Age: European Alternatives, 28 Yale Journal of International Law 109, 164 (2003).
41.
A study on the substantive content of standard terms found that the majority of the explored contracts were more favorable to the drafters or the sellers, particularly the standard terms concerning dispute resolution clauses, as compared to the same issues prescribed in the default rules set by the state. See F. M. Wurgler, Unfair Dispute Resolution Clauses: Much Ado About Nothing?, in O. B. Shahar (ed.), Boilerplate: Foundations of Market Contracts, 45, 45–64 (2007).
42.
See also J. Braucher, New Basics: Twelve Principles for Fair Commerce in Mass-Market Software and Other Digital Products, in J. K. Winn (ed.), Consumer Protection in the Age of the Information Economy 177, 188 (2006).
43.
See ibid.
44.
See R. J. Mann and T. Siebeneicher, Just One Click: The Reality of Internet Retail Contracting, 108 Columbia Law Review 984, 999 (2008).
45.
Although arbitration comes with confidentiality, speed and lower cost, the binding arbitration of future disputes in consumer transactions has been criticized and objected to by many scholars. The OECD, for example, has considered cross border consumer dispute resolution in various study documents and mandatory arbitration is not suggested or endorsed by them because it places an unfair burden on consumers. For further arguments regarding arbitration clauses in consumer sales, see S. McGill, Consumer Arbitration Clause Enforcement: A Balanced Legislative Response, 47 American Business Law Journal 361–413 (2010).
46.
See Wurgler, supra note 41, at 45–64 (2007).
47.
See Annex (q) of the UTD.
48.
In the European Union, the Brussels Regulation provides the ground rules for jurisdiction of judgments in civil and commercial cases between parties and governs the enforcement of judgments through the Member States.
49.
Article 15 of the Brussels Regulation defines a consumer as someone who is acting “outside his trade or profession” which is the definition used in all of the mandatory rules concerning consumer protection under the European Legislation. Article 17 specifies that consumers cannot waive their rights to initiate or defend litigation in their local or residential courts.
50.
See ibid.
51.
See Joined cases C-240/98 to C-244/98, Oceano Grupo Editorial SA v. Rocio Muciano Quinterno and Salvat Editores SA v. Jose M. Sanchez Alcon Prades, Jose Luis Copano Bacillo, Mohammed Berroane and Emilio Vinas Feliu, 2000 E.C.R I-4941.
52.
The ECJ ruled that the forum clause violated the UTD because consumers were compelled to settle their dispute far away from their home. Also the court additionally reasoned that where the cases involve a small monetary amount, the consumers seem to have no redress because the cost of litigation will highly exceed the possible recovery. Therefore, such choice of forum clauses are considered to have the effect of excluding or hindering the rights of consumer to pursue legal action.
53.
See Article 4 of the Rome I Regulation.
54.
See Article 4 of the Rome I Regulation.
55.
See Article 7 (1) of the Rome I Regulation.
56.
In the original proposal for a Directive of Consumer Rights which was the result of the Review of the Consumer Acquis launched in 2004 by the Commission with the aim of improving and modernizing the existing consumer directives, it includes a blacklist of terms that are unfair in all circumstances and a gray list of terms that are presumed to be unfair, replacing the UTD. The blacklist may be an effective tool for consumers in struggling against compelled arbitration clauses, unfair choice of law and forum clauses that are commonly found in wrap agreements.
57.
The intervention in the market to protect or benefit consumers can have a distributive effect toward others. The merchant will suffer from certain costs to comply with the set regulations. See H. Luth, Behavioural Economics in Consumer Policy, The Economic Analysis of Standard Terms in Consumer Contracts Revisited 113 (2011).
58.
The requirements for businesses to comply with foreign laws and litigate in foreign jurisdictions add cost to those who do business across borders. See also European Commission, Proposal for a Directive of the European Parliament and of Council Concerning Unfair Business-to-Consumer Commercial Practices in the Internal Market and Amending Directives 84/450/EEC, 97/7/EC and 98/27/EC Explanatory Memorandum, 18.6.2003 COM (2003) 356 final 2003/0134 (COD) (June 18, 2003), available at eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52003PC0356:EN:NOT (visited March 1, 2013).
59.
See European Commission, Unfair Contract Terms July 4 2007), available at ec.europa.eu/consumers/cons_int/safe_shop/unf_cont_terms/index_en.htm (visited 28 June 2012).
60.
Legal obligations will create additional costs to sellers, who will usually pass these on to consumers where possible. This is the so called mandatory allocation or risk. See R. J. van Den Bergh, Competition Law and Consumer Protection Legislation, in A. N. Hatzis (ed.), Economic Analysis of Law: A European Prospective 22, 22–3 (2003).
61.
See R. J. van Den Bergh, Subsidiary as an Economic Demarcation Principle and the Emergence of European Private Law, 5 Maastricht Journal of European and Comparative Law 129, 135 (1998).
62.
“… it would be indeed ironic if greater insight into the complexity of human decision making become the justification of taking the freedom to decide, even if imperfectly, from those very individuals.” See S. Issacharoff, Can There be a Behavioral Law and Economic?, 51 Vanderbilt Law Review 1729, 1745 (1998).
63.
See Luth, supra note 57, at 35.
64.
See C. P. Gillette, Rolling Contracts as Agency Problem, 42 Houston Law Review 679, 716–7 (2004).
65.
Some scholars argue against the UTD that terms of consumer contracts will be automatically efficient in the market as the invisible hand is assumed to drive the information flow, resulting in better and fairer terms. To maximize profit and attract more consumers, sellers will have to draft their standard terms to meet consumers’ preferences, in particular those who are reading and shopping for better terms. Other consumers then can free ride on the efforts of the informed consumers who discipline the market unless they can be distinguished and preferentially treated by sellers. For the details of the argument that the competition drives efficient contracts, see Luth, supra note 57, at 134–5.
66.
For the translated detailed of this study, namely Consumentenautoriteit’s study conducted in 2010, see ibid., at 191.
67.
See ibid.
68.
See OECD, supra note 19, at 30.
69.
See ibid.
70.
The substantive rule of unconscionability or unreasonableness has been developed in common law countries, including commonwealth countries. The concept of unconscionability represents a combination of unequal bargaining power and unfair terms. See Lord Denning’s explanation in Lloyda Bank Ltd v. Bundy (1975) QB 326.
71.
See ibid.
72.
For the details of first development of the two-pronged test, see A. Leff, Unconscionability and the Code – The Emperor’s New Clause, 115 University of Pennsylvania Law Review 485, 489–546 (1967). See also Williams v. Walker-Thomas Furniture Co., 350 F. 2d 445, 449 (D.C. Cir. 1965). The guideline drawn by this court decision mirrors the two-pronged test initially introduced by A. Leff.
73.
See Parilla v. IAP Worldwide Services VI, Inc., 368, F. 3d 269, 276–77 (3d. Cir. 2004). See also A. J. Schmitz, Embracing Unconscionability’s Safety Net Function, 58 Alabama Law. Review 73, 91–2 (2006).
74.
See Brower v. Gateway 2000, Inc. 676 N.Y.S. 2d 569, 574 (N.Y.App. Div.1998).
75.
See M. Zhang, Contractual Choice of Law in Contracts of Adhesion and Party Autonomy, 41 Akron Law Review 123, 153 (2008).
76.
See Wilson Trading Crop. v. David Ferguson, Ltd. 23 N.Y. 2d 398, 403 (N.Y. 1968). The court concluded that the question of whether the terms in a contract are unconscionable or not is an issue for the judicial institution to determine based on the background and circumstances surrounding the commercial setting of such contract.
77.
Generally modern contract law has been crafted and advanced by lawmakers and scholars who put emphasis on the freedom of choice and the limitation of state regulation and judicial intervention in promissory exchange. Formalist concepts that promote harsh enforcement of commercial contracts are relatively prevalent. As the society industrialized in the US, the contract rules were then formalized which focused on the idea of modern contract law and transformed into the Restatement (Second) of Contracts and Article 2 of the Uniform Commercial Code (UCC), which governs the sale of goods. However, such formalized contract laws cannot ignore the flexible fairness that lies at the core of contract. The Restatement (Second) of Contracts and Article 2 of the UCC, have appeared to recognize the unconscionability doctrine as a mechanism to flexibly protect fairness and equality. The Restatement (Second) of Contracts states prescribes unenforceable standard terms are that beyond reasonable expectation. The Restatement (Second) of Contracts refers to the unconscionability doctrine that a bargain “is not unconscionable merely because the parties to it are unequal in bargaining position nor even because the inequality results in an allocation of risks to the weaker party”. See e.g. Braucher, supra note 42, at 192, Schmitz, supra note 73, at 75, P. S. Atiyah, The Rise and Fall of Freedom of Contract 146–7 (1979) and P. Huber, Flypaper Contracts and the Genesis of Modern Tort, 10 Cardozo Law Review 2263, 2268–9 (1989).
