Select Committee on European Union Minutes of Evidence

Examination of Witness (Questions 981 - 999)




  981. Mr Power, it is very kind of you to give us your time.
  (Mr Power) I am very glad to have the opportunity. One of the things that has always impressed me is the great interest that the House of Lords has taken in European affairs and in various other jobs I have been in in the Commission it has always been a pleasure—not just to say nice things—because your reports are always very well balanced. The non-political tone, if I can say, that comes from the reports make them all the more valuable.

  982. Thank you very much indeed. We are hoping that we can maintain the tradition. As you have probably gathered, we have been looking at e-commerce development generally but in particular we are looking at how policy is developed here, how it is co-ordinated, or not as the case may be, and we will see if you can make some observations on that, but naturally, unavoidably, we have had to move into wider issues and consumer topics have cropped up and a whole range of other issues and some have fallen in your area of activities. I hope we have managed to get the questions to you.

  A. Yes, indeed, I have seen them.

  983. We are beginning to have a look at some of the ways in which consumers can be protected, and I am thinking particularly of the Web Trader scheme and the support being given for that by your good selves. There are schemes in seven European countries, as we understand it, six beyond the United Kingdom. The primary purpose of these schemes is still to address the domestic issues. Is this what your Alternative Dispute Resolution scheme is primarily about?

  A. Perhaps if I just situate things a little bit more globally in terms of the approach that David Byrne and we have been trying to put in place for the e-commerce area. This all came out of the Brussels Convention first of all and if the Brussels Convention is turned into European law how then would this apply to e-commerce trade? A lot of the industry were saying "oh, come on, we do not want to use courts in the customer's country, this will only tie us up, we want the internal market approach", namely home country control. The approach that David Byrne has taken is "look, I cannot accept that consumers cannot have access to their courts. That has to be the bottom line. But, it should never be necessary for a consumer to have to go to court, it is too expensive, it is too time consuming. We must have a series of other measures in place so that the court would only be the rarity". From that point of view what we have tried to have is a series of other safety nets in place that would solve most of the problems that could arise from problems with electronic commerce. Here we have been focusing on what we call preventative measures and then dispute resolution measures. When I talk about preventative measures, these are issues such as the Web Trust, having seals of approval or some kind of kite mark that would appear on websites and a consumer would know "these guys subscribe to certain codes of conduct, I can get my money back or they will replace the goods", all of this type of thing. The other aspect linked into the preventative measures that we have been trying to do is we have been trying to encourage the bank and credit card companies to bring in what they call in the US the charge back, which you make reference to as well, because under United Kingdom law they have to intervene for sales of over £100 where there is failure to deliver. What we would like to do is to see the credit card companies bring in something to say "fine, we will", as they do very much in the US, "take on the responsibility of sorting out the problem if the consumer does not get the goods or is dissatisfied with the goods that are supplied to them in using a credit card". With these measures in place you would cover a huge area of the problems that could arise. The next stage we have gone into is the Alternative Dispute Resolution area whereby we have tried to see what we can do to facilitate a range of measures that could be put in place. We are not talking anything in terms of who is providing good dispute resolution, the main thing out there is that things are seen to be operating, they operate according to a certain, if I can say, bottom line and then to see how this covers the range of areas that a consumer is likely to encounter. In some of the areas, for example like in financial services, you find that already there is a very well defined set of dispute resolution mechanisms in place; in other areas they are weaker. As you know yourself, there are a number of actors out there who are saying "look, we can set up a service, whether it is a cyber tribunal or whether it is the International Court of Arbitration", there is a whole range of parties out there saying "look, we see a market for this and we are going to market some things where as a company you would be able to subscribe to our service and we would be able to provide online dispute resolution." At the end of the day this would not prevent the consumer going to his own national court but hopefully by having these types of measures in place, the problem will be long solved before it ever got there. David Byrne outlined all of this the last time the Consumer Council met, which was in early April, and we have now convened meetings and we have got various stakeholders involved. There is a group of people now working on this whole area of trying to put together an inventory and perhaps a set of guidelines that would apply to the area of kite marks, Web Trustmarks and Alternative Dispute Resolution mechanisms, the idea being that by late autumn, probably around October, we will have some recommendations from this group as to whether or not specific Community measures are needed in this area. When I talk about specific Community measures, what we have more in mind is a recommendation rather than something in the form of hard legislation. The area is moving so fast and to have hard legislation I think we would be on to some of the next generation of problems before we would have something like that. What we have been trying to do basically is a pragmatic approach, to see what is out in the market, how the market is developing and how we can act as a catalyst in bringing this together in a way where we can say "look, by and large things are well looked after, things are developing in such a way that the consumer can have a degree of confidence in doing business over the web".

