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AN EXAMINATION OF ONLINE TRADING AND THE RIGHT OF THE CONSUMER
CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
The world of commerce has changed dramatically in the last couple of decades. Before the advent of the internet and electronic commerce, transactions were carried out face to face and in close proximity, and in some cases by post. However, the internet has brought with it a faster, and in some instances more efficient way of doing business, now businesses can offer their products and services to individuals in locations which they would hitherto have been unable to. Now, an individual can buy goods in Ghana from a business located in Russia, to be delivered to a person in New Zealand. This is an illustration of the immense advantages which online businesses have brought to the commercial environment.
Electronic commerce (e-commerce), like all concepts is the subject of varied definitions, and most times, the definition applicable would depend on the context in which it is used. E-commerce has been defined as ‘sharing business information, maintaining business relationships and conducting business transactions by means of telecommunications networks’[1]. This definition is however a very broad definition, and will not be applied in the context of this essay.
A simpler definition of e-commerce that has been proffered is ‘the buying and selling of products, services, and information via computer networks including the internet’[2]. This definition is more in line with the thrust of this essay; e-commerce is used in this essay with particular reference to how to protect consumers during those transactions. For the purpose of this essay, we will be adopting the definition put forward by Paul Todd3, ‘any transaction involving goods or services where digital electronic communication performs an essential function.’[3]
The steady growth of electronic commerce in everyday business cannot be overemphasised. In fact electronic commerce is fast becoming the preferred method for concluding day to day business transactions, especially in the retail trade. This is largely due to the immense benefits which the platform affords, chief of which is its convenience. The internet provides online businesses with many potential benefits, such as reducing the size of staff, providing secure means for conducting long distance transactions, increasing efficiency in contacting consumers, and improving overall cost-effectiveness.[4]
The growth of the internet and electronic commerce has brought with it attendant legal and economic issues and peculiarities. As a direct consequence, online business has brought with it some negative side effects or disadvantages; chief of these disadvantages is the potential vulnerability of the consumer.
In online transactions the consumer is the party that is most at risk if a transaction goes sour. This is because in some online transactions, the consumer may not know, or have any access to the seller beyond his e-commerce medium, and there’s the potential for the seller to either wrongly advertise the product, or for the whole transaction to be an outright scam.
The negotiation process in e-commerce transactions highlights the need for consumer protection at the highest level. Generally, the consumer’s position at the conclusion of the contract needs to be strengthened and brought at par with the position of the seller: the consumer agrees to a nonmodifiable fixed contractual proposal by the supplier and very often – especially when he is negotiating from home, at a distance – he has no possibility to obtain the adequate information about the goods or services for which the contract was concluded, that would normally be necessary to create his full intention to enter into the contract.6
STATEMENT OF THE PROBLEM
Nigeria as a developing nation is particularly susceptible to these negative elements of e-commerce. This is because of the lack of sufficient and adequate regulation, and also because of the general underdevelopment in the Information and Communications technology sector; therefore it is imperative that the protection afforded to the consumer by the legal system is adequate. Adequate consumer protection would serve to cushion the possible negative effects of e-commerce, and in fact could serve as a spur to the growth of e-commerce.
SIGNIFICANCE OF THE STUDY
The law therefore has come to the rescue of the perennial hapless consumer; in many developed countries, laws have been put in place to protect the vulnerable consumer, and to ensure that the consumer is always adequately protected at each stage of the transaction.
Developing countries are positioning themselves to be more involved in the flow of e-commerce; however, most of these countries are yet to put in place the adequate regulatory framework with which to ensure the smooth running of the system, adequate protection of businesses and consumers, and to prescribe for crimes and punishment for cybercrimes in relation to e-commerce. This essay will analyse these protection mechanisms with particular reference to the Nigerian legal system.
LITERATURE REVIEW
Consumer protection online may take various forms, the main risks involving the online shopper are- financial, product performance, psychological and time/convenience loss. However, it seems that all barriers to purchasing online mostly revolve around safety issues. According to several worldwide studies, the online threats include: virus attack, spam, click streams, pop-ups identity theft, computer system invasion, card fraud, loss of private information, scams, online transaction insecurity, customer data abuse, and others.7 However for clarity of discussion we shall group it into 2 basic categories; identity protection, and consumer satisfaction.
6 Salvatore Mancuso, Consumer Protection in E-commerce Transactions: a First Comparison between European Law and Islamic Law, Journal of International Commercial Law and Technology Vol.2 , Issue 1 (2007) 7 Forsythe, Sandra M., Shi Bo. 2003. Consumer patronage and risk perceptions in Internet shopping.
