Orders of the Day — E-commerce

– in the House of Commons at 2:09 pm on 8th December 2000.

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Motion made, and Question proposed, That this House do now adjourn.—[Mr. Betts.]

Photo of Mr Brian White Mr Brian White Labour, North East Milton Keynes 2:30 pm, 8th December 2000

I should declare an interest. I am a member of Eurim, which brings together parliamentarians and industry to discuss information technology matters with the Government.

Before I left for the debate, I received a telephone call from the Consumers Association which seemed to warn me not to comment on it. I did not intend to talk about the Consumers Association, and found its call threatening and disturbing. However, I shall return to that later in my speech.

Security and confidence in online shopping, and business online generally, have yet to develop fully in the United Kingdom. Many people in the internet industry have come to view trust marks and certification schemes as an excellent opportunity to further the e-commerce market. Trust marks will help to provide confidence and a system of recourse in buying and selling online and in business-to-business transactions. However, there are many certification schemes and trademarks, and the number of them is rapidly increasing. I am worried that, instead of building public confidence, it might cause confusion.

Public awareness of such schemes is quite low. The Government have rightly backed the TrustUK scheme to tackle that problem. The umbrella organisation brings together various schemes and ensures that they conform to criteria and that websites which carry the TrustUK hallmark—either on its own or with other symbols—give consumers, at a glance, the confidence that they are safe to do business with that website. Consumers can be assured that that company will adhere to high levels of business standards on a diverse range of issues such as privacy, delivery and returns, security of payment, quality of goods and consumer assistance.

I emphasise that my concerns about TrustUK are based on a belief that it is a good idea. The Government are to be commended for creating it. I am worried about its operation in the first few months since it has been established. Anything critical that I say should be seen in the context of my support for it.

It could be argued that TrustUK has only been running since August and it is early days, but it took two years to set up and there were warnings that instead of using a system of self-regulation, it would rely on self-declaration. I am concerned that those warnings by people in the internet industry have gone unheard.

I have looked at TrustUK's website to see what it is trying to achieve. I am worried about self-declaration. TrustUK seems to be setting itself up as a body that recognises codes of practice instead of providing a mechanism so that buyers can have confidence in individual merchants. Its web page says that TrustUK pulls together the various schemes and hallmarks being used and makes sure that they are bona fide. There are no tests carried out on the statements made by the code owners; they merely sign up to the code.

The website goes on to say: TrustUK means that the company showing the symbol on-line is complying with a Code of Practice, which has been accredited (or approved) by TrustUK. The thrust of my concern is that TrustUK is an approval mechanism for the code of practice and is not involved in its implementation. The website also says: Look out for the TrustUK Hallmark to show you that the e-trader operates to the requirements of an accredited code of practice. There is no evidence of that implementation being tested before the trader signed up to the code of practice, or subsequently, when the code of practice was approved by TrustUK. I am concerned that it is down to the individual code of practice owner to determine whether that is happening, not TrustUK.

My fear, which I shall come to shortly, is that not conforming to the codes of practice could undermine TrustUK. At present, that is not a problem. However, if this does not develop into self-regulation in the long term, it could become a major problem for us.

TrustUK is a non-profit-making organisation owned by the Consumers Association and the Direct Marketing Association. My understanding is that there are three codes—the DMA's, Which?webtrader—owned by the Consumers Association—and the Association of British Travel Agents. I do not think that ABTA's agent is accredited, but I stand to be corrected by the Minister.

With regard to the Consumers Association, there is a potential conflict of interest. When I got the telephone call this morning, I wondered why. Is the association concerned because Which? carried out a study on internet service providers and included its own Which? web page? Does it carry out advertising practices which it has condemned other organisations for in the past, such as using gimmicks so that people will join? Could it be that the last time I raised concerns about an organisation that was supposed to be looking after the interests of consumers—the National House-Building Council—it was found that the Consumers Association, far from protecting consumers, was actually part of the problem? I do not know the reason for that telephone call this morning, but it started making me think about the Consumers Association, which I previously had no intention of referring to in my speech.

My concern about the procedures used by TrustUK is that there is no independent audit of the merchants before the certificate is issued, and no monitoring afterwards. TrustUK is very good at reviewing the codes of practice, but the lack of requirement regarding the process that the code owners then use and their monitoring of how the code user monitors its traders is a real problem.