78.
During the 1970s, courts in the U.S. had shown their positions on these debates through their judgments. These judgments confirmed the courts’ belief that state actions are necessary for the creation and assurance of basic justice although such state actions may adversely affect the exercise of freedom of contract. In Jones v. Star Credit Corp., for example, the court declared that the doctrine of unconscionability is a state regulation ensuring basic justice while respecting the sanctity of bargain on the basis that contracting parties are free to make decisions to be bound by any contract term that they are truly willing to be bound by. See Jones v. Star Credit Corp., 298 N.Y.S. 2d 264, 265 (N.Y. Sup. Ct. 1969). See e.g. Rowe v. Great Atlantic & Pacific Tea Co., 385 N.E. 2d 566, 569 (N.Y. 1978) and Ortelere v. Teachers’ Retirement Bd. of City of New York, 250 N.E. 2d 460, 465 (N.Y. 1969).
79.
Policing contractual relationship for unfairness is not a new concept. The unconscionability doctrine is believed to have its roots in the Roman civil law of laesio enormis doctrine in the early fourth century. According to this Roman doctrine, the seller could call for revocation if the price of a land sale received was not equivalent or over half the value of the land sold. For further discussion of the historical evolution of unconscionability, see S. E. Friedman, Giving Unconscionability More Muscle: Attorney’s Fee as a Remedy for Contractual Overreaching, 44 Georgia Law Review 317, 334–5 (2010). See also Edwards, supra note 8, at 672.
80.
See Edwards, ibid.
81.
See ibid.
82.
See Comb v. Paypal, Inc., 218 F. Supp. 2d 1165 (N.D. Cal. 2002).
83.
See DeJohn v. The TV Corp. International, 245 F. Supp. 2d 913, 915–19 (N.D. Ill. 2003).
84.
This highlighted the difficulty of proving an online contract unconscionable, see R. J. Casamiquela, Contractual Assent and Enforceability in Cyberspace, 17 Berkeley Technology Law Journal 475, 493–5 (2002).
85.
See Novak v. Overature Svcs., 309 F. Supp. 2d 446, 456 (E.D.N.Y.2004).
86.
See ibid., at 452. See also Riensche v. Cingular Wireless LLC, No. C06-1325Z, 2006 U.S. Dist. (December 27, 2006), available at aterwynneblog.com/oregon_business_litigatio/files/riensche_order.pdf (visited January 12, 2013).
87.
Contractual content and the content of the language have long been problematic issues in traditional consumer sales and the discussion is still ongoing. This paper has limited discussion in this area as the contractual language is not the main critical issue in the internet context and it does not create any distinctive problems as compared to the related long developed ideas in traditional sales.
88.
See Hubbert v. Dell Corp., 835 N.E. 2d 113, 126 (Ill. App. Ct. 2005).
89.
See Novak v. Overature Svcs., 309 F. Supp. 2d 446, 452 (E.D.N.Y.2004).
90.
See Comb v. Paypal, Inc., 218 F. Supp. 2d 1165 (N.D. Cal. 2002).
91.
See DeFontes v. Dell Computer Corp., No. PC 03-2636, 2004(R. I. Sup. Ct.).
92.
See Provencher v. Dell, Inc., 409 F. Supp. 2d 1196, 1201–02 (C.D. Cal. 2006).
93.
See DeJohn v. The TV Corp. International, 245 F. Supp. 2d 913, 915–19 (N.D. Ill. 2003).
94.
For the further discussions on this matter, see Schmitz, supra note 73, at 75.
95.
Contemporary trends in contract law accept the individual’s right to pursue their individual interests by contractual means and refuses the imposition of limitations on such rights such as through judicial intervention using the unconscionability doctrine in relation to social justice. See e.g. E. A. Posner, Contract Law in the Welfare State: A Defense of the Unconscionability Doctrine, Usury Laws, and Related Limitation on the Freedom to Contract, 24 Journal Legal Studies 283, 318–9 (1995) and M. Rosenfeld, Contract and Justice: The Relation Between Classical Contract Law and Social Contract theory, 70 Iowa Law Review 796, 776–83 (1985).
96.
At present, there is no current objective criterion for establishing what is an appropriate “just term”. See R. A. Epstein, Unconscionability: A Critical Reappraisal, Search Term Begin, 18 Journal of Law & Economics 293, 306 (1975) and M. Rosenfeld, ibid, at 779–840. On the other hand, those who are against the limited application of this doctrine believe that judges are quite qualified to exercise their discretion in relation to social fairness norm as members of society. As members of society judges have a better understanding of such norms than the complex formalized rules or regulations.
97.
See Schmitz, supra note 73, at 75.
98.
See Epstein, supra note 96, at 315.
99.
See ibid., at 293.
100.
See A. R. Kamp, Uptown Act: A History of the Uniform Commercial Code: 1940–1949, 51 SMU Law Review 257, 335 (1998).
101.
See Schmitz, supra note 73, at 98. The author explains the economic rationale behind the strict application of the unconscionability doctrine by referring to the statements of many scholars.
102.
See ibid., at 110–1.
103.
These kinds of standard terms do not explicitly conflict with any substantive laws of the US. The Restatement (Second) of Contracts allows parties to freely choose an exclusive forum. Section 114 endorses the forum selection clause which states that the court will broadly enforce the parties’ choices of forum clause unless the choice is “unfair or unreasonable”. The UCC also entitled the parties’ choice of law in standard form unless it was so one sided as to be “unconscionable”. Consequently, these terms shall be legally enforceable unless they meet the two prong tests of unconscionability and are found to be unfair or unreasonable terms.
104.
See R. J. Casamiquela, Contractual Assent and Enforceability in Cyberspace, 17 Berkeley Technology Law Journal 475, 493–5 (2002). See also Riensche v. Cingular Wireless, LLC, No. C06-1325Z, 2006 WL 3827477. (W.D. Wash. Dec. 27, 2006).
105.
Due to the fact that the courts respect the inviolability of the freedom of contract theory and value promissory exchange promoting electronic growth and economic developments. See Friedman, supra note 79, at 342–3.
106.
See ibid.
107.
See Schmitz, supra note 73, at 91–2.
108.
See G. A. Michael, Is There a There There? Toward Greater Certainty for Internet Jurisdiction, 16 Berkeley Technology Law Journal 1345, 1387–90 (2001). The author noted that the “court generally enforces forum selection clauses and that cases protecting consumers from manufacturers’ contractual specifications of applicable law are exception rather than rules.”
109.
See Schmitz, supra note 73, at 98–102. The author discusses unconscionability’s failure to fix contractual wrongs because of bargaining inequalities and unfair terms.
110.
See ibid., at 104. The author further analyzes a numbers of weaknesses concerning strict implementation of unconscionability.
111.
See Braucher, supra note 42, at 188.
112.
The enforcement of consumer protection law is faced with many challenges. Large numbers of consumers will not go to court because the expected benefits from going to the courts or conducting dispute settlements do not exceed the cost of participating in such processes. In internet sales, the cost of time, effort and money seem to be far greater for e-consumers who lost a small value looking for dispute settlement in a distant place under unknown law. See Luth, supra note 57, at 151.
113.
See Schmitz, supra note 73, at 111–2. See also Zhang, supra note 75, at 152–6.
114.
See Brower v. Gateway 2000, Inc., 676 N.Y.S. 2d.
115.
See ibid.
116.
See S. Macaulay, Elegant Models, Empirical Pictures, and the Complexities of Contract, 11 Law and Society Review 507, 517–20 (1997).
117.
See Schmitz, supra note 73, at 114.
118.
See ibid.
119.
The difficulty in seeking the optimal balance between protecting consumers from being taken advantage of by business and the promotion of market efficiency pressures the US court to create a special scale of justice for determining the validity of e-consumer contracts. In many cases, the court finds it difficult to balance this special scale and accommodate both of these two equally important interests. See S. Burton, Principle of Contract Law 256 (1995).
120.
Contract law principles and the unconscionability doctrine governing standard contracts have long been claimed to be vague, ill equipped and to frequently produce unpredictable outcomes. Some scholar further noted that the lack of clarity of the unconscionability doctrine ruins its value and it should be abandoned and the focus should be directed to other mechanisms. See also Schmitz, supra note 73, at 95–6, 98.
