2015 EU-Taiwan Consumer Protection Conference on On-line Transactions
Taipei, 30 October
Note: This is an abridged version. To read the full report, please click HERE.
The EU-Taiwan Consumer Protection Seminar on Online Transactions was jointly organized by the European Economic and Trade Office (EETO), under the framework of the European Business and Regulatory Cooperation Programme (EBRC) and the Department of Consumer Protection (DCP) of the Executive Yuan. The seminar, the first event of its kind arranged under the EBRC framework, was attended by representatives from European and Taiwan government, industry and academia. It hosted a field of distinguished experts to share insights in three sessions covering the following areas: consumer protection laws and regulations on online transactions; the management and practice of online transactions and resolving consumer disputes arising from online transactions. Each session was concluded with a lively panel discussion featuring all of the sessions’ speakers and active audience participation. Dr Chang San-Cheng (張善政), Vice Premier of the Executive Yuan and Ms Madeleine Majorenko, Head of the EETO delivered opening remarks. At the conclusion of the seminar, Ms Tsai Yu-Ling (蔡玉玲), Minister without portfolio delivered closing remarks.
In her remarks Ms Majorenko
said that the European Commission has always put consumers at the heart of the
single market and making consumers key players in the digital era is a
priority. This means that consumer rights, health and safety rules should be
respected and vulnerable consumers must be protected.
Session 1: Consumer protection laws and regulations on online transactions
Moderator: Dr Jan Sheng-Lin, Commissioner, Committee of Consumer Protection, Department of Consumer Protection, Executive Yuan & Professor & Dean, College of Law, National Taiwan University
Topic: Status of e-commerce and the Consumer Protection Law in Taiwan
Speaker: Mr Chen Hsing-hung, Senior Secretary, Department of Consumer Protection, Executive Yuan
Consumer protection & e-commerce in the EU: Key regulatory and
According to Dr Terryn, e-commerce is not meeting its true potential in the EU. Only 7% of SMEs sell cross-border. This is partly because doing business in another country requires having to learn the laws and adapt to doing business in other countries and partly owing to a lack of confidence on the part of consumers to purchasing goods outside of their own countries.
Important parts of legislation governing e-commerce are already harmonized across the EU but not all. At the EU level, in certain areas, there is a minimum level of regulation but national governments can go beyond this. The consumer rights directive is now fully harmonized but there are still some issues of divergence in the Member States (eg the rules on consumer sales). There was an alternative proposal for regulation on a common European sales law which traders could voluntarily agree to (an opt in instrument) but there is not enough support in the European Council to reach an agreement on this yet. It is therefore off the agenda. However, there are plans for further harmonization in other areas, especially in the field of sales law, since it is acknowledged that differences in the implementation of consumer law is a barrier to e-commerce.
The EU will introduce legislative proposals for simple and effective cross-border contract rules for consumers and businesses for sales contracts and digital content this year and review the Regulation on Consumer Protection Cooperation in 2016. Regulations on online software are not yet regulated or harmonized. Digital content harmonization is also on the agenda. The EU also plans to address geoblocking, the process of limiting access or offering different pricing of the same services in different countries. Addressing discrimination based on one’s residential area is also on the agenda.
The EU has a number of consumer protection instruments that are harmonized throughout the EU. For example, Directive 2005/29/EC on Unfair Commercial Practices and Directive 2006/114/EU on Misleading and Comparative Advertising provides protection against unfair commercial practices and misleading advertising is not allowed all across Europe. Under Directive 99/44 on Consumer Guarantees, a 2-year legal guarantee is the minimum requirement that is mandatory across the EU for all consumer goods. Directive 93/13/EEC on Unfair Contract Terms protects consumers from unfair contract terms.
Directive 2011/83/EU on Consumer Rights mandates default delivery within 30 days. Directive 95/46/EC covers data protection while there is a proposal for a General Data Protection Regulation COM (2012)11.