We looked at a sample of eight merchants accredited by TrustUK which show the TrustUK logo, although some did not display it. In some, there were no references to security, as required by TrustUK. There was no opportunity to complain which, again, is required by TrustUK.

TrustUK promises to provide strict accreditation criteria, against which any code must be matched, ensuring that minimum standards are in place for consumer protection. However, that is only at the point at which the accreditation is given—there is no way of checking that that continues to be the case. In the sample, we found that although that had been true, it was no longer true. The statements of code owners about bringing the various schemes and hallmarks together are not tested. The sample showed that various hallmarks and trust marks were used. In one case, shoppers could not opt out of providing personal information before supplying it. The company in question, which has an entry in the data protection register showing that it trades under 21 other names, collected personal data for the purposes of credit reference, trading in personal information, crime prevention, prosecution of offenders and keeping details of offenders and suspected offenders. Shoppers had to provide the information before being able to opt out, yet the TrustUK logo was being used.

None of the sites that we looked at had any reference to complaints, either to the code owner or TrustUK. That is worrying.

As TrustUK develops, how do we monitor it? I know that it has to provide a report to the Office of Fair Trading, but is that sufficient? There are questions to be answered about how TrustUK is monitored. The initiative is a good one, but I have concerns about accountability.

All code subscribers must display the hallmark on their website, and I am concerned that that tends to restrict it to the UK, even though much internet trade is global. A UK-centric approach has the potential either to mislead consumers or to restrict opportunities for UK-based traders in the global environment.

TrustUK is a welcome initiative in that it provides a recognisable image for web traders and enables consumers to have confidence. However, there are myriad certification schemes, some paid for, some free, and the tendency is to treat all of them as being of equal value and, at the same time, potentially equally flawed. That becomes apparent when we see that certain members of the internet industry have criticised TrustUK for having a less than rigorous approval procedure.

In the monitoring of certified websites, there is no common practice between the different certification schemes. TrustUK faces calls to raise its minimal requirements in terms of approval and monitoring criteria, by including matters such as third-party verification. Although I do not advocate any particular scheme, I recognise that some of the paid-for certification schemes have a problem with that.

Consistent monitoring of websites as a standard condition of the hallmark provides a guarantee. Without it, there is a risk that TrustUK could undermine all certification schemes. I have a dreadful fear of Anne Robinson telling TrustUK: You are the weakest link. Goodbye, and of e-commerce in the UK being undermined. Some certification schemes used in other countries employ third-party verification and enforce a consistent form of monitoring. The key is that there is review following approval, and that is where TrustUK lets itself down. We can generate confidence in e-commerce and the fact that there are many certification schemes need not be a problem, provided my concerns are addressed and a monitoring procedure is introduced.

The UK schemes are designed to generate greater e-confidence in this country, but e-commerce, by its very nature, is cross border. I am glad that there are no Conservative Members present, because they would jump up when I say that there is a European dimension to the issue. My hon. Friend the Minister is aware that that aspect must be addressed in current negotiations with the European Union, and that as EU e-commerce develops we have consistent standards that enable us to resolve cross-border issues, jurisdictions and national consumer laws. I realise that those will be difficult negotiations, but they are critical if e-commerce is to flourish here.

It is early days and most certification schemes are still in their infancy. I suspect that many of my concerns will be sorted out as practical steps are taken. I raise the subject in today's debate because I believe that the Department of Trade and Industry has a responsibility. I have long known that Governments are good at generating policy and allocating money and other resources, but bad at following through in implementation. There are several examples throughout Government of implementation being treated as if it were an add-on, not an essential part of the delivery of Government policy, and I fear that, if we are not careful, TrustUK will become another example. I hope that the implementation of TrustUK is properly handled by the DTI and that we establish a public sense of security and confidence in the hallmark.

I am concerned about one more aspect of TrustUK. I refer to trade bodies that cannot deliver all their members because they do not have the necessary enforcement schemes to ensure that all their members are consistent, or bodies such as the British Bankers Association, whose complaints procedure is dealt with not by the trade body, but by an ombudsman. TrustUK does not cover such a case, as it relies on the code of practice owner, the trade body, to deal with complaints. That aspect needs to be taken into account.