121.
See R. Korobkin, Bounded Rationality, Standard Form Contracts, and Unconscionability, 70 University of Chicago Law Review 1230, 1244 (2003).
122.
See Schmitz, supra note 73, at 97.
123.
Under Article 2 of the UCC which applies to sale of good transaction, Section 2-302 states: “1. If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made, the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable term as to avoid any unconscionable result.” Similarly, the Restatement Section 208 prescribes that: “if a contract or term thereof is unconscionable at the time the contract is made a court may refuse to enforce the contract, or may enforce the remainder of the contract without the unconscionable term, or may so limit the application of any unconscionable term as to avoid any unconscionable result.” Therefore, the UCC and the Restatement contain similar statements that have led to the judicial conclusion that the unconscionability does not provide an award of contractual remedy or a cause of any action.
124.
See Friedman, supra note 79, at 319.
125.
One scholar suggests for example the attorney’s fees as a remedy for unconscionable contracts. See ibid., at 334–5. Another propose for the adequately liability toward the drafter, so called contra proferentem. See Horton, supra note 8, at 431.
126.
Traditional commercial law has taken an ambivalent position concerning non-disclosure of some material facts by one contractual party because such disclosure would substantially distort the bargaining value between parties, respecting the doctrine of caveat emptor–buyer beware. In consumer sales, the law and economic perspective is calling for information disclosure from sellers which is believed to promote economic efficiency. “…in general it is the case that a requirement of seller disclosure of material facts is more likely to promote efficient information dissemination, without seriously undermining incentives for information generation, than a requirement of buyer disclosure of material fact, which may undermine incentives to invest in information generation relating to privately and socially undervalued assets in the first place”. See M. J. Trebilcock, Rethinking Consumer Protection Policy, in C. E. F. Rickett and T. G. W. Telfer (eds.), International Perspectives on Consumers’ Access to Justice 68, 95 (2006). The economic analysis of law further suggests that the government should only intervene in the market’s functions to correct market failures, with information failure being the most recognized. Information failure results from information asymmetries, destroying the value of contractual bargaining between parties and undermining market efficiency. Thus, the information disclosure regulations are creatures of well accepted rationale as a tool in the fight against information asymmetries in the market. See Ramsay, supra note 1, at 53–106 and S. Bainbridge, Mandatory Disclosure: A Behavioral Analysis, 68 University of Cincinnati Law Review 1023–60 (2000) and T. Durkin and G. Elliehausen, Disclosure as A Consumer Protection, in T. Durkin and M. Staten (eds.), The Impact of Public Policy on consumer Credit 109–48 (2002).
127.
The ECD covers all transactions relating to e-information to ensure that a contract concluded by e-means is based on free and valid consent. The ECD requires the service providers to provide necessary information, appropriate processes for the placing of the order and general obligations to monitor and comply with the relevant codes of conduct. See Articles 5 to 15 of the ECD. See also Riefa and Hörnle, supra note 12, at 113.
128.
See Article 5 of the ECD.
129.
See Article 10 of the ECD Article 10 (1) of the ECD prescribes that, in case of consumer contract entered into by electronic means, the service provider (i.e. merchant) must provide consumers with the following necessary information before the consumer can place an e-order:
(a) the different technical steps to follow to conclude the contract;
(b) whether or not the concluded contract will be filed by the service provider and whether it will be accessible;
(c) the technical means for identifying and correcting input errors prior to the placing of the order;
(d) the languages offered for the conclusion of the contract.
130.
See Article 10 (1) (c) of the ECD requires a service provider, including the merchants, to acknowledge consumers and provide consumers with a technical means for identifying and correcting any input error before the consumers are able to enter the final ordering process. In this regard, Article 11 (2) of the ECD enumerates that the merchant shall provide to the consumer of the service appropriate, effective and accessible technical means allowing him to identify and correct input errors prior to the stage of order placing.
131.
See Article 5 (1) (a) to (g) and (2) of the ECD.
132.
See Article 5 (1) and 10 (1) of the ECD.
133.
See Article 10 (1) of the ECD.
134.
See Article 10 (1) of the ECD.
135.
The CRD prescribes the obligation of trader that trader must disclose necessary information to consumers in distance contracts before entering in to the contract. It contains specific provisions relating to the conclusion of distance consumer contracts by mail order, phone, fax and internet. For the purposes of the ECD, see The preliminary Section of the ECD.
136.
See Article 6 of the ECD.
137.
See Article 8 (1) of the ECD.
138.
See Article 8 (1) and (2) of the CRD.
139.
The transparency requirements are to ensure that the information is disclosed in ways that are easy to digest and understand by consumers as well as to maximize the opportunity for consumers to take such information. Articles 5 (1) and 10 (1) of the ECD and Article 6 (1) and 8 (1) of the CRD are considered the transparency requirements.
140.
See Article 8 (1) to (4) of the ECD.
141.
See Article 8 (7) of the ECD.
142.
See A. N. Scholes, Information Requirements, in G. Howells and R. Schulze (eds.), Modernizing and Harmonizing Consumer Contract Law 213, 213–4 (2009).
143.
See ibid., at 217.
144.
See ibid., at 214.
145.
In contrast, the use of direct regulation, which compromise diverse preferences by providing an appropriate pattern, usually imposes a single and similar choice on consumers and may result in a rigid market environment. See H. Beales, R. Craswell and S. Salop, The Efficient Regulation of Consumer Information, 24 Journal of Law and Economics 491, 513–32 (1981) and Ramsay, supra note 1, at 119.
146.
See Beales, Craswell and Salop, ibid. Phrased differently, information disclosure helps to lead consumers to make appropriate informed decisions to protect themselves according to their different individual interests rather than placing on the state the difficult task of deciding what is the common need for different and diverse consumers’ preferences.
147.
The information remedies in e-markets may be complicated and subtle task compared to those in the traditional market because of its technological nature. See E. Rubin, The Internet, Consumer Protection and Practical Knowledge, in J. K. Winn (ed.), Consumer Protection in the Age of the Information Economy 35, 38–40 (2006).
148.
The problem of information overload seems to be a critical issue in the internet context rather. The opportunity to digest information by internet means is not comparable to the physical inspection of the goods, an inquiry with seller’s representative, or reading information printed on paper. In addition, the assessment of an unlimited amount of information may sometimes not be a worthwhile exercise compared to the relatively small value of most e-sales. See also O. Ben-Shahar, The Myth of the ‘Opportunity to Read’ in Contract Law, 5 European Review of Contract Law 1, 12–20 (2009).
149.
Many websites insert an overdose of information, confusing consumers rather than helping them. See Riefa and Hörnle, supra note 12, at 116. See also J. Landers and R. Rohner, A Functional Analysis of Truth in Lending, 26 UCLA Law Review 711, 722–25 (1979).
150.
See Luth, supra note 57, 167.
151.
See G. Miller, The Magical Number Severn, Plus or Minus Two: Some Limits on Our Capacity for Information Procession, 63 Psychological Review 81–97 (1956).
152.
See Korobkin, supra note 121, at 1230–95. An author further points out that information overload in e-market may render consumers confused and feel paralyzed with cause consumers to refrain from taking any action, including reading them. See also T. Brennan, Consumer Preference Not to Choose: Methodological and Policy Implications (2005), available at papers.ssrn.com/sol3/papers.cfm?abstract_id=854424 (visited July 12, 2012).
153.
See G. Howell, The Potential and Limits of Consumer Empowerment by Information, 32 Journal of Law and Society 349, 363 (2005), Ramsay, supra note 1, at 122 and Riefa and Hörnle, supra note 12, at 116–7.
154.
See Riefa and Hörnle, ibid, at 116.
155.
The term of “cheap talk”, according to the economic notion, “consists of statements by a participant in a transaction that do not commit the person to any particular course of action; in other words, for proposes of reaching an enforceable agreement, such talk is useless.” Thus, the cheap talk is not beneficial. See E. Rubin, supra note 147, at 47.
156.
From a technological point of view, information disclosure could be more effective as it is cheaper with fewer limitations in some aspects. However, there is an argument that some businesses are attempting to create a new legal culture in the information economy where it is allowed to hold back some important information until after consumers make payment. See Coteanu supra note 3, at 129–30.
157.
See ibid. and Tasker and Pakcyk, supra note 14, at 103.
158.
See also K. Engle and P. McCoy, A Tale of Three Markets: The Law and Economics of Predatory Lending, 80 Texas Law Review 1255, 1307 (2002) and Rubin, supra note 147, at 39.