There are also regulations against spam and provision for a 14-day right of withdrawal without reason. While there is full harmonization of certain consumer rights, sanctions are not harmonized – Member States decide their own sanctions.
In terms of information requirements, traders must provide information before the conclusion of a contract so that consumers can give and their informed consent. In addition, traders must confirm this information on a durable medium. The trader must provide the main characteristics of the goods or services, the identity of the trader, the total price, the arrangements for payment, delivery, performance, legal guarantee of conformity or commercial guarantees; the functionality and interoperability of digital content; steps in the booking process; the existence of the right of withdrawal and modalities. In addition, a model withdrawal form must be provided so that consumers can exercise their rights to return goods or cancel the contract within 14 days.
During the contractual process, a summary needs to be provided before confirmation of the order and a button needs to be provided that warns consumers that confirmation will oblige them to pay for the product or service. If the button is not provided, the consumer will not be bound by the contract.
There are complicated rules for digital content. Consumers have to be informed that they will lose their right to withdrawal once they have started downloading a song, video or software, but this must be clearly stated. The 14-day withdrawal period applies to services but consumers have to pay for the part of the service that has been completed.
EU level regulations provide that refunds must be made within 14 days (although this can be postponed until after the goods have been received). Refunds cannot be in the form of a voucher. There are also rules relating to diminished value. For example, the customer will be liable for the handling of the goods other than what is necessary to “establish the nature, characteristics and functioning of the goods”. For example, consumers may try on clothes or test goods such as a television bought online but they may not wear the clothes or use the TV for several days. There are still some grey areas to be worked out. For example, what type and period of use constitutes a fair testing of a bed before a customer can return it without liability? The EU provides a list of 13 exceptions to the right to rescind (compared to 6 in Taiwan) in order to balance the rights of traders and consumers, including perishable goods and goods made to order.
Customers must receive goods within 30 days (although there are some exceptions and this is also a default rule). The trader is liable and responsible for risks until the goods are delivered. In the EU, the shipping costs of returning goods in case of withdrawal are the responsibility of the consumer.
Besides the obligation to disclose the full costs of the goods or services (no hidden items are allowed), contracts may not make extra services, such as additional insurance for an air ticket that require additional charges, to be the default option using a pre-ticked box. Only opt-in or informed consent options are allowed for additional charges.
The EU Sweep is a new kind of enforcement action. It takes the form a systematic check carried out simultaneously in different Member States to investigate breaches of consumer protection law. It is coordinated by the European Commission under the Consumer Protection Co-operation Regulation which came into force at the end of 2006. It has been used for example in the airline industry and has been effective in reducing issues of non-compliance.
While the EU has a lot of effective mechanisms in place to protect consumer rights, there are still some challenges remaining, including fragmentation of the legal framework and enforcement of existing consumer protection provisions. For example, most complaints are because goods are not even delivered, indicating the need for more enforcement. In addition, the current legal framework for digital content is inadequate. Dr Terryn concluded that it is the objective of the Digital Single Market Strategy to address these issues.
Topic: Progress on the personal information protection of ecommerce in Taiwan
Speaker: Dr Chang Feng-Yuan, Senior Executive Officer, Department of Commerce, Ministry of Economic Affairs
Session 1 panel discussion
On the subject of consumer dispute resolution in Taiwan, Dr Chen said a mechanism is available for traditional and e-commerce cases. The first option is to deal with cases through local government agencies. The next option is to use a consumer ombudsman. The third mechanism is a mediating committee. If the case still cannot be resolved, it goes to court. He noted that alternative dispute resolution is not mature in Taiwan but that Taiwan hopes to learn from Europe’s experience.