I conclude by going back to where I started. I have raised a number of concerns because I want TrustUK to succeed. It is a good initiative, it has had a good start, and it has the potential to make Britain the best place for e-commerce. I do not seek an instant response from my hon. Friend the Minister, but I want her to take those concerns back to her officials and to TrustUK, and to work with consumer groups and the industry to ensure that those practical problems are taken seriously by TrustUK and that practical solutions are developed.

Photo of Patricia Hewitt Patricia Hewitt Minister of State, Department of Trade and Industry 2:46 pm, 8th December 2000

I congratulate my hon. Friend the Member for Milton Keynes, North-East (Mr. White) on securing the debate. As he rightly says, TrustUK is a new organisation, a new initiative, and he has done the House and TrustUK a great service by bringing his concerns to the attention of the House at this early stage, so that we can ensure that they are taken on board and that TrustUK continues to fulfil its early promise and overcome any difficulties that there may be.

I strongly agree with my hon. Friend's point about the importance of getting implementation right. It is not enough to get the policy design right; we must execute it well, too. That is well understood in the Department and well put into practice.

Electronic commerce is bringing enormous benefits to consumers, learners, and people who simply want to keep in touch with friends and family. Consumers have access to a wide range of products and services. Convenience is increasing rapidly as use of the internet spreads. Of course, consumer confidence is vital to that process.

My hon. Friend referred to my right hon. Friend the Prime Minister's goal of making the United Kingdom the best place in the world for electronic commerce. Before I deal with his comments about TrustUK, I shall outline a few of the advances that we have made over the past year—perhaps I should say in the past four or five internet years—in achieving the goal set by the Prime Minister.

We have, for example, held the world's first auction for the allocation of spectrum for third-generation mobile services, which will make us one of the leading nations of the world in the next generation of the internet—the mobile internet. We have worked with Oftel to drive down the cost of internet access, and we have rolled out a national network of UK Online for Business centres and advisers.

As a result, we are now the cheapest country in Europe, and one of the cheapest in the world, for internet access. One third of the UK population is now online. There has been a 50 per cent. increase since September last year. We remain the largest e-commerce market in Europe, with retail e-commerce alone estimated at well over £1 billion.

However, there is continuing evidence that consumers still do not trust the new medium. Recent figures from the National Consumer Council show that about a third of the public felt that the internet was the riskiest way to shop, compared with only 3 per cent. who felt that high street shopping was particularly risky.

Consumer confidence depends on a number of factors. It depends on having access to the technology, having the skills to use it, and feeling comfortable doing so. Once people are on the internet, they need to be able to get clear, unbiased information, to pay safely, and to know that any personal data that they give, particularly credit card data, will remain confidential. Consumer confidence also depends on people receiving what they ordered, and getting things put right if they go wrong.

The Government have a responsibility to help build consumer confidence, as do business, the consumer organisations and the regulatory bodies. Our general approach to regulation for consumers is to favour a flexible system of co-regulation, in which the Government set policy objectives and charge business and consumer organisations with achieving those goals through codes of practice and voluntary systems for dispute resolution. Where necessary, we will back that with legislation. The Data Protection Act 1988 and the Data Protection Registrar, for instance, set and enforce the rules on the use of personal data. Of course, existing consumer law applies online, just as it applies offline. In addition, we have just introduced new regulations governing distance selling, including protection against the fraudulent use of payment cards.

That is the context within which TrustUK operates. I welcome my hon. Friend's support for TrustUK because, as the information age partnership recently told us, it is hugely important in helping to build consumer confidence and making the UK one of the best places in the world in which to do electronic business.

TrustUK is a good example of co-regulation. It is a private sector body set up by the Alliance for Electronic Business and the Consumers Association. As my hon. Friend said, its job is to approve codes of practice for retail e-commerce. Those approved codes meet good practice standards on advertising, transaction information, contracts, fulfilment, privacy, security, children and selling to children, redress mechanisms, monitoring and enforcement. The TrustUK logo indicates to consumers that a trader is committed to good practice and subscribes to a worthwhile code of practice. In particular, the scheme will give small and medium-sized businesses a way of generating confidence in their services, enabling them to gain recognition and break into new markets.

