TO: Provincial Ministers responsible for Consumer Affairs;
Provincial Ministers of Justice
Re: Uniform Electronic Commerce Act and Consumer Protection
In October 1999, the Uniform Law Conference of Canada adopted the Uniform Electronic Commerce Act (“UECA”), a model statute designed to facilitate electronic commerce throughout Canada. Provinces are now being urged to enact legislation based on this model. We are writing to express concerns about the potential effect of this proposed legislation on consumer protection, and to urge you to address these concerns through either your province’s general electronic commerce legislation or its specific consumer protection legislation.
The Public Interest Advocacy Centre (PIAC) is a federally incorporated non-profit organization which provides legal advice, representation and research to groups and organizations who represent vulnerable Canadian consumers and who lack the ability to be heard when decisions are made that affect their interests. PIAC’s membership includes over 800 individuals and group members representing over 1.5 million Canadians. Since its inception in 1976, PIAC has made issues associated with communications policy and regulation a priority. Over the past few years, consumer issues in electronic commerce have been a focus of our attention.
The UECA has been carefully drafted so as not to change existing contract law, but rather to permit the use of a new medium of communication in commercial transactions. However, a practical effect of permitting businesses to use electronic means of communicating with their customers, without further safeguards against abuse, may be to undermine existing consumer protection law.
We are wholly supportive of the goal of facilitating electronic commerce between businesses and consumers. However, we also want to ensure that households without the means to engage in electronic commerce are not penalized by new laws which give this new medium the status of a norm – a status that electronic commerce has not yet reached. At a minimum, it is essential that existing laws designed to protect consumers from unfair or deceptive business practices are not circumvented through the use of electronic communications.
Accordingly, we ask you to consider the following recommendations for amendments to the UECA and/or supplementary consumer protection laws.
Existing Requirements to Provide Information to Consumers
Consumer protection laws typically include requirements for certain key information to be provided to the consumer (for example, by the vendor in advance of a purchase transaction). The purpose is to ensure that the consumer is in possession of the information.
Clauses 8 and 9 of the UECA address this issue by stating as follows:
8. A requirement under [enacting jurisdiction] law for a person to provide information in writing to another person is satisfied by the provision of the information in an electronic document,
(a) if the electronic document that is provided to the other person is accessible by the other person and capable of being retained by the other person so as to be usable for subsequent reference;
9. A requirement under [enacting jurisdiction] law for a person to provide information in a specified non-electronic form to another person is satisfied by the provision of the information in an electronic document,
(a) if the information is provided in the same or substantially the same form and the electronic document is accessible by the other person and capable of being retained by the other person so as to be usable for subsequent reference;
These clauses leave unclear the question of what “provision” entails. Specifically, it is unclear whether mere posting of the information to a website can satisfy the requirement of provision. Yet, such an interpretation would undermine the functional objective of consumer protection laws which require actual transfer of information in to the custody of the consumer.
Enacting jurisdictions should therefore ensure, through appropriate drafting, that the term “provision” means actual transfer into the other’s custody, as opposed to mere notice of availability.
Consumer consent to receive information electronically
Clause 6(1) of the UECA states:
Nothing in this Act requires a person to use or accept information in electronic form, but a person’s consent to do so may be inferred from the person’s conduct.
This rule is meant to ensure that the Act is not used to compel people to accept electronic documents against their will. It is effective in the context of individually negotiated contracts between parties of relatively equal bargaining power. It provides very little protection, however, to the average consumer who is faced with standard form contracts and “take it or leave it” offers in which consent to replace paper disclosures with electronic disclosures is required as a condition of entering into the transaction. Instead, the UECA leaves up to courts the question of whether consent in such situations is meaningful and therefore legally binding.
This approach may seem reasonable insofar as the UECA is not meant to change the law of contract, but rather to ensure that the same rules of contract apply to a new medium of communication. However, leaving the question of when consumer consent to electronic disclosures and records is binding to a case-by-case determination by the courts will create uncertainty and necessitate costly litigation in cases where the question could easily have been settled in advance by statute. It is also fundamentally unfair to vulnerable consumers who do not have the means to litigate in the first place.
For these reasons, consumer protection laws (or the UECA itself) should specify that:
- electronic delivery of legally required notices, and of any information that is required by law to be in writing, is permitted only where the consumer transaction is negotiated electronically, or where the consumer’s consent to receive such information electronically originates from the consumer’s email address to which the electronic records will be delivered.
In this way, disputes over the validity of standard form consents to electronic communications will be limited, and consumers will be clearly protected from unintentional consent in the most egregious situations (e.g., when the consumer does not even own a computer, or does not have Internet access). It is important to note in this respect that approximately half of Canadian households still do not have Internet access, and that three-quarters of low income households remain unconnected.