A question from the floor asked about protection for online gamers, who sometimes invest millions in their games but operators often force gamers to accept conditions without their informed consent and also modify terms and conditions without notice. Taking action is difficult if the operator is located outside Taiwan. In response Dr Chen said that there is a standard contract for online games. Gaming companies must fully disclose rules and be transparent. If gamers accept the rules, they have to accept the consequences. However, another problem is that there is always the risk that hackers can steal information. Consumers should protect their identities and report crimes to consumer protection agencies. For cross-border disputes, negotiations can be done with the local distributors but authorities also need the cooperation of online gaming companies.
Dr Terryn noted that similar problems with gaming also occur in Europe, such as gamers giving consent for one thing but getting charged for other services. However gaming companies are subject to the same rules as other online service providers. For example, if a game is advertised as being free, it must really be free. Otherwise, the operator will be liable for misleading adverting. In addition, operators are required to get gamers’ explicit consent for each payment.
On a question about bloggers getting paid for posting content (such as reviews), which is advertising that looks like independent content, the problem is recognized but the EU currently does not yet have a solution. While EU law requires vendors to remove false reports or reviews or face liability, there is not yet a good solution for advertising posing as independent content.
On a question of raising awareness of consumer rights, Taiwan authorities have various campaigns including working with the Ministry of Education to promote consumer protection awareness in schools through plays as well as awareness campaigns for the elderly.
On the subject of consumer rights on social media sites, Dr Terryn noted that while there have been discussions about the way social media sites use data, the same consumer rights do not apply to free services, although social media sites are subject to the same rules regarding unfair contract terms.
The EU is looking into regulations for C2C businesses such as Airbnb. Dr Chen expressed the view that consumer protection is needed for all kinds of e-commerce, including the sharing economy.
Session 2: Online transactions - Management and practice
Moderator: Stefaan Voet, Associate Professor, University of Leuven, Belgium
Topic: EU management of online payments
Speaker: Ms Guna Dirveika, Senior Legal Consultant, Financial and Capital Market Commission, Latvia
Ms Dirveika gave an overview on EU’s legal framework for online payments which draw on the Payment Services Directive (2007/64/EC, PSD), the Electronic Money Directive (2009/110/EC, EMD), the European Central Bank’s (ECB) recommendations for the security of mobile payments (2013), the European Banking Authority’s (EBA) Guidelines on internet payments security (2014) and the Revised Payment Services Directive (PSD2) (2015), the latest rules to be adopted.
Payment services regulations are transposed in national legislation so there is not much room for differences. PSD2 updated some definitions that were already 10 years old and difficult to apply to new services. While the basic requirements are the same in all Member States, rules are stricter in Eurozone countries. It also included a re-evaluation of security requirements for internet and mobile payments.
Not all payments are covered under the directive, which focuses on intra-EU payments. For payments going outside or coming into the EU, there may be different rules.
PSD2 also covers platforms that just initiate payments and don’t deal with money such as third party payment service providers or payment initiation service (overlay service), a mechanism enabling customers of online shops to initiate quick payments. While many intermediaries may be involved in processing payments which consumers don’t usually know about, the new rules make it the responsibility of the payment service providers to handle any problems. The consumer only needs to contact her payment service provider (usually a bank), which is then obliged to follow up with intermediaries.
New players like third party payment service providers that do not deal directly with money, such as facilitators (payment initiators) or data managers are still subject to the regulations and must protect and provide security for personal data. There are now greater security requirements for payment service providers. Third party payment service providers may not keep sensitive data and must receive consent from consumers and banks for permission to transfer customer credentials to each other. In the past, banks did not always know about intermediaries that could pose as customers. New rules make it compulsory to disclose this. Any account information service providers will be regulated and subject to same security requirements as other providers given that they are handling personal data as well as customer financial information.
Mobile payments are already subject to the same rules across the EU. All electronic (including mobile) payments are covered. Currently the European Banking Authority’s (EBA) security guidelines contain strong customer authorization but do not cover mobile payments. Stronger security requirements for mobile will follow later that will aim to balance the need to protect data without stifling the development of mobile commerce. There are strong security requirements in the new rules. So guidance has been given to the EBA to take into consideration that requirements for mobile payments should be proportionately easier so as not to stifle trade. Ms Dirveika noted that the EU already has data protection rules, which, among other things also apply to mobile commerce. The main point of future rules will be to make sure clients’ money is safe.