159.
See Braucher, supra note 42, at 185. This argument is also confirmed by an observation of consumers’ behaviors in lending transactions, which “are typically provided after the contract has been negotiated by the parties, or, to describe the situation more realistically, after the borrowers have been approved for the loan. At this point, researchers have noted, borrowers are already committed to the transaction…Consumers are often unwilling to unwind it and incur the cost of seeking another cost”. See Engle and McCoy, ibid., at 1307, W. Eskridge, One Hundred Years of Ineptitude: The Need for Mortgage Rules Consonant with the Economic Dynamics of the Home Sale and Loan Transaction, 70 Virginia Law Review 1083, 1128–29 (1984). See also C. Peterson, Truth, Understanding, and High-Cost Consumer Credit: The Historical Context of the Truth in Lending Act, 55 Florida Law Review 807, 898 (2003) and Durkin and Elliehausen, supra note 126, at 39.
160.
See Article 8 (3) of the CRD.
161.
Article 8 (2) of the CRD specifies that “the trader shall make the consumer aware in a clear and prominent manner and directly before the consumer place his order of the information provided for in points (a), (e), (o), and (p) of Article 6 (1).”
162.
Article 8 (4) of the CRD states that “…the trader shall provide, on the particular means prior to the conclusion of such contract, at least the pre-contractual information regarding the main characteristics of the goods or services, the identity of the trader, the total price, the right or withdrawal, the duration of the contract and, if the contract is of indeterminate duration, the conditions for terminating the contract, as referred to in points (a), (b), (e), (h) and (o) of Article 6 (1)… ”
163.
Article 8 (4) states that “… The other information referred to in Article 6 (1) shall be provided by the trader to the consumer in an appropriate way in accordance with paragraph 1 of this Article” and such paragraph 1 (Article 8 (1)) provides that “.. the trader shall give the information provided for in Article 6 (1) or make that information available to the consumer in a way appropriate to the means of distance communication used in plain and intelligible language. In so far as that information is provided on a durable medium, it shall be legible”. This means that there is no requirement concerning the time of disclosure for the information excluding from Article 8 (4), unless it otherwise specifies in other particular provisions of timing disclosure requirements such as Article 8 (2) and 8 (3). These are the information required to be disclosed to consumers according to Article 6 (1) (c), (d), (f), (g), (i), (j), (k), (l), (m), (n), (q), (r) and (s).
164.
Also a consumer, at that stage, has already completed almost all of the burdensome steps of the order and may be hesitant to cancel such transaction after such an investment even if the consumer subsequently discovers unfavorable information and they have the right to withdrawal or the right to return.
165.
Generally, the positive outcome of information disclosure does not only require specific content of information that needs to be presented to consumers, it also relies on the fact that such information is presented in clear and understandable language and in a comprehensible manner which allows consumers to digest and understand it.
166.
See Tasker and Pakcyk, supra note 14, at 105.
167.
See Coteanu, supra note 3, at 123–6.
168.
See Tasker and Pakcyk, supra note 14, at 105.
169.
Texts presented in such means that only appear on the computer screen after the consumer click a relevant button. This form of presentation may easily escape consumers’ view or observation, without close direction and guidance from the web operator.
170.
It is an unsettled issue as to whether the use of a scroll bar on a computer monitor to view the information (including terms and conditions) is an obstacle for manifesting consent. The US Courts have divergent views on this matter. However, if the scroll bar connects to a distracting feature which may be able to deter consumers from scrolling further, such form of presentation will be considered an insufficient notice and render the e-contract unenforceable. For a discussion of various trial court decisions concerning the scroll bar method, see Tasker and Pakcyk, supra note 14, at 97–8.
171.
Pop-up windows have become a standard item in software products. Many consumers click to close the pop-up window without reading information contained therein because of their annoyance. Sometimes, pop-up windows were designed to disappear within a certain period. The pop-up window method may become hidden from view and such means of communication may make information more difficult to be digested by viewers. See ibid., at 98–9.
172.
There is an argument that “the physical effort of scrolling to read terms is analogous to turning pages in paper contracts, and not more onerous”. See Bar-Ayal v. Time Warner Cable Inc., No. 03 CV 9905(KMW), 2006 WL 2990032 (S.D.N.Y. Oct. 16, 2006). In contrast, there are arguably enormous differences between information contained on paper and the information conveyed by internet. “Paper is static, while web pages can be dynamic in countless ways, limited only by the imagination and skill of the side developer.” See ibid.
173.
This e-information may easily escape consumers’ view or observation in the absence close direction and guidance from web operator. For a detailed discussion on consumer difficulties with e-shopping and e-communication, see S. L. Jarvenpaa and P. A. Todd, Consumer Reactions to Electronic Shopping on the World Wide Web, 1 International Journal of Electronic Commerce 59–88 (1996–1997).
174.
In the internet market, the mere access of a webpage may be a legal manifestation of the assent of consumers to information and terms provided. See Register.com, Inc. v. Verio, Inc., 356 F.3d 393, 403 (2d Cir.2004). See also Tasker and Pakcyk, supra note 14, at 111.
175.
See Tasker and Pakcyk, ibid., at 100.
176.
See ibid., at 95–105. The author discusses various forms of e-presentations (e.g. scroll bars, pop-up windows, design bypassing, etc.) and the designed effects.
177.
See R. A. Hillman and J. J. Rachlinski, Standard-Form Contracting in the Electronic Age, 77 New York University Law Review 429, 480 (2002).
178.
See OFT, Web Sweep Analysis (March 2008), available at oft.gov.uk/713560/publications/reports/consumer-protection/oft982 (visited March 12, 2013).
179.
See ibid.
180.
The transparent requirements are specified in Article 10 of the ECD and Article 8 of the CRD.
181.
See OFT, supra note 178, at 178 and Riefa and Hörnle, supra note 12, at 115.
182.
See Pinsent Masons, Out-law.com, One in Three Airline Sites Break Consumer Laws (May 13, 2008), available at out-law.com/page-9113 (visited December 30, 2011).
183.
See Article 23 (1) of Regulation 1008/2008 on common rules for the operation air services in the communities. It compels airlines to disclose airfares and related costs in a more transparent and clear manner.
184.
See OECD, supra note 19, at 19.
185.
See G. Hadfield, R. Howse and M. Trebilcock, Information Based Principles for Rethinking Consumer Protection policy, 21 Journal of Consumer Policy 131, 155–66 (1998). The authors outline the characteristics of the market structures that are similar to internet markets, where there was likely to be a detriment to consumers.
186.
See I. D. C. Ramsay, Rationales for Intervention in the Consumer Marketplace 25–35 (1984) and OECD, supra note 19, at 30.
187.
See OECD, ibid. at 30.
188.
See ibid.
189.
See M. Loos, Rights of Withdrawal, in G. Howells and R. Schulze (eds.), Modernizing and Harmonizing Consumer Contract Law 237, 248.
190.
There is an argument put forward for e-sales growth based on the idea that, if more agreements are concluded online, it will ultimately increase the number of cross border transactions. See ibid., at 248.
191.
The right of withdrawal has become an important topic for the revision of the consumer acquis, which the European Commission recently adopted. The framework of the CRD is intended to revise the consumer acquis in the EU, including the consumers’ rights of withdrawal in sale transactions. The right of withdrawal is sometimes called the cooling off period. It is a new legal concept in private law as it was first mentioned in legislation in the early 1970s. The right of withdrawal initially aims to help consumers out from rash transactional decision. During a short cooling off period, consumers may choose to walk away from a contract that may already be concluded. In the European community, the right of withdrawal was initially introduced by the Doorstep Selling Directive. Since then, this concept has been specified in many EU Directives such as the Directives on Life Assurance, Timeshare, Distance Selling and Consumer Credit. For further detailed description of the history of the right of withdrawal at the EU level, see ibid., at 239.
192.
See Article 3 of the CRD.
193.
See Article 9 (2) (a) and (b) of the CRD.
194.
See Article 6 and Article 10 of the CRD.
195.
See Article 11 (3) and Annex I (B) of the CRD. In the case there is a dispute, the burden of proof of exercising the rights of withdrawal rests on the consumers. See Article 14 (1) of the CRD.
196.
See Article 12 of the CRD.
197.
See Article 13 (1) of the CRD. However, if the consumers use the goods, they will be liable for any diminished value of the goods resulting from the handling of goods other than what is necessary to establish the nature, characteristics and functioning of the goods. The consumer will not be responsible for such diminished value if the merchant fails to provide the notice of the withdrawal right to the consumer. See Article 14 (2) of the CRD.
