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• Electronic Transactions Framework

6 Consumer issues

103 IT IS CLEAR from a footnote to article 1 that the Model Law ought not override any rule of law intended for the protection of consumers. However, that exclusion from the Model Law results more from the terms of reference under which UNCITRAL operates than from any reasoned or concluded view that exemption of consumer protections is justified. UNCITRAL was created in 1966 as an organ of the Sixth Committee of the General Assembly of the United Nations.²⁰¹ That resolution authorised UNCITRAL to prepare or promote the adoption of conventions, Model Laws and uniform laws. In those days, international trade law regulated international trade in an almost exclusively business to business sense. It is only with subsequent developments such the ease of international travel by aircraft and the development of the internet which has brought consumer transactions within this general sphere.

104 The potential implications for consumers in the increasing use of electronic commerce were recognised by the Ministry of Consumer Affairs in its 1997 discussion paper, Electronic Commerce and the New Zealand Consumer: Issues and Strategies for the Future, which raised the issues for public debate.

105 In ECom 1 we examined electronic commerce from the perspective of those involved in international trade on a business to business basis.²⁰² This was done to focus issues of law reform on the potential benefits which could be gained from international trade, given that New Zealand earns its living from export earnings. It was noted that the OECD was addressing matters relating to protecting the interests of consumers who were engaged in commerce on the internet, and that recommendations were due to be concluded in October 1998.²⁰³ The work of the OECD on this issue is not yet concluded, but is scheduled to be completed by the end of 1999. The Ministry of Consumer Affairs is representing New Zealand at that forum.

106 In the Guide to Enactment of the Model Law²⁰⁴ it is expressly stated that the Model Law had been drafted without special attention being given to issues which might arise in the context of consumer protection. The Guide to Enactment then states –

At the same time, it was felt that there was no reason why situations involving consumers should be excluded from the scope of the Model Law by way of a general provision, particularly since the provisions of the Model Law might be found appropriate for consumer protection, depending on legislation in each enacting State. Footnote ** [to Article 1] thus recognises that any such consumer protection law may take precedence over the provisions in the Model Law. Legislators may wish to consider whether the piece of legislation enacting the Model Law should apply to consumers. The question of which individuals or corporate bodies would be regarded as “consumers” is left to applicable law outside the Model Law.²⁰⁵

ELECTRONIC TRANSACTIONS FRAMEWORK

107 The thrust of this report is to recommend adoption of an Electronic Transactions Act for New Zealand which is similar to that currently before the Federal Parliament in Australia but more limited in its scope.²⁰⁶ The issue which we now address is whether there are any reasons, stemming from the need for consumer protection, which militate against the Act applying generally to both business to business, and business to consumer transactions.

108 In general, we believe it is appropriate for any Electronic Transactions Act passed by the New Zealand Parliament to apply equally to business to business and consumer to business transactions. The Ministry of Consumer Affairs has drawn to our attention that in the United States of America, the National Conference of Commissioners on Uniform State Laws established a task force to consider this issue in the context of the proposed (American) Uniform Electronic Transactions Act.²⁰⁷ The task force decided that consumer transactions should not be exempted with the reason for that decision resting primarily on the expected growth of electronic consumer transactions.

109 The Ministry of Consumer Affairs has advised us²⁰⁸ that it has reservations about protections for consumers arising out of statutory provisions requiring delivery or service of notices or other documents and the retention of copies. Otherwise, the Ministry generally agrees with the views reached by the United States task force.

110 On the question of delivery or service of notices or other forms of documents, we have already referred to problems which arise out of the media specific way in which legislation is currently drafted.²⁰⁹ We have recommended no change in the meantime to the law but, rather, a review of particular statutes to see whether service of documents by email is appropriate.²¹⁰ That recommendation should meet the concern validly expressed by the Ministry of Consumer Affairs in relation to the delivery of notices. Our further recommendation would enable service to be effected by email where consent was given in writing, on a paper based document, prior to the need for delivery or service to be effected which recorded the intended recipient’s consent to receipt of information by email using a particular type of application.²¹¹ In our view, those recommendations adequately meet the concerns of the Ministry of Consumer Affairs.

111 We have made recommendations concerning retention of records later in this report which we believe meet adequately the concerns expressed by the Ministry of Consumer Affairs.²¹² In addition, the liability of customers for unauthorised electronic banking transactions was also mentioned by the Ministry, and this issue is also discussed later in this report.²¹³

112 In coming to the view that any Electronic Transactions Act should apply equally to consumer transactions, we also bear in mind that:

• in a New Zealand context it is difficult to apply the term “rule of law intended for the protection of consumers”²¹⁴ in any practical sense. Many statutes which contain consumer protection provisions apply across the whole range of business activity. The Credit Contracts Act 1981 and the Fair Trading Act 1986 are notable examples;²¹⁵
• the OECD Guidelines on Consumer Protection in the Context of Electronic Commerce also strive towards functional equivalency and technological neutrality as general principles, while recommending safeguards for consumer protection;
• it would be difficult, if not impossible, to articulate a generic description of the type of consumer transaction which would be excluded from the operations of an Electronic Transactions Act.

113 The policy considerations for specific safeguards in relation to legislative requirements for writing and signing are identified in Sneddon, Legislating to Facilitate Electronic Signatures and Records: Exceptions, Standards and the Impact of the Statute Book.²¹⁶ These considerations are evidentiary (ensuring availability of admissible and reliable evidence), cautionary/protective (encouraging deliberation and reflection before signing), record keeping (creating a durable record which facilitates regulation), and channelling (clarifying whether the parties intend to act in a legally significant way). In relation to consumer contracts being formed online we suggest that:

• It is necessary to differentiate provisions dealing with contracts from those relating to advertising. The question is whether the appropriate demarcation is available in an electronic environment.
• There is a need for pre-contractual and contractual information to be accessible to the consumer.
• Consumers should have the ability to keep copies of the agreements for future reference.
• Substantive requirements as to the format and font size may be necessary.
• Subsequent communications, such as statements of account and notices of variation should only be sent electronically when the consumer has expressly consented to this.²¹⁷ There may be a need for appropriate rules to limit a supplier’s liability where it is fair and reasonable (possibly relating to attribution and the like) in a manner akin to section 68A(3) of the Trade Practices Act 1974 (Australia).²¹⁸

114 The Ministry of Consumer Affairs is currently undertaking a review of consumer credit law and policy and intends to report to Cabinet with recommendations for legislative reform by mid 2001. Electronic commerce issues which arise in the context of consumer credit will be covered as part of that review, and the Ministry intends to release a consultation document discussing these issues in May 2000. Submissions on the matters raised in this chapter should be made directly to the Ministry of Consumer Affairs.