  984. So the target is the autumn?

  A. I would say the target is October at the latest. There is a whole set of meetings that have been set up and we are working to try to bring all of this together in the autumn. That is within the EU. There is the other question which you have raised, which we will come to, in the wider international context because obviously we cannot just sort out something in the EU, we have to do something with the US and take this forward.

  985. Could I just ask you about the stakeholders. You said the stakeholders are meeting. We have had one or two complaints from some consumer interests that, in fact, they do not get as good a hearing as they feel they ought to have in Brussels. Are they part of the stakeholders?

  A. Yes, they are very much so. In our particular area we are responsible for consumers as well so, naturally, they would be inside our door. How they might feel being addressed in some of the other areas, I am not in as good a position to appreciate. I am not trying to sell you the Commission or anything like this but one of the things that has struck me, and I have worked here in the Commission for the last 17 years, is that this is a Commission that is working extremely well together. The individuals in this Commission have a good rapport between them. In terms of internal co-ordination between the individual commissioners, that is particularly good. Erkki Liikanen, who is the main person responsible for e-commerce and relations between Liikanen and Byrne are good. Byrne is going out there to try and bring this part of the e-commerce jigsaw into place, that is fine, that works well. Liikanen knows what is going on. Liikanen's services are involved in the work we are doing, we are equally involved in what they are doing. Now, whether individual stakeholders feel "Well, we are not getting a look in" at some other part of what the Commission is doing, I am not in a very good position to give you any advice on.

  Chairman: I am going to move on to wider links with the US but I think we will leave that for a moment and stay in Europe.

Viscount Brookeborough

  986. Just one second on self-regulation on legislation. Is it your opinion that self-regulation will work? The banks after all, if they give a business the right to use and trade on their cards, they must have vetted it to some extent. Therefore, if you bring legislation in it will take a year or more to do so. Is it your opinion that ultimately it will be self-regulation?

  A. Ideally for us self-regulation would be the right way forward if it works but you have a big cultural difference. Self-regulation is well recognised in the United Kingdom, it is less well recognised in other parts of Europe. There we have to be a little bit more cautious in terms of whether it will solve everything or not. This is where I come back to the idea that if there are good Web Trustmarks, people will recognise and say "Here is a company, that is a kite mark", or whatever it is, and recognise it, they will have confidence. That is one side of it. That is a self-regulation.

  987. That is a PR exercise, is it not? The people will want to find confidence in it, they will be looking for it providing that they are aware of how to find it.

  A. I think there are two aspects to this. One is that if you look at experience in the United Kingdom, I think 75 per cent or 80 per cent of companies that are using the Web Trustmarks are small or medium sized companies, which is what you would expect because they are the companies who are not known. They need to have some security, you are doing this, you see something, "Oh yes, that is good, I am reassured". The bigger companies are going to trade on their own name, they are not going to need the back up of that. If you are looking for what e-commerce is going to bring for the small and medium sized enterprises, it will open up cheaper—hopefully—access to markets and things like that. That is what it is aiming to do. Equally that is what the consumer needs. The second aspect is if we get the credit card companies to undertake chargeback. If they can bring in something, you have covered a huge degree of concerns of consumers.


  988. I noticed on the seven countries we have got, we have not got Ireland.

  A. Yes.

  989. I am just wondering about the others. Is there a reluctance to come on board or is it just a new concept you are not able to embrace yet?

  A. No. I think one of the things is you do not have very well developed consumer groups in a lot of Member States. The Irish one is not very well resourced. On the other hand, in Ireland there is a huge development of online dispute resolution and they are very, very far advanced in setting up cyber tribunals and things like that. On the other hand, they are finding certain solutions themselves to another part of the problem. In areas like Spain, Portugal, Italy and even France, the consumer associations are very divergent. In France they are politicised for various historical reasons, so you do not have the same kind of centralised strong consumer associations you find in the United Kingdom, you find in the Netherlands and in Belgium. The Belgians, with the United Kingdom, have been doing a lot of work with the Portuguese and with others in terms of helping to bring them along, forming alliances, which I think is extremely useful in terms of the sharing of expertise that is needed.