198.
See Article 14 (1) of the CRD. It specifies that “[t]he consumer shall only bear the direct cost of returning the goods unless the trader has agreed to bear them or the trader failed to inform the consumer that the consumer has to bear them.”
199.
See Article 16 of the CRD.
200.
The case of doorstep selling is a clear example. This means of sale had some influence over the establishment of the withdrawal right in legislation. Merchants in door step sales usually make an unsolicited visit to the home of the consumer and induce the consumer to make a decision “he cannot oversee at the moment”. Although the introduction of the right of withdrawal is aiming at eradicating the aggressive sale techniques in the market, obviously one may claim that a distance consumer is also deprived from the chance to assess the quality of product or service offered by the merchant at the time of concluding the consumer contract. In this circumstance, this may create unfairness to consumers and the right of withdrawal should be extended to help them. Macro Loos confirms that “the right of withdrawal serves to enable consumers to rethink their earlier decision, which may not have been made under the influence of the actions of the trader.” Today, the right of withdrawal has been adopted in consumer transactions, including those in the e-market. An often seen example is the e-retail trading practice that the purchased goods can be exchanged or returned within a specified time if consumers are not satisfied with them. This may be because the withdrawal right was also founded on the rationale that consumers in e-sales who cannot determine the quality of the products or ascertain the nature of the services before conclusion of contract. For further discussion of the rationales and aims of the withdrawal right, see Loos, supra note 189, at 245.
201.
The right of withdrawal under the CRD obviously gives the consumers the option to unilaterally go back on their determination to enter into a consumer transaction. The effects of withdrawal mechanisms are far reaching as they protect one party from other party by restricting the binding nature of the contract. See ibid, at 241.
202.
It often includes a variety of sales methods such as e-catalogue sales, e-basket shopping, website marketing, unsolicited e-mails and so on.
203.
See Ramsay, supra note 1, at 330.
204.
“Cooling off period is very attractive because they do not seem to interfere with consumer choice. Unlike bans or costly licensing procedures they protect individual who wish to cancel without interfering with the other individual choices”, see Ramsay supra note 1, at 346. See also C. Camerer, S. Issacharoff, G. Loewenstein, T. O’Donoghue, M. Rabin, Regulation for Conservatives: Behavioral Economics and The Case for “Asymmetric Paternalism”, 151 University of Pennsylvania Law Review 1211 (2003), available at papers.ssrn.com/sol3/papers.cfm?abstract_id=399501 (visited January 12, 2013).
205.
See Ramsay, supra note 1, at 346.
206.
See Loos, supra note 189, at 246–7.
207.
See ibid.
208.
See Recitals 11, 13 and 14 of the preamble to the Distance Selling Directive.
209.
See ibid.
210.
See Reticle 5 of the preamble of the CRD. However, there is an argument against the effectiveness of the withdrawal mechanisms. Although it will certainly take away some barriers for trade in distance and cross border transactions, including internet sales, there are many cautions relating to its function and performance. For example, it is difficult to justify the length of the cooling off period. A short cooling off period may be insufficient “where an individual signs up to a long term contract such as a health club. The consumer may not realize until after a month or so that she will not make significant use of facilities”. See P. Rekaiti and R. van Den Bergh, Cooling of Periods in the Consumer Laws of the EC Member States, A Comparative Law and Economics Approach, 23 Journal of Consumer Policy 371, 383 (2000). For the detailed discussion of the limitations of the withdrawal right, see Ramsay supra note 1, at 345–6 and Loos, supra note 189, at 248.
211.
It is believed that an introduction of the right of withdrawal is in fact the promotion of concluding online consumer contracts through the internet, which would indirectly and efficiently enhance the rise of the transactional participations in the internet market. See Loos, ibid., at 247–8.
212.
See Ramsay, supra note 1, at 330.
213.
See ibid., at 344.
214.
See Loos, supra note 189, at 244.
215.
See Rekaiti and van Den Bergh, supra note 210, at 371–408.
216.
Based on this economic point of view, some commentators doubt the effectiveness of the withdrawal right in internet contracting. See e.g. ibid. and R. Hillman, Online Consumer Standard Form Contracting Practices: A Survey and Discussion of Legal Implementations, in J. K. Winn (ed), Consumer Protection in the Age of the Information Economy 283, 299 (2006).
217.
See ibid.
218.
For agreements concerning moral hazard problems because of the cooling off period, see Rekaiti and van Den Bergh, supra note 210, at 371–408.
219.
See Article 9 (2) of the CRD.
220.
See Article 10 (1) of the CRD.
221.
Unlike the cooling off period rules specified in the various EU directives (such as the 2002 Distance Marketing of Financial Service Directive and the 2008 Consumer Credit Directive) where the extension of cooling off period will be applied if the merchant has not only breached his disclosure information relating to the consumer right of withdrawal but also other information disclosure obligations, the new CRD explicitly specifies that only the beach of the information to be given on the existence of the right of withdrawal will constitute the extension of cooling off period. For further detailed discussion on this issue, see Loos, supra note 189, at 250, 257. In Heininger v. Bayerische Hypo-und Vereinsbank, the ECJ confirmed that the right of withdrawal shall not be start before the consumer is informed of such right by the merchant. See Heininger v. Bayerische Hypo-und Vereinsbank, Case C-481/00, ECR [2001] I-09945, nos. 44–48, AG ECJ 12 December 2001.
222.
Based on the Heininger case, a consumer may be able to withdraw from the transaction as long as one year after the contract was concluded. In this case, the consumer legally exercised his withdrawal right almost 8 years after the conclusion of the contract. See Hamilton v Volksbank Finlder, ibid.
223.
See Article 10 of the CRD.
224.
See Article 8 (1) and Article 6 (1) of the CRD.
225.
Today, there has not been any studied evidence that the right of withdrawal has a positive outcome in EU online sales. It is likely that many online consumers do not notice the right of withdrawal and they rarely use or exercise such right. See Ramsay, supra note 1, at 143.
226.
See Article 11 (1) and Annex I of the CRD.
227.
See Article 11 (3) and Annex I of the CRD. Such notification can also be given by a letter, a telephone call or by returning the goods with a clear statement of the consumer’s decision to withdraw from the contract. See Recital 44 of the CRD.
228.
See ibid.
229.
Many scholars similarly affirmed the benefits over the cost of the withdrawal right. One example study concluded that “[cooling off period] likely to impose costs on sellers, but the greater costs focus on the sellers who benefit from consumer making hasty, ill-conceived decisions in the heat of the moment.” See e.g. Camerer, Issacharoff, Loewenstein, O’Donoghue, Rabin, supra note 204.
230.
See Rekaiti and van Den Bergh, supra note 210, at 371.
231.
See Hillman, supra note 216, at 229. See also Rekaiti and van Den Bergh, supra note 210, at 371, W. Shanklin and H. King, Evaluating the FTC Cooling Off Rule, 11 Journal of Consumer Affairs 101–6 (1977) and Citizen Advise, Can You Cancel It? CAB/ECC Clients’ Experience of Cancellation Rights in Consumer Contracts’ CAB Evidence Briefing (2005), at 4.
232.
See Loos, supra note 189, at 263.
233.
“The form requirement is not based on the need for protection of a fundamental interest of the trader as such, but also seeks to safeguard the trader’s need for a clear, unequivocal statement by the consumer, whereas that objective has apparently been achieved in the particular case at hand.” See ibid.
234.
See ibid.
235.
See ibid.
236.
See Ramsay supra note 1, at 338.
237.
See Article 9 of the CRD. It is interesting to point out that the cooling off period is extended only if the trader has not informed the consumer of his withdrawal right, while the breach of any other information obligation is not sanctioned by the cooling off period extension. Rather, the sanction for the breach of information disclosure requirement is “left to member states to specify in their national laws.” For further detailed discussion on this issue, see Loos, supra note 189, at 250, 257.
238.
For the detailed discussion of these studies, see Ramsay supra note 1, at 338. The author refers to many studies conducted about the cancellation rights. The studies conducted by T.G Ison and OFT are some examples. See T. G. Ison, Credit Marketing and Consumer Protection (1979) and OFT, Doorstep Selling, A Report on the Market Study (2004), available at oft.gov.uk/shared_oft/reports/consumer_protection/oft716.pdf (visited January 12, 2013).
239.
See K. Viitanen, Enforcement of Consumers’ Collective Interests by Regulatory Agencies in the Nordic Countries, in W. van Boom and M. Loos (eds.), Collective Enforcement of Consumer Law 81, 100 (2007).