Supervision will become stronger and more complex because Member States will also have to supervise cross-border information transparency and liability issues. It will be underscored by common EBA standards for incident reporting and monitoring, and other technical standards. Supervisors are advised to take a risk-based approach.
On the subject of unexpected payments, such as the practice of blocking funds on credit cards, a new provision holds that the payment service provider has to make sure that the customer is informed beforehand and the customer has to give their consent. Moreover, the amount has to be unblocked as soon as the final receipt is received by the customer and its bank. New rules also make customer authentication stronger with two or three levels of protection required. Service providers must also ensure a 'one-stop process' for customer queries and complaints, which the service provider is obliged to follow up on.
Consumers have an unconditional refund right to for direct debit transfers in euros. There is also an immediate refund obligation for payment service providers if customer did not authorize the transaction. The service provider has to pay back and investigate any unauthorised transactions. There are also provisions for the complaint procedure, which require service providers to always inform the client, provide contact details and an indication of how long it will take to investigate the complaint.
Topic: The administration of online transactions in Taiwan
Speaker: Ms Wang Shu-hui, Senior Executive Officer, Department of Consumer Protection, Executive Yuan
Topic: Latest developments in the Personal Information and Protection Act (PIPA) and the achievements of the Taiwan Personal Information Protection and Administration System (TPIPAS)
Speaker: Ms Chiu Ying-Hsi, Director, Science and Technology Law Institute, Technology Application Law Centre, Institute of Information Industry (III)
Topic: Dialogue on comparison tools
Speaker: Mr Daver Lau, General Manager, Amadeus Taiwan
Mr Lau made the point that because that there are more than 1,000 airlines worldwide, the system of booking and selling tickets is now very complicated. The key issues for travelers when searching for an booking online are:
Transparency: Is the listed airfare the real price or are there hidden extra costs?
Neutrality: Are search results neutral? Does it include all airlines flying the route? Why do different results for the same flight have different prices?
Quality/integrity: Is the fare and schedule still valid? Are there still seats available?
EU regulations on transparency and neutrality have had a positive effect on the travel distribution market.
For example, airlines are now required to publish fares that are inclusive of all taxes, charges and fees which are unavoidable. In addition, search results must be really neutral to all participating carriers.
Computerised Reservation Systems (CRS) provide efficient distribution platforms that safeguard the interests of travellers and address the key concerns of transparency, neutrality and quality/integrity by providing the widest range and transparent comparison of fares, availability and schedules amongst airlines, hotels and railway companies, which includes fares and ancillary prices whenever content is provided by travel providers in a neutral and transparent manner that is also always up-to-date in terms of pricing and availability.
With a CRS, what you see is what you get including a full fare plus a breakdown of various parts. The system is also able to recommend a combination of air and rail options. Schedules and availability dates are updated very often so the chances of there being no vacancies are very low.
Things are changing fast in the travel distribution industry. For example, there are new distribution platforms and a growing trend of unbundling of travel inventories. This model, adopted by Low Cost Carriers (LCCs), is likely to be followed by full service airlines to some extent. The practice of unbundling products makes it very difficult to compare travel services. In addition, new technologies are changing consumer behaviour while review sites are becoming more important to users. This is affecting how consumers interact with offerings and providers. This has both positive and negative effects. The positive effect is a greater variety of products and services. On the negative side, new players and new business models/commercial practices are affecting transparency and neutrality. Unbundling will require greater transparency.
Mr Lau concluded that EU regulations set a good basis to protect consumers but enforcement needs to be significantly enhanced to improve transparency, neutrality and fair competition. In this regard CRS can play a critical role in facilitating a transparent, neutral and comprehensive online distribution of travel products and services. Finally, new technologies are making mass customization possible but this raises the next challenge as to how to protect transparency and neutrality.
