Memorandum by Vodafone Ltd
Vodafone is submitting these comments in addition
to the Operators Group response to question 1 of the enquiry.
In case of any perceived inconsistency between the Operators Group
response and this response, the comments in this response should
be taken as Vodafone's view.
1. Consumers need to trust websites, and the
means of access, if they are to purchase goods and services using
them. For consumers to gain that trust they will need to be able
to recognise whether a company behind a site is likely to meet
certain standards of service. A good standard of service would
include delivering the service or product of the quality requested,
and ensuring the customer has a secure link when submitting personal
information to the site. The providers of the diverse possible
range of access channels, whether these channels be PSTN, cable
or mobile etc, must provide a secure framework both for passing
information, such as credit card details, and for providing a
customer's identity, for example by electronic signature. Voluntary
measures by industry, government-facilitated action which does
not involve formal regulation, consumer and market led initiatives
are ways of engendering that trust.
Leading the Way
2. European and UK government institutions
should lead by example in the electronic age. Citizens should
be able to communicate and transact with government institutions
electronically. A good example of this is the UK Government's
incentivising of UK citizens to return taxation details and to
pay tax electronically.
3. The following are a sample of the problem
areas Vodafone is currently aware of.
4. Businesses need to know how to deal with
VAT. Crucial business decisions are being taken now with a view
to services being launched within a few months but there are still
no clear guidelines on VAT treatment. The issue must be pushed
to the top of the agenda, rather than being dealt with only at
the six monthly OECD meetings. Speed is essential.
5. Businesses are currently working in a
void when determining the treatment of new types of supplies and
payment collection. For instance, if a telecommunications operator
were to supply a broking service as agent via its internet site,
with payment collected through the monthly telephone bill, what
would the liability of that service be as denoted on the bill?
Different rules apply to telecoms services compared to broking
servicesnot only are broking services often exempt, but
the place of supply rules differ too. There is no general guidance
on deciding the liability of services provided via the internet
so businesses are having to take their "best guess"
and set up and configure their systems accordingly. If the EU
does eventually implement general rules or specific guidance,
businesses will be forced to pay for costly operational and systems
6. Neither should UK business be put at
a competitive disadvantage to, say, US business because of VAT
legislation. However, until legislation is passed, non-EU businesses
can easily provide digitised services VAT free. Digitised services
are those which can be downloaded from the Internet. In addition,
if the option chosen is to require non-EU business to register
in one EU Member State, UK business will still be at a disadvantage
due to the difference in VAT rates across Europe.
7. To help to combat the uncertainty government
should update business on progress on taxation, by issuing regular
monthly Business Briefs which can be communicated via local VAT
offices. If there are key proposals or major hold ups, business
should be informedeven if it is to say there has been no
advance since the last Brief, it would keep the issue live and
changes would not come unexpectedly.
UK Financial Services and Markets Bill
8. The Treasury recently consulted on this
Bill which is intended to provide a modern framework for the regulation
of financial services. Unfortunately it appears to diverge from
general regulatory principles now being articulated at a European
level notably within the draft Electronic Commerce Directive.
It may also create a complex and confusing regulatory structure
inhibiting development of new internet-based financial services.
This may, in turn, undermine investment and innovation in the
on-line financial services market and in supporting markets such
as communications services.
9. The Bill concentrates on the use of "country
of reception" as a principle. This may lead to regulatory
uncertainty when contrasted with the stance of the European Union,
supported by the DTI, which asserts that to promote e-commerce
services "country of origin" should be the overriding
principle. The DTI and the Treasury need to co-ordinate their
work to use the country of origin.
10. Regulatory authorities examining issues
in e-commerce have generally recognised that it is desirable to
exempt network operators and internet service providers (ISPs)
from excessive liability and undue burdens with respect to third
party content provided to retail customers using operators' and
ISPs' services. In this way new electronic media are being regulated
on a level playing field with established forms of communication
such as postal services. This also reflects the realities of providing
network services where liability for content would suppress incentives
to make new network services available and would result in barriers
to the deployment of new retail services (financial in this case).
11. Some more specific concerns about the
(a) Clause 19 of the draft Bill extends the
restriction on financial promotion to a communication originating
outside the UK if "the communication is capable of having
an effect in the United Kingdom". This appears inconsistent
with EU legislation. We would therefore like Clause 19 amended
to accept financial promotions directed at the UK market, originating
in another Member State, provided they comply fully with the legislation
of the originating Member State.
(b) Clause 19 also states that "if A's
website contains a . . . link to B's website, A may, nevertheless,
breach the clause 19 prohibition if B's website contains material
amounting to an unlawful financial promotion if A has in fact
"caused" the unlawful financial promotion on B's website
to be communicated". While those establishing hypertext links
from their websites to those of others should take reasonable
care the legislation should not place an undue burden on website
hosts. Periodic checks to ensure that links do not infringe this
provision should be sufficient.
(c) We believe that companies acting as mere
conduits of "invitations or inducements" should be excluded
from liability. It is not clear that telecommunications operators
and ISPs would fall within the mere conduit exemption where the
content being transmitted is not the operator's own. If this is
the case it is also inconsistent with other legislation and would
be another barrier to e-commerce.
12. Comments have already been provided
in the Operators Group response to question one on the current
derogation for consumer contracts from the country of origin principle.
As it stands consumers from the rest of the EU who bought goods
off a small UK company's website will be able to use consumer
laws in each of their respective states and sue using the courts
of each of those states if they had a dispute with the company.
Of course, this could put a small company out of business and
could stretch unduly the resources of even large companies.
13. Instead of these potentially catastrophic
measures more emphasis needs to be placed on options like alternative
dispute resolution which appear to be being promoted by the European
Parliament. It might be possible to achieve this by setting up
an online arbitration and settlement procedure, establishing an
independent tribunal for claims, or a scheme such as that provided
by the Financial Services Ombudsman in the UK. Such schemes could
be supported by self-regulatory sectoral codes of conduct. The
aim would be to ensure basic standards of consumer protection
for contracts and commercial communications effected by electronic
means, while at the same time preserving the advantages (to both
suppliers and consumers) ofe-commerce.
14. Other concerns about the Directive include:
Articles 9-12: Formation of a Contract
The draft Directive proposes a three part process:
-(a) acceptance of the offer by the customer;
-(b) an electronic acknowledgement of receipt
of the customer's acceptance;
-(c) confirmation of receipt of the acknowledgement
of receipt by the customer.
Acknowledgement of receipt is deemed to be received
and confirmation is deemed to have been given when the parties
to whom they are addressed are able to access them. The aim behind
these provisions is to ensure that the time at which the contract
is concluded can be established. However, by providing that the
contract is concluded when the receipt has been accessed, no account
is taken of delays and faults in the transmission of e-mails or
of the difficulty in establishing when the customer has accessed
the acknowledgement. Currently there is no guaranteed technological
means of establishing that an acknowledgment has been received.
This will, in practice lead to uncertainty on the part of the
service provider as to when the contract has been concluded and
may mean that services will be provided to a customer before a
contract has been put in place, exposing the service provider
to serious risk of losses. It would be preferable to amend the
requirements to provide that a contract is concluded once the
receipt is sent to the correct address, which would bring the
provisions in line with the postal rule.