240.
See OFT, supra note 178, at 20.
241.
See ibid., at 27–8.
242.
See Article 3 of the CRD.
243.
See Rekaiti and van Den Bergh, supra note 210, at 371 and Hillman supra note 216, at 229. In Canada, for example, there is no cooling off period or withdrawal mechanism in e-sales, even though many e-traders offer return policy for their e-consumers. This may be because their policy-makers are skeptic about the benefit of this mechanism. See also Ramsay, supra note 1, at 134.
244.
Due to these burdens, the right of withdrawal in e-sales may cause internet contracting to be prohibitively expensive for merchants while affording little or no benefit to consumers. See Hillman, ibid., at 229.
245.
Some researches show that only a few consumers noticed their withdrawal rights and some found that the exercise of such rights is very complicated. For discussion of these research results, see Ramsay, supra note 1, at 338.
246.
See W. Shanklin and H. King, Evaluating the FTC Cooling Off Rule, 11 Journal of Consumer Affairs 101, 105 (1977).
247.
See ibid.
248.
See Article 13 (1) of the CRD.
249.
See Article 14 (1) of the CRD.
250.
During the discussion in the green paper relating to the CRD, there are various opinions on who should carry the burden of returning goods purchased at a distance. Consumer agency alleged that it would be more efficient if the cost of returning the purchased goods would fall on the sellers because the exercising of the right of withdrawal should not cost anything to consumers. In contrast, some merchants claim that in traditional sales when a consumer buys goods or services and he wishes to return them, he has to bear all the costs associated with the return, including transportation costs. In addition, if the cost of returning were to be borne by consumers, it will prevent abuses and excesses. However, both groups similarly argue in favor of having the sellers pay for returning in case of using the withdrawal right by the consumer because the goods and services delivered do not conform to the contract. For detailed explanation on this matter, see the review of consumer acquis document, at 9–10. See also Loos, supra note 189, at 267.
251.
See OFT, supra note 238.
252.
See ibid.
253.
See also Loos, supra note 189, at 267. The author explained various opinions and the rationale behind the question of who should bear the returning cost during the drafting process of the CRD.
254.
See ibid.
255.
See Hillman, supra note 216, at 282–300. The author provides the detailed data based on his survey with an explanation of why consumers do not read or only partially read the information and standard terms.
256.
The Citizens Advice is an agency service established in UK, aims to provide the advice people need for the problems they face and to improve the policies and practices that affect people’s lives. In 2002, after the Citizen Advice has been informed of various problems relating to consumer transactions from consumers, it made a complaint to the OFT alleging the problems, in particular a lack of knowledge of consumer rights and limitations of cancellation rights provided under the law. In response to such complaints, the OFT conducted a market study identifying detailed problems and making recommendations, see OFT, supra note 238.
257.
It should be noted that today the role of withdrawal mechanisms specified in the CRD, and its impact on the internet market of the EU, have not yet been thoroughly explored by any study because of its recent implementation.
258.
See Rekaiti and van Den Bergh, supra note 210, at 383.
259.
See A. Rea and K. Chen, Chapter VIII Privacy Control and Assurance: Does Gender Influence Online Information Exchange?, in K. Chen and A. Fadlalla (eds.), Online Consumer Protection: Theories of Human Relativism 165, 165–6 (2009).
260.
Generally, if the collected individual information is often used without consumer’s consent or for purposes other than what the consumer was informed of, or the data was easily transferred or shared with other parties without the consumer’s knowledge, the consumer may be unwilling to disclose personal data to merchants. See ibid.
261.
See ibid., at 168.
262.
See ibid., at 177. See also A. Gurung and A. Jain, Chapter VII Antecedents of Online Privacy Protection Behavior: Towards an Integrative Model, in K. Chen and A. Fadlalla (eds.), Online Consumer Protection: Theories of Human Relativism 151, 159 (2009).
263.
See ibid., at 159.
264.
This is because “trust in e-privacy practices has been often cited as one cause of the low consumer involvement in business to consumer electronic commerce.” See ibid., at 177.
265.
Among EU Member States, Article 8 of the European Convention on Human Rights and Fundamental Freedom (ECHR), Council of Europe Convention for Protection of Individuals with Regard to Automatic Processing of Personal Data 1981 (The Data Protection Convention) and Data Protection Directive 95/46/EC (DPD) have been influential in developing the laws on data protection. However, the most important of these is the DPD, which will be the subject of discussion in this part. These pieces of legislation aimed at protecting personal data in Europe are particularly puzzling because of the distinctive characteristic of the EU law and the quick pace of development. However, it should briefly be noted that Article 8 of the ECHR is the fundamental principle of data protection law created in all EU Member States who are signatories to the ECHR. It specifies that “[e]veryone has the right to respect for his private and family life, his home, and his correspondence.” For a general discussion on the implementation of Article 8 of the ECHR by the European Court of Human Rights, see A. Mowbray, Cases and Materials on the European Convention on Human Rights (2007). As inspired by Article 8 of the ECHR, the creators of the data protection Convention drawn guidelines for all Member States in prescribing precise principles and norms aimed at preventing the unjust collection and processing of personal data and information. Although the Data Protection Convention is not legally enforceable, it wields substantial influence over the development of data protection laws in the EU. With the influence of the Convention’s principles, in 1995 the DPD was introduced. For further detailed development of the EU privacy laws, see C. O’ Mahony and P. Flaherty, Chapter XVII The Legal Framework for Data and Consumer Protection in Europe, in K. Chen and A. Fadlalla (eds.), Online Consumer Protection: Theories of Human Relativism 326, 334 (2009).
266.
In 2002, the DPD was complemented by the Directive 2002/58//EC, which is known as the directive on privacy and electronic communications. However, the main principles were already set in the DPD, which covers computerized files containing personal data, including the data that is not automatically processed if such data forms part of a filing system.
267.
See Article 6 (1) (a) of the DPD.
268.
See Article 7 of the DPD.
269.
See Article 8 (1) of the DPD.
270.
See Article 10 of the DPD.
271.
See Article 11 of the DPD.
272.
See Article 14 of the DPD.
273.
See ibid.
274.
See Article 15 of the DPD.
275.
See Article 17 (1) of the DPD. Also, in the case where the processor carries out the process on behalf of the controller, the processor must procure efficient guarantees in respect of the technical security measures and organizational measures governing the processing.
276.
See Article 24 of the DPD. In addition, the DPD further prescribes the establishment of a supervisory authority in each Member State to review the application within its territory of the DPD provisions adopted by the Member State pursuant to the DPD (Article 28 of the DPD). It requires the Member State to make a judicial remedy for any breach of the rights guaranteed by the national law applicable to the processing in question available to any person who has suffered from such infringement (Article 22 of the DPD). The controller will be liable for any compensation to any person who has suffered damage because of unlawful processing operation or any act incompatible with the national provisions adopted pursuant to the DPD (Article 22 of the DPD).
277.
See Articles 24 and 25 of the DPD.
278.
In a more specific context, privacy may take many forms. Some scholars view it as moral, legal or consumer rights. Privacy can be defined as “the right of an entity (normally a person), acting in its own behalf, to determine the degree to which it will interact with its environment, including the degree to which the entity is willing to share information about itself with others”. Others view it as a “social power effort”, “economic theory” or “trust establishment”. For various discussions on the meaning and scope of the privacy, see J. Campbell and M. Carlson, Panopticon.com: Online Surveillance and the Commodification of Privacy, 46 Journal of Broadcasting and Electronic Media 133–145 (2002), T. Hemphill, Electronic Commerce and Consumer Privacy: Establishing Online Trust in the U.S. Digital Economy, 107 Business and Society Review 221–239 (2002) and A. Mukherjee and P. Nath, Role of Electronic Trust in Online Retaining: A Re-Examination of the Commitment-Trust Theory, 41 European Journal of Marketing 1173–1202 (2007). Many look at it within the context of a need to maintain personal space or an important psychological condition. See e.g. G. Gumpert and S. Drucker, The Demise of Privacy in a Private World: From Front Porches to Chat Room, 8 Communication theory 408–25 (1998) and R. Clarke, Internet Privacy Concerns Confirm the Case for Intervention, 42 Communications of the Association for Computing Machinery 60–67 (1999). For other various different opinions toward the definition and scope of privacy, see C. Goodwin, Privacy: Recognition of a Consumer Right, 10 Journal of Public Policy and Marketing 149–166 (1991), A. Papazafeiropoulou and A. Pouloudi, Social Issues in Electronic Commerce; Implications for Policy Makers, 14 Information Resources Management Journal 24–32 (2001) and P. Han and A. Maclaurin, Do Consumers Really Care About Online Privacy?, 11 Marketing Management 35–8 (2002). This study will focus on the consumers’ need for privacy or information privacy in B2C e-commerce, which requires the protection of collecting compilation and dissemination of information relating the use of consumers’ data.
