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European Commissioner for Health and Consumer Protection
Consumer Confidence in the Online Marketplace Boosting Competitiveness
European Consumer Day Conference
Dublin, 15 March 2004
Ladies and Gentlemen,
15 March Consumer Day marks a yearly rendez-vous to focus on the state of affairs for consumers in the market place. I am delighted to be here today at the opening of this conference that will take stock of how far we have come in terms of Consumer Confidence in the online marketplace, but equally important how far we still need to go.
The confidence of consumers is an essential ingredient for any market to flourish and thrive be it national or cross-border, off-line or on-line. But in a market where consumers and suppliers may be separated by distance, language or tradition, nurturing confidence is all the more important.
Competitiveness and Single Market
Only 16 % of EU citizens make use of e-commerce. This is confirmed by the Eurobarometer poll on e-commerce which we publish today. It is clear that consumers continue to have little trust in e-commerce.
However, the EU is making determined efforts to develop a single market for consumers and business alike and to put consumer confidence in the spotlight. We have devised a comprehensive system of rules that defines the EU Single Market and sets out the framework within which it can function.
But are consumers getting the benefit the single market should bring, namely wider choice, better products and services and lower prices?
The evidence on this is mixed. What is clear is that consumers are not prepared to undertake cross border purchases as they would domestic purchases.
There are a variety of reasons for this. Not least of these being the fact that consumers say they feel "less protected" when purchasing from abroad.
Other Eurobarometer surveys confirm that consumers' knowledge of their protection within in the Single Market remains stubbornly low and has not, in fact, shown any appreciable increase in recent years.
What all this shows is that the growth of e-commerce, and in particular e-commerce across borders, is inhibited due to a basic lack of consumer trust in the online marketplace and cross-border trade.
Not enough attention has been paid to the benefits of consumer confidence. Consumers who do not feel that the market offers them the best deal will not spend and consume as readily as they might.
In other words, not only do consumers not benefit, but business suffers too from this lack of trust in the online marketplace, - by loss of economic activity and reduced competitiveness.
The questions affecting businesses go even deeper: the study done by the Euroguichet network that is being presented here today indicates that fragmentation of applicable rules is an active disincentive for small and medium enterprises to launch themselves into cross- border e-commerce.
Equally I must say, too many businesses in Europe still do not have a service-oriented approach to their customers. It should not need laws for firms to provide basic remedies such as refunds or simple redress procedures for their customers.
When you look at some of the successful e-commerce traders, it is thanks to their service oriented approach that their businesses have succeeded where others have failed.
The increased use of the internet in the travel trade is a good example of this.
So- where do we go from here?
The contribution of EU consumer policy
My job as European Commissioner for consumer protection is to address the issues I have just described. The Commission must be realistic in this. Confidence can not be imposed by law. Many of the confidence dilemmas need to be addressed by the market players themselves; By businesses that seek to sell online and yes also by consumers who should realise that rogue traders operate as much on-line as they do off-line. Consumers must realise that if an offer made by a company sounds too good to be true, in all likelihood it is!
That being said a proper regulatory framework is an essential element of consumer confidence. I see the role of the European Commission as driving the development of such a regulatory framework and in motivating the market players in meeting their part of the bargain.
For the EU on-line market to deliver its true potential, it should be a cross-border market.
A cross-border market requires a level playing pitch. It requires a regulatory framework that is the same across the European Union so that consumers know what rights and protection they can expect and businesses know what the rules of the game are.
For confidence to be nurtured, this regulatory framework should set a high common level of protection. Harmonisation of legislation should not be seen as a means to liberalise markets or dilute protection at national level.
It also means that we have to make sure that such legislation which harmonises consumer protection, is adequately enforced across borders, and equally from Member State to Member State.
We have taken some important legislative initiatives in this respect, some of which are currently passing through the legislative process.
Unfair Commercial Practices
First, a proposal for a framework Directive on unfair commercial practices was adopted by the Commission in May of last year.
This will put in place a common, EU-wide framework for protecting consumers against unfair practices, including unfair advertising. In presenting this proposal we aim to go for an overall approach that can be applied across various sectors rather than a sector by sector approach.
This proposal aims to benefit consumers as well as businesses by allowing for mutual recognition. This will provide regulatory certainty for business in particular e-commerce businesses- , so that they only have to comply with one set of rules not 15 sets or, after enlargement, 25.
By seeking to free up the internal market, it should bring considerable opportunities for cross-border selling. In our surveys, nearly half of all businesses cited the need for compliance with different national rules on unfair commercial practices as an important barrier to cross-border trade.
Discussions on the proposal, with Council and Parliament, are making steady progress. The European Parliament is due to complete its first reading by the end of this legislature in April, and the Council is aiming to reach a political agreement in May. I am particularly grateful for the efforts made by the Irish Presidency in helping to drive this dossier forward.
We must remember, however, that no matter how good the rules are, they will not be effective if they are not properly enforced.
Our proposal for a Regulation on enforcement co-operation is an essential component in our strategy to complete the internal market for consumers and businesses. A network of public authorities is critical to give consumers, honest businesses and Member States the confidence to open up and profit from the internal market.