Paper disclosures required by law are designed to provide consumers with information critical to making informed choices in the marketplace, to understanding their rights and obligations during commercial transactions, and to enforcing their rights when transactions go sour. Consumers can benefit from receiving information electronically, and should be permitted to do so, but the law should not create a situation in which consumers without the ability to receive electronic communications may be required by contract to do so.
It is particularly important that any electronic notices, failure to reply to which will lead to loss of service or property, actually reach the consumer. Unlike receipt of mail via Canada Post or courier service, receipt via email requires access to a working computer with Internet access. Home internet access remains a luxury service for many consumers, and is likely to be one of the first services discontinued when a household without such access runs into financial difficulty. In such situations, the customer’s failure to respond to the creditor’s email notice should trigger a requirement that the notice be provided in paper form. We therefore recommend establishment of a rule that:
- in respect of notices of impending default by or penalty to the consumer, electronic delivery is legally effected only where the consumer recipient has affirmatively acknowledged receipt of the notice
Another, related, problem with reliance on electronic records in consumer transactions occurs when consumers find that they are unable to access or retain the electronic record in question. This can happen as a result of computer breakdown, or incompatible software programs, for example. It is important in such situations that consumers be able to obtain paper copies of the records in question. For this reason, we recommend statutory requirements that:
- regardless of the terms of the contract, the consumer is entitled to receive paper copies of electronic records upon request, for which providers may charge no more than their actually incurred costs of accommodating this request.
Consequences of Refusing to Deal Electronically
It is likely, assuming passage of laws based on the UECA, that businesses rely increasingly on electronic communications. Indeed, given the low cost of electronic communications as opposed to paper communications, it is likely that businesses will take various measures to encourage consumer acceptance of electronic communications, including preferential pricing for those consumers who agree to deal electronically.
While such pricing strategies are understandable in light of underlying cost considerations, they will in effect penalize unconnected consumers (disproportionately low income) and will tend to further marginalize those who cannot afford to deal electronically in the first place. Such implications of the UECA need to be seriously considered in the overall policy context.
At a minimum, consumers transacting non-electronically should always be entitled to refuse electronic receipt of contractual records and statutorily required notices without incurring extra charges as a result. Until Internet household penetration has reached the level of telephone penetration, it is premature to establish laws and policies which assume electronic capability. There is no compelling policy reason to favour consumers with electronic access over those without, in respect of important commercial disclosures.
Integrity of Electronic Signatures
Electronic commerce requires the development of reliable methods of verifying the identity and capacity of contracting parties. The UECA provides electronic signatures the same legal status as handwritten signatures and leaves it up to each enacting jurisdiction to decide whether or not to establish regulations regarding the reliability of electronic signatures. Moreover, the UECA does not attribute liability for losses arising from good faith use of electronic signatures.
In deciding how to address this issue, it is important to recognize, first, that different forms of electronic signatures will have different levels of security and that the standard of care for the use of electronic signatures is unclear at this early stage of development. At the same time, most consumers using electronic signatures will have no sophistication in electronic security procedures, and could unwittingly expose themselves to liability despite due diligence and good faith.
Second, businesses have access to information about electronic commerce-enabling technologies and the ability to limit and plan for the risks created by electronic commerce. Consumers, in contrast, have neither the access to information nor the expertise necessary to evaluate the reliability of a given technology.
Third, unless fraud and error losses associated with online transaction technologies (and not attributable to carelessness on the part of the consumer) are allocated to technology providers and online vendors, there will be little incentive for investment in the further improvement of authentication technologies.
For all these reasons,
Legislation should clearly place the responsibility and liability for technology failures on certificate authorities, manufacturers, or the businesses dictating the authentication technology to be used.
A good baseline model to consider in this respect is the Canadian Code of Practice for Consumer Debit Card Services, prepared by the Electronic Funds Transfer Working Group in 1992, and revised in 1996. This voluntary code outlines the respective responsibilities of industry players and consumers in the use of debit cards.
Consumer protections equivalent to those found in the offline world must be built into the online marketplace, at the same time that rules facilitating the conduct of commerce electronically are enacted. In this way, we will ensure the emergence of a robust infrastructure for electronic commerce in Canada. We trust that you will consider and act upon the concerns and recommendations raised in this letter.
cc: John Gregory, Chair, ULCC Working Group on Uniform Electronic Commerce Act ; David Waite and Rob Harper, Co-Chairs, Consumer Measures Committee Working Group on ECommerce