279.
See Clarke, ibid.
280.
See ibid.
281.
See Rea and Chen, supra note 259, at 168.
282.
See ibid. See also, M. J. Culnan and R. J. Bies, Consumer Privacy: Balancing Economic and Justice Considerations, 59 Journal of Social Issues 323, 323–24 (2003).
283.
See FTC, Protecting Consumer Privacy in an Era of Rapid Change, A proposed Framework for Businesses and Policymakers, Preliminary FTC Staff Report (2010).
284.
For a detailed discussion on the issue of consumer information exchange, see also Culnan and Bies, supra note 282, at 326.
285.
The extent to which consumers will allow access to their personal information also depends on the extent of their access after they have given such information, see D. Shubhankar, Remedying a Technological Challenge: Individual Privacy and Market Efficiency; Issues and Perspectives on the Law Relating to Data Protection, 15 Albany Law Journal of Science & Technology 337, 358 (2004).
286.
See J. Borland, Apple’s iTunes Raise Privacy Concerns, CNet New, (July 12, 2006), available at news.cnet.com/2100-1029_3-6026542.html (visited August 21, 2012).
287.
See K. McElhearn, Kirkville, iSpy: More on the iTunes MiniStore and Privacy (2006), available at mcelhearn.com/2006/01/12/ispy-still-more-on-the-itunes-ministore-and-privacy/ (visited August 12, 2012).
288.
Microsoft denied having a plan to use this data and provided an explanation of how to turn off this function. However, “the feature is on by default until a user completes a series of steps hidden within a detailed privacy statement. For further discussion on this case, see Rea and Chen, supra note 259, at 166 and R. Smith, Microsoft Response to the Window Media Player for Window XP (February 20, 2002), available at computerbytesman.com/privacy/wmp8dvd.htm (visited August 12, 2012).
289.
See H. Green, A Little Privacy, Please, Business Week, March 16, 1998, at 98–102.
290.
See Gurung and Jain, supra note 262, at 151–3. The author emphasizes the importance of online privacy concerns, which is closely related to the growth of e-consumer sales, by referring to a long list of online privacy literature supporting his arguments.
291.
See ibid. This survey’s result is also consistent with the 1997 Privacy and American Business Research, which revealed that approximately only 2 % of consumers are very confident that merchants selling online will handle their personal information fairly. See Louis Harris & Associations & A. F. Westin., Commerce, Communication and Privacy Online: a National Survey of Computer Users (1997).
292.
This signaling function of fair privacy practice is also necessary to strengthen business and consumer relationships, which is critical in the e-market where the consumer has no direct contact with the seller. Instead, consumers in e-sales have to establish relationships with businesses who are strangers via computer programs that act on consumers’ behalf. The provisions of the DPD may help consumers overcome distrust in transactions where there are great distances between the parties by providing assurances to consumers that e-businesses, through their computer programs or employees, will handle the individual data of consumers fairly and the consumers themselves still preserve the right to control their own information. See also Culnan and Bies, supra note 282, at 331. Such assurance provided by the DPD is critical and essential in attracting and promoting consumers’ relationships, particularly the consumers who make first time online purchases. One survey reported that 71 % of consumers would be willing to give their personal data over the website only if they have an existing relationship with the same business in offline society. See ibid. It can be said here that if e-consumers have trust in the businesses’ practice, it will facilitate the sharing of information in B2C transactions and the relationship will be built. With respect to privacy concerns in e-sales, the DPD may be a tool to increase growth in the internet market.
293.
See Culnan and Bies, ibid., at 331.
294.
In other words, the DPD is also designed to ensure that the appropriate information about privacy is available, accurate and easy to understand for consumers, thereby ensuring that consumers have legitimate choice about how and for what purposes their personal data will be used. See Beales, Craswell and Salop, supra note 145, at 491–539.
295.
See Recitals 4 of the preamble to the DPD.
296.
Despite the creation of various data protection laws in the EU, the widespread violation of data laws and ignorance of good privacy practices continues. This has implications for consumers and the potential growth of online market. See Mahony and Flaherty, supra note 265, at 339.
297.
The privacy legislation has struggled to keep pace with the rapid growth of technological business models and structures that enable merchants to collect and exploit consumer personal information in ways that often are invisible to consumers. See FTC, supra note 283, at i.
298.
Some argue that legislative actions in regulating the internet may be more presumed than real. This is because the internet can never be regulated because of its fast growth and complicate technological involvement. They instead propose an unofficial form of self-regulation on the internet. For the detailed discussion on principal approaches of online data protection, see Shubhankar, supra note 285, at 337.
299.
See Article 6 (1) (b).
300.
See ibid.
301.
See J. Bagby, E-Commerce Law: Issues for Business 575 (1999). Please note that the main principal objective of the DPD appears in Article 1, which states that it is to “protect the fundamental rights and freedoms of natural persons, and in particular their right to privacy”. At the same time, the DPD also balances free trade among Member States by removing any restrictions on “free movement of personal data”. Phased differently, if the personal data is appropriately protected in the manner set out in the DPD, the free flow of personal data within the EU zone is allowed. See Article 1 (1) (2) of the DPD.
302.
See Shubhankar, supra note 285, at 356.
303.
See Article 6 (1) (b) of the DPD.
304.
See Article 10 of the DPD.
305.
See Shubhankar, supra note 285, at 357.
306.
See ibid., at 358.
307.
According to Article 8 of the DPD, sensitive information is personal data relating to racial or ethnic origin, political opinions, religious or philosophical beliefs, trade-union membership, and the processing of data concerning health or sex life.
308.
See Shubhankar, supra note 285, at 345–6.
309.
See D. Rowland and E. MacDonald, Information Technology Law 399 (2000).
310.
For detailed discussion on the unlimited ways of information presentation in the online market, see Sect. 5.2.
311.
There is a criticism that the consumer privacy choices in e-sales are often buried by the pre-checked boxes. This mean seems to be ineffective in obtaining meaningful consent or explicit consent. See FTC, supra note 283, at 60.
312.
See Shubhankar, supra note 285, at 358.
313.
This problematic issue of burden in understanding privacy policy has also been the subject of discussion in the US. See FTC, supra note 283, at 52–3.
314.
See F. H. Cate, The Failure of Fair Information Practice Principles, in J. K. Winn (ed.), Consumer Protection in the Age of the Information Economy 341, 358–60 (2006).
315.
See FTC, Workshop on the Information Marketplace: Merging and Exchanging Consumer Data (March 31, 2001).
316.
Although in March 2002 when Yahoo substantially amended its policy allowing marketing messages by telephone and e-mail, causing a high public awareness, the rate of privacy policy visitors in its website increased only to 1 %. See S. Hansell, Compressed Data: The Bog Yahoo Privacy Storm That Wasn’t, New York Times, May 13, 2002, at c4.
317.
See FTC, supra note 283, at 60.
318.
See ibid., at 29.
319.
Although many studies indicated that many consumers are interested and aware of the danger in providing information through websites, they have no capability or sufficient computer technical expertise to protect their personal data from the possible danger online. For example, they can also not distinguish between safe and unsafe merchants’ websites. See e.g. G. Milne, A. Rohm and S. Bahl, Consumers’ Protection of Online Privacy and Identity, 38 Journal of Consumer Affairs 217–33 (2004) and K. Chen and A. Rea, Protecting Provisional Information Online: A Survey of User Privacy Concerns and Control Techniques, 44 Journal of Computer Information Systems 85–93 (2004).
320.
See FTC, supra note 283, at 26.
321.
According to the study of Kuanchin Chen and Alan Rea consumers may utilize 3 measures to control their privacy where they are not confident in online privacy protection or there is a possibility that others might collect and use their information, namely (a) falsification, (b) passive reaction and (c) identity modification. See Chen and Rea, supra note 319, at 85–93 (2004). These situations will negatively affect online market efficiency. This is because in general, consumers’ information comprises “individual interest and buying habits”, which are necessary for the merchant to develop and procure goods and services to meet the needs and interests of consumers who are the merchant’s target. This is in accordance with economic arguments made by the International Chamber of Commerce that “there is a vital need for an unrestricted flow of business information a premise justified by” the four basis reasons, namely the efficient exchange of information and the growth of international trades; the right of free communication; the right of business to access and utilize communication facility and the recognition of modern business communication. See Y. Poullet, Privacy Protection and Transborder Data Flow; Recent Legal Issue, in Advanced Topics of Law and Information Technology 29 (1989). Rather than mass offering, all different kinds and qualities of goods and services, personalized information or data enable businesses to narrow their focus on marketing and trading based on previous preferences and control and reduce unnecessary costs. For example, a precise consumer ranking would permit the merchant to correctly approach the rich consumers, who can afford to pay more, with expensive high quality goods or services, meanwhile “consumers of moderate means would pay lower price, closer to what they could afford.” See Shubhankar, supra note 285, at 348.