Topic: Experience sharing on Taiwan’s e-commerce practice
Speaker: Mr Bill Lin, General Manager, PayEasy Digital Integration
On a question as to how to protect one’s data online, Mr Lin said that one should always assume that any information uploaded to or sent to someone over the internet will be disclosed. He therefore recommended never putting anything you don’t want to be disclosed on the internet.
On a question of crowd funding, the EU does not have harmonized regulations. Only the UK and Estonia have specific regulations while other Member States are still discussing the issue. At the moment, the EC does not regard it as necessary to have common regulations on crowd funding since it is related to credit and investment and not third party payments.
On a question of a case involving the Taipei City Government and Google, the conclusion was that traders need to provide full disclosure to consumers regarding payments for Apps or provide a free trial period given that informed disclosure and consent is compulsory and any violation may be subject to penalties.
Session 3: Resolving consumer disputes arising from online transactions
Moderator: Dr Wu Jiin-Yu, Commissioner, Committee of Consumer Protection, Department of Consumer Protection, Executive Yuan & Professor, College of Law, National Chengchi University
Topic: Settlement and analysis of cyberspace consumer dispute cases settlement
Speaker: Mr Wang De-Ming, Senior Consumer Ombudsman, Department of Consumer Protection, Executive Yuan
Topic: EU mechanisms for the resolution of (cross-border) consumer (online) disputes: The New ADR and ODR framework
Speaker: Dr Stefaan Voet, Associate Professor, University of Leuven, Belgium
According to the 2015 EU Consumer Scoreboard, 59% of business-to-consumer (B2C) companies are still not selling online while most retailers only sell to local consumers (only 12% of B2C sales are to other EU countries and 14% to non-EU countries). Moreover, while the percentage of the population who purchase goods online has been steadily rising, fewer than 15% of consumers ordered goods from sellers in other EU countries and fewer than 10% from outside the EU.
The underlying problem is a gap in confidence as 61% of consumers are confident about buying goods in their own country, but only 38% of people trust retailers in other countries. This is a missed opportunity meant to be realized by the single market as consumers could enjoy an estimated saving of €11.7 billion if they could choose from the full range of goods available online within the EU. According to statistics quoted by Dr Voet, small online businesses wishing to trade in another EU country face €9,000 in extra costs from having to adapt to local laws. If the same rules for e-commerce were applied across the EU, it is estimated that 57% of them would either start or increase trade with other EU countries. It is one of the aims of the Digital Single Market to address this.
By creating an efficient mechanism to resolve consumer disputes, it is hoped that consumer confidence will be enhanced. For disputes involving small amounts it does not make sense to go to court. In 2013, the EC recommended common principles for injunctive and compensatory collective redress mechanisms in the Member States concerning violations of rights granted under Union Law. Directive 2013/11/EU of the European Parliament and of the Council of 21 May 2013 on alternative dispute resolution (ADR) for consumer disputes provides a harmonized basis to settle cases out of court. Regulation 524/2013/EU of the European Parliament and of the Council of 21 May 2013 on online dispute resolution (ODR) creates a pan-European Online Dispute Resolution platform. Both instruments will be the framework for the future.
The ADR Directive sets out procedures for the out-of-court resolution of domestic and cross-border disputes concerning contractual obligations stemming from sales or service contracts between an EU consumer and an EU trader through an ADR entity, proposing or imposing a solution or bringing parties together with the aim of facilitating an amicable solution. At present there is insufficient awareness of ADR, insufficient coverage (it is not available in every sector) and a lack of harmonization of quality standards for ADR entities and procedures (there are around 750 ADR schemes in Europe with different structures and names).