  Chairman: That is helpful. Thank you.

Viscount Brookeborough

  990. Data protection is obviously an important issue and linked with that are discussions with the US Government. Can you tell us how those discussions are progressing and whether you feel they are going to expose Europeans to additional risk en route?

  A. I am not the expert on data protection. This is in Fritz Bolkestein's area. My feeling is, one, there will be agreement on this. I think that is going to be signed. For various reasons people want to have that. The safe harbour approach will be there. Our own consumer associations are very sceptical about the safe harbour approach basically because they feel it is not going to be enforced, there will be all kinds of problems. At the same time you have to give the benefit of the doubt at this stage. The Americans have signed up, they are going to sign up in terms of how they will enforce it. It is one of the areas also where there has been spill over from the EU to the US. In the area of data privacy, data protection, there were not large concerns in the US. There are now starting to be greater concerns in the US. The FTC is having to address the issues involved in this and I think this whole discussion has woken them to the need that they are going to have to be more vigilant in terms of the surveillance of this operation. For the moment the jury is out but I am sure the agreement is going to come into effect.

  991. Following on from that to smart cards. There is tremendous resistance in the United Kingdom against anything approaching an ID card and in Ireland as well.

  A. Yes.

  Viscount Brookeborough: What do you feel about that? Do you think that we can develop along those lines?


  992. How many Member States have got ID cards?

  A. I think nearly every other Member State has ID cards.

Viscount Brookeborough

  993. You do not have them in the Republic?

  A. We do not have them in the Republic. The Republic and the United Kingdom do not have them. After living here for long periods of time and I am used to now carrying ID cards, they are very practical things to have[1].

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  997. And on the smart card?

  A. Going on to the smart card, it is going to be a difficult debate but, for example, let us take the health care area, here there is a big move on, the Italians are developing systems, others are as well, in France, developing systems of keeping basic information on smart cards. Now, as people start to move around this starts to have a certain advantage. Also there are concerns about confidentiality and things like this, for example if you are going on holiday, or if you are going to spend time in other Member States, carrying basic information with you that will give you quick access to services, where you go along, get your card and if you have to present yourself for medical care or something in another area you have certain entitlements that are readily available, maybe a very short medical, things that the doctor can download and have a look at. At the same time you have to balance out what are the individual's concerns in carrying such information. Personally I think it is a false concern, I think it will come in time because people will see the usefulness of it.

  Chairman: We were all advised to fill in form E111 before we came but I suspect that none of us have done it. You did, did you?

  Viscount Brookeborough: Of course I did, you told me to.


  998. That could be European wide, could it not, on a card?

  A. Of course, yes. Then you are into various technologies because you are after certain compatibilities and things. Look at what the banks have done with the automatic tellers, the ATMs. It is now very handy to be able to go in no matter where you are, put in your little card and download money. We are not talking of huge leaps in brain surgery here in this sense in trying to develop something.

Lord Paul

  999. You did talk about the fact that you are looking at this question of consumer protection over £100, like the UK Act. Have you got any idea of the total costs of this if that is there, and will it be online?

  A. At this stage there is certainly an interest on credit card companies' behalf. It is clear that they got pushed into it in the States from a series of measures that happened in the 1970s where there were certain court decisions on things like this and they were all involved in such a way that made them go down this track. It costs them money to do it in the States and they were not initially enthusiastic about having to go down this line in Europe as well. I think they see a certain commercial interest in doing it and I hope that they will come around to offer something in that light. How they do it themselves, it would be up to them whether they would offer an online dispute resolution. I assume if it is cheaper they will do it, they will offer dispute resolution online rather than handling paper and things like that. I saw a figure—it was quite high, I am just trying to remember—there was quite a high cost. The average cost was something like $50 or $60 for handling each complaint in the US. In that sense there is a certain cut-off for them in terms of what they would pursue. As of yet they have not come up with any firm undertaking that they are prepared to do it on a wider basis.

1   QQ 994-996 contain answers given in confidence and have been deleted. Back

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