Journal of Business Research Vol. 56 No. 11 pp. 867-875.
Racolta-Paina, N., Luca, T. ,Nowadays Online Consumers’ Rights and Interests. Case Study- The Romanian
Educated Online Young Consumer, Management & Marketing Challenges for the Knowledge Society (2011) Vol. 6, No. 2, pp. 255-272
Identity protection deals with the safety, security, and sanctity of the information which is shared by the consumer in the course of an e-commerce transaction. Before any transaction can be consummated, in most cases[5], the consumer may need to provide certain personal information in order to process the transaction.
The consumer will typically provide his name, address, phone number, email address, credit/debit card details etc. All these requests are legitimate in order to process the transaction; however, the issue is the existence of measures which are put in place so that this information is not abused. It may be abused primarily in three ways;
- the information provided may be used for purposes not contemplated by the consumer when it was provided e.g. direct marketing[6], profiling[7], data mining[8] etc;
- Also of paramount importance is the safe keeping of the information provided. Information may be collected for legitimate purposes, but negligently handled by the person in possession of the information. A common fear among consumers is the level of security which their data will be afforded.
- the third and most detrimental use which the consumer’s details can be put to is that it may be used for fraudulent purposes, the information may be fraudulently accessed so as to either illegally remove money from the consumer’s account, or to use for some other nefarious purpose. In fact, studies have shown that these reasons are some of the primary reasons behind consumer’s distrust of e-commerce as a business model[9].
Consumer satisfaction refers to the level of satisfaction of a consumer after an online transaction has been concluded, it deals with issues like: ‘is the consumer happy with the quality of the goods delivered?’, ‘does the product delivered match up to what was advertised?’, ‘does the customer/consumer have the option to decide to return the goods or ask that they be replaced?’ These are the central issues in consumer satisfaction. The law of e-commerce therefore has been developed to address these important issues.
The success of e-commerce in any society depends on its efficiency as a business platform, however, and more important than the level of efficacy is the perception by the consumers. If the consumer believes the potential risks involved in the transaction totally outweigh the benefits of being efficient and time-saving, then e-commerce cannot thrive in that society. The consumer will in this case embark on a ‘felicific calculus’[10] kind of permutation in a manner of expression.
Following from the above, one can see that the existence of a set of laws which cater for online consumer protection is imperative for the success of any meaningful e-commerce structure. This is even more evident and pronounced in developing countries which are still in the nascent stages of their Information and Communications Technology sector development.
action is right in a given situation, we should consider the pleasures and pains resulting from it, in respect of their intensity, duration, certainty, propinquity, fecundity (the chance that a pleasure is followed by other ones, a pain by further pains), purity (the chance that pleasure is followed by pains and vice versa), and extent (the number of persons affected). We should next consider the alternative courses of action: ideally, this method will determine which act has the best tendency, and therefore is right. (source : The Penguin
Dictionary of Philosophy ed. Thomas Mautner ISBN 0-14-051250-0)
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[1] V.Zwass, ‘Structure and macro-level impacts of electronic commerce: from technological infrastructure to electronic marketplaces’, < http://www.mhhe.com/business/mis/zwass/ecpaper.html > accessed 18 July 2011
[2] <www.whatis.com/ecommerce > accessed 18 July 2011 3 Paul Todd, E-Commerce Law, (Cavendish Publishing, 2005)
[3] ibid 1.
[4] Neitivanich, Watchara (2004) “Mechanisms for the Protection of Online Consumers: A Comparative Analysis of the U. S. E-Sign Act and Thai E-Transactions Act,” Annual Survey of International & Comparative Law: Vol. 10: Iss. 1, Article 5.
[5] This is true in most cases, apart from one-off transactions which do not require the exchange of personal and/or financial details.
[6] This is when businesses send offers about products and services to consumers via email, texts and other means.
[7] It is the process of examining the data available in an existing data source (e.g. a database or a file) and collecting statistics and information about that data.
[8] This is where data is collected from one source and may be combined with other databases so as to generate new data revealing significant connections and comparisons
[9] <http://www.trustedshops.com/news/data–protection–online–shop–trust/> accessed 23 July 2011
<http://www.ecommercetimes.com/story/6494.html> accessed 23 July 2011
[10] a method of working out the sum total of pleasure and pain produced by an act, and thus the total value of its consequences; it was sketched by Jeremy Bentham in chapter 4 of his Introduction to the Principles of Morals and Legislation 1789. When determining what