322.
Weak personal data protection, which allows the free flow of personal information, may help to reduce the cost of doing business. See also ibid.
323.
See also ibid.
324.
See Article 12 of the DPD.
325.
See Article 6 (1) (d) of the DPD.
326.
Please note that the DPD does not grant a general right to object to the processing of personal data, as it is contrary to the objective of maintaining data movement. Article 12 of the DPD states that “rectification, erasure or blocking” will not be done if it is proven that the privacy practice does not involve a disproportionate effort.
327.
See also Shubhankar, supra note 285, at 359.
328.
See ibid. The uncontrolled information may later become a source of unpleasant annoyance for them as the consumers cannot control or update it. The nuisances of junk mail and misplaced telemarketing are examples of unpleasant marketing because they collect the personal data of consumers.
329.
See P. B. Maggs, J. T. Soma and J. A. Sprowl, Internet and Computer Law 691 (2001).
330.
To prevent personal information from leaking to unintended recipients and/or being used unfairly to the detriment of consumers, placing the duty on merchants according to the DPD is one of the measures that helps facilitate and encourage implementation of appropriate protections for consumers’ data.
331.
See Article 25 (i) of the DPD.
332.
An example of a third country responding to the provisions of the DPD is the US. The US negotiated a safe harbor agreement with the European Commission to satisfy adequate privacy protection prescribed under the DPD. The safe harbor agreement provided clearer and more predictable practices relating to transferring of personal data based on the aim of fostering and promoting international commerce. See US Department of Commerce, Export.gov, Safe Harbour Overview (April 26, 2012), available at http://www.expoert.gov/-safeharbor/shoverview.html (visited August 23, 2012).
333.
Some believe that a detailed series of consent and security requirements may impose significantly more financial burdens on all market players. See e.g. FTC, supra note 283, at 54.
334.
See ibid., at 55.
335.
First marketing includes only the gathering of information from the consumer “with whom the company interacts directly for the purpose of marketing to that consumer. If the company shares such data with a third party other than the service provider acting on the company’s behalf”. This would no longer be a first marketing practice. See FTC, supra note 283, at 55.
336.
This is because the processing of data for the purpose of first direct marketing in internet sales does not fall under the exemption from the requirement to obtain consent from consumers who are the owners of such data pursuant to Article 7 (b)–(f) of the DPD.
337.
See FTC, supra note 283, at 53–4.
338.
See ibid, at 53.
339.
Many have voiced support for self-regulation for controlling privacy in the internet market. See e.g. FTC, supra note 285, Coteanu, supra note 3, at 197, FTC, FTC Testifies in Support of Federal Legislation Protecting Children’s Online Privacy (September 23, 1998), available at ftc.gov/opa/-1998/09/privchil.htm (visited August 17, 2012) and B. Gates, The Road Ahead (1996).
340.
The US promotion of “privacy accepted business practice” through self-regulation with a monitoring agency, such as the FTC, will maintain flexibility in the market that “allows company to innovate in the area of privacy-enhancing technologies.” See FTC, supra note 283, at 35.
341.
See Coteanu, supra note 3, at 161–3.
342.
See FTC, supra note 283, at 35. The businesses have named internet users as “Netizens” and proposed “Netiquette”, which is “an unofficial form of self-regulation that emphasizes courtesy, respect and self-restraint, as evidence of increasing self-regulation on the internet.” See Coteanu, ibid., at 197.
343.
See also Shubhankar, supra note 285, at 362.
344.
Individual consumers in the internet market, who often have limited understanding of the technology, are unlikely to overcome the business power of data collecting and processing practices. These practices are very sophisticate and utilize specialized knowledge to run and manage, particularly the e-businesses, which have sufficient incentives to hide its data management activities. Data protection law must be premised on principles that “would enable the market to reach this optimum efficiency but with maximum privacy”. This is because the consumers are unable to fight the market power of data collecting, particularly in internet market. See Shubhankar, supra note 285, at 337, Milne, Rohm and Bahl, supra note 319, at 217–33 and Chen and Rea, supra note 319, at 85–93. It is interesting to note that although the US privacy protection framework is often regarded as industry’s self-regulation, the last few years have seen a rise of legislative mechanisms designed to protect online information privacy for US consumers This may be because the “efficiency of the internet’s self-regulation is probably dependent on many more factors that the regulators are willing to accept.” See Shubhankar, supra note 285, at 361. If the recent increasing legislative introductions in the US may be an indication, the effectiveness of the internet self-regulation may not yet be adequate for the real internet market and the legislation may still be necessary.
345.
See Milne, Rohm and Bahl, ibid.
346.
These include, for example, e-retailers collecting the information directly from their consumers and then selling it to a data broker or a third party that has never had any direct contact with the consumers. It is also possible that online behavioral advertisings, created by online publishers who are usually e-merchants, may allow a third party to collect data of consumers who visited the e-merchant’s website. For further discussion of unfair privacy practices in the e-market, see FTC, supra note 283.
347.
For further discussion on the outcome of this survey, see Mahony and Flaherty, supra note 265, at 337.
348.
See FTC, supra note 283, at 25.
349.
See ibid.
350.
See Rowland and MacDonald, supra note 309, at 341.
351.
For discussion on this report, see ibid, at 337.
352.
See ibid.
353.
E-traders in such jurisdictions would not be deterred by the relatively light sanctions and continue to unfairly utilize the data of consumers with the aim of maximizing their profits and commercial advantages. In this regards, the UK Information Commissioner has suggested that there is “the need for a strong deterrent and greater attentiveness to the law control by organizations”. Such action will send a strong signal to e-businesses that the violator of the DPD will face potentially harsh penalties. This recommendation demonstrates the need for Member States to review and amend their national laws to ensure that appropriate sanction mechanisms for breach of the DPD are in place; and that they are effective and adequate in deterring e-businesses from illegally processing consumers’ personal information. See Mahony and Flaherty, supra note 265, at 339.
354.
Some believe that consumers’ confidence in e-sales is very limited because of the failure in online privacy protection, including the ineffectiveness of legislation. See ibid., at 339–50.
355.
See A. Fielder, Better Compliance: Guidance, Enforcement and Self-Regulation, Paper Present at the Data Protection Conference and Report on the Implementation of the DPD (2002), available at ec.europa.eu/justice_home/fsj/privacy/docs/lawreport/fielder_en.pdf (visited October 12, 2012).
356.
See OFT, Internet Shopping-Some Key Data (2005), available at oft.gov.uk/shared_oft/press_release_attachments/internetshopping.pdf (visited January 12, 2013).
357.
See ibid.
358.
See FTC, supra note 283, at 33.
359.
See ibid.
360.
See Rea and Chen, supra note 259, at 167.
361.
See ibid.
362.
See E. Schuman, eWeek.com, Gartner: $2 Billion in E-Commerce Sale Lost Because of Security Fears (November 27, 2006), available at eweek.com/article2/0,1895,2063979,00.asp (visited January 12, 2012).
363.
This appears to be inconsistent with the explanation of Cristina Coteanu that emphasizes the unequal power between contractual parties and the technological involvement in e-market. She indicates that “there is a transaction form contract–as-consent model to the contract-as-technological assent model”, including clicking or browsing to express assent and the dominance of technological information which is a result of merchants’ control of market behavior which has a detrimental impact on consumers and normal market competitive processes. See Coteanu, supra note 3, at 63, 129, 206.
364.
Even though the EU law, for example, renders them unenforceable. At the same time, such legal features may be too one-sided, as they do not take into consideration the negative effects on the traders, placing all the burdens, hassles and costs of cross-border dispute resolutions in e-sales solely on e-traders.
365.
See Coteanu, supra note 3, at 183.

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Sutatip Yuthayotin

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Yuthayotin, S. (2015). Substantive Mechanisms for Achieving Access to Justice. In: Access to Justice in Transnational B2C E-Commerce. Springer, Cham. https://doi.org/10.1007/978-3-319-11131-5_5

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