While the Directive sets overall goals and quality standards, Member States are free to implement as they see fit but there are binding quality standards for ADR-entities and procedures. For example, ADRs must be accessible via publicly-available websites and publish annual activity reports. Procedures should be easily accessible or free of charge and outcomes must be available within 90 days.
Belgium has implemented the Directive and Dr Voet gave a brief overview of Belgium’s ADR body, the Consumer Mediation Service. The board of the Service is composed of six existing ombudsmen. It provides a single access point (website), available in four languages. Filing a complaint is very simple. Users just need to visit the website and fill out an online form. The service will then forward the complaint to an existing ADR entity or, if one does not exist, deal with it directly. The service can only mediate disputes and try to reach a settlement. If not, it can issue a recommendation. It can also name and shame traders who are deemed to have behaved unfairly. Consumers can then take the case to court to obtain relief.
The ODR Regulation covers out-of-court resolutions of disputes concerning contractual obligations stemming from online sales or service contracts between an EU consumer and an EU trader through the intervention of an ADR entity listed in accordance with the ADR Directive. As the name implies it can only be used for online transactions. The whole process is to be conducted online. Only ADR entities will be able to use the ODR platform. The ODR platform is currently in the testing phase and is only set to be launched in 2017 as a single point of entry for consumers and traders seeking an out-of-court resolution of disputes. It will be accessible in all official European languages. A network of ODR contact points in Member States will exchange information with their counterparts in other states.
To use the system will require filling out an electronic complaint form. The information will be used to determine the competent ADR entity. The complaint will then be transmitted to the respondent party. Both parties have to agree on an ADR entity. Once this is done, the ADR entity takes over.
The form will be translated using an automated system. Dr Voet said that this is the biggest challenge now since the form needs to be sent to the counterparty in his/her own language.
Dr Voet went on to describe Belmed, a platform for out-of-court consumer dispute resolution employed by Belgium’s Federal Public Service (FPS), which provides a service for consumers and business to reach resolutions of disputes with the help of an independent ADR body. Complaints can be filed by an individual or a company or on behalf of someone else (such as a legal representative). When the form is uploaded it is automatically sent to the competent ADR body. Contrary to the ODR Regulation, parties do not have to agree on an ADR body. The service has been welcomed by businesses.
Dr Voet concluded that it is good to have a platform but it is important to integrate ADR, ODR, regulatory enforcement and litigation systems in order to be effective in resolving disputes.
Topic: Recent developments and studies on cross-border dispute resolution mechanisms
Speaker: Dr Jimmy Yu, Associate Professor, Soochow University
On a question of what happens if companies do not cooperate when asked to address consumer complaints, Mr Wang said that, according to the recently-amended Consumer Protection Law, fines can be imposed if companies do not take remedial action. Besides fines, the government discloses the number of disputes and comparative figures on a quarterly basis, which puts pressure on traders to take action.
On a question about ODR platforms, Dr Voet said that the EU’s ODR platform can only be used by ADRs which fulfill the requirements of the ADR Directive. Member States’ governments are responsible for checking if they fulfill the requirements. If there is a problem, entities could be removed from the list of qualified ADRs. He noted that in Belgium, there are a lot of sectors that do not have entities but, in response to this vacuum, many players, including retailers, are now creating their own entities because they don’t want their disputes to be resolved by residual bodies.
Dr Yu pointed out that while setting up entities to deal with disputes in Taiwan is good, it is important to find ways to deal with disputes involving online companies based in China.
In her closing remarks, Ms Tsai Yu-ling, Minister without portfolio, said that the government had high expectations for the seminar given the impact that the internet has on our lives and business. Standard contracts for the virtual world and internet transactions may need different provisions from other types of commerce. Disputes regarding small payments need to be resolved in an efficient way. Moreover, personal data protection is especially important in a borderless world. While the internet brings global business opportunities, it also presents global problems. She concluded that the seminar provided new ideas for new solutions and that the opinions and ideas expressed at the seminar would serve as an important reference for the government’s future policies.