The report of the European Consumer Centres on the European online marketplace highlights numerous enforcement problems in relation to cross-border e-commerce. The proposed Regulation aims to address these problems by establishing a network that can tackle cross-border e-commerce rogue traders quickly and effectively. It will therefore have an important role in enhancing trust in the cross-border on-line marketplace.
The work piloted by my colleague Frits Bolkestein, in the area of services, is another effort to make the market deliver what it should deliver: true freedom of circulation, and true transparent availability for goods and services to consumers whilst at the same time recognising that harmonisation of rules in certain areas, and in particular, consumer protection, is crucial.
Beyond the legislative aspect, there are more intangible issues affecting trust. Our surveys show that consumers in fact rely on the perceived trustworthiness of businesses. Consumers who are aware of trustmarks actually prefer websites that carry them and consumers generally feel positive about codes of conduct and trustmarks as a means to inspire confidence.
I do believe that effective and properly enforced codes of conduct can, under the right conditions:
I want to refer in this context to important work done and being done in the area of codes in e-commerce. You may well recall the e-confidence initiative. This initiative aimed to complement legislative work by encouraging industry to work together with consumers in developing best practices in the area of e-commerce.
It was our aim that this exercise should contribute to the consolidation and furthering of consumer confidence in e-commerce, and most importantly, to provide guidance at EU level for codes or trustmarks.
This was a valuable initiative. Much good work has gone into developing a model for best practices in e-commerce
Before concluding my presentation here today, there is one further issue to which I would like to draw your attention, namely the importance of confidence in payment systems for electronic commerce.
A closer look at the available data shows that while consumers are often still prepared to surf the web looking for a good deal, in many cases they abandon the transaction at the moment payment data have to be transmitted. The result is lost transactions.
Good security technology is available that effectively addresses security concerns. Yet it does not seem to boost consumer confidence, but often discourages or intimidates consumers. It would almost appear as if the more consumers are confronted with security technology and security devices, the more they wonder about the reliability of systems and their vulnerability to fraud. This presents a real confidence dilemma.
Payment systems are secure and mishaps are rare. The risk tends to be more perceived than real, but in today's world perception is as important as reality.
Yet, surveys even if anecdotal at times illustrate that some fears are not completely unfounded. Consumers are sometimes confronted with unauthorised transactions and reimbursement can be difficult to obtain if goods or services fail to be delivered.
I have spoken on a number of occasions about the urgent need to address this problem. I remain more than ever convinced that the payment industry has an important role and responsibility to play in this. It also stands much to gain from overcoming the payment confidence gap. In some countries we see that industry does indeed take up its role in this respect, either because of legal obligations, but also voluntarily. In a number of countries consumer liability for unauthorised transactions is limited by law. Some countries also impose legal obligations on payment service providers to reimburse the consumer in the event goods fail to show up or do no live up to requirements.
Such obligations do not cause a competitive disadvantage. In many cases payment service providers considerably exceed legal obligations by pursuing zero liability policies or full money back guarantees and this turns out to be a cost-effective way of boosting confidence.
I have great difficulty in accepting that consumers in one country receive better treatment and protection than consumers in another country, although the transactions they are involved in and the payment instruments they use are essentially the same.
At the end of last year the Commission issued a consultation paper on a single European payment area with a view to present legislative proposals for a comprehensive legal framework for payments in the EU. I believe that fair liability rules and effective refund mechanisms should be an integral part of such a legal framework.
Before summing up, I should stress that much work has been done to boost confidence. I am optimistic that over time the electronic market place will deliver its true potential provided we continue to pursue consumer confidence.
That is why, looking at the work ahead of us, I have asked my services to prepare a policy document on online consumer confidence that focuses on those areas that continue to hold back consumer confidence and that should provide guidance and a framework for future work. It should build on work to date such as the e-confidence initiative, available data, the contribution of stakeholders and the lessons learned from conferences such as today's event.
My aim is to provide support, beyond our own mandate as regulators, to efforts made to ensure that best practices are established that can improve consumer trust in the EU internal market.
Ladies and gentlemen, I have given you an overview of the initiatives I have taken to bolster the confidence of consumers within the Single Market, and in e-commerce. I would like to finish, however, with a final thought about the fundamental relationship between business and consumers.
I often get the impression that many observers view consumer interests and business interests to be on opposite sides of the fence. That consumer interests can only be satisfied to the detriment of industry interests.
I simply don't believe this is true. I want to encourage a more enlightened and holistic approach to business/consumer relations. One that recognises that, contrary to being in opposition, consumer and business interests have much in common and should work in tandem.
Measures which deliver satisfaction and confidence to consumers have a positive influence on business as a whole. Contented and confident consumers are essential to provide the demand which is necessary to foster a competitive and thriving business sector.
Only last week at the Competitiveness Council some ministers spoke of consumer rights being a drag on the competitiveness agenda. This thinking must evolve. The potential of the Lisbon agenda can only be fully achieved by promoting confidence.
This does not dilute the message this is the message.