Of course I understand my hon. Friend's concerns about the early roll-out of TrustUK. On the question of a possible conflict of interest, I stress to the House that the approvals committee is independent and separate from the management of TrustUK. The approvals committee, which approves the codes of practice, has a secretary provided by the Department of Trade and Industry and is chaired by the former Director General of Fair Trading, Lord Borrie QC. I am sure that my hon. Friend agrees that he is an excellent chairman.

I understand my hon. Friend's concerns about the role of the Consumers Association.

Photo of Mr Brian White Mr Brian White Labour, North East Milton Keynes

Some people in the industry have expressed concern about the transparency of the separation of the approvals committee. Will my hon. Friend look at ways of ensuring that the industry has confidence in that transparency?

Photo of Patricia Hewitt Patricia Hewitt Minister of State, Department of Trade and Industry

I readily undertake to look into that matter. When I launched TrustUK, I stressed to industry and the media the separation of its management from the approvals committee and from the role of Lord Borrie. However, I shall certainly see whether we can do more.

The Consumers Association is a private sector organisation with its own commercial interests. I am confident that it takes care to ensure that those interests do not compromise its hard-won reputation for impartiality and its role as a consumer advocate. It is important that we involve consumer organisations in TrustUK and similar co-regulatory schemes.

The main issue raised by my hon. Friend concerned TrustUK's requirements for the vetting and monitoring of traders. I am grateful to him for the considerable research that he has undertaken. I know to my own cost that I never have enough time to research websites, and I am grateful for the amount of work that he has put in. I hope that he will pass on to me the details of the traders' sites that he looked at and to which he referred, as I shall draw them to the attention of TrustUK and the approvals committee.

The underlying issue is whether we need a greater element of independent third-party vetting and more consistent monitoring and review. We are aware of those issues, having listened carefully to those who have raised such concerns, and we will keep looking for the best way of solving them.

However, the problem is to strike a balance between the rigour of the code owner procedures—and, indeed, those of TrustUK—and the cost that they impose, especially on smaller firms. I do not want to establish complicated procedures, whose hurdles only large, highly profitable businesses can jump. That would undermine the purpose of TrustUK, which is to enable more small businesses to offer their goods and services on the internet—that is part of the value of e-commerce.

Of course, the code owners vet their members. I think that more than 100 traders have now been approved. My hon. Friend referred specifically to the Association of British Travel Agents and asked whether it had approved any traders. I understand that it is now processing and considering the operations of its members, who number around 2,300. The vetting process takes time, but I hope that it will go at least some way towards reassuring my hon. Friend that the code owners take the process seriously. I understand that the approvals committee has considered the question of monitoring carefully, and as a result, there may be scope for more consistent monitoring. TrustUK will need to assess the results of the quarterly monitoring reports, which will be considered by the committee next week.

One of the great virtues of self-regulation and co-regulation is that they can be flexible. Clearly, improvements can and will be made as TrustUK develops. The Government will listen carefully not only to my hon. Friend, but to what others, such as the information age partnership, are telling us.

I agree with my hon. Friend that one of TrustUK's priorities must be to extend its coverage to more codes and e-commerce retailers. In order to do so, it must build recognition of the TrustUK brand. I understand that the Alliance for Electronic Business will invest in a promotional campaign in the new year. If the trade associations are to deliver their members, as my hon. Friend puts it, there must be demand from those members to join a well recognised name and brand.

We are also encouraging the development of alternative dispute resolution—ADR—through TrustUK. That welcome move means that code owners and traders approved by them will not be able to ignore consumers' complaints. TrustUK requires approved codes of practice to provide access to an ADR scheme. One result of that was that the Consumers Association decided to set up an ADR scheme as part of its Which?webtrader code. That was a nice example of spreading best practice. I shall certainly pursue my hon. Friend's point about the use of ombudsman schemes in some trade association codes.

My hon. Friend also asked whether TrustUK was too UK-centric. I am pleased to say that it is not at all inward looking. We were concerned that it should not be. It will approve codes from other countries. Indeed, it is about to approve its first one. In Europe, the Commission and a group of stakeholders, including TrustUK, are already developing European principles for codes of practice—a nice example of Europe following a United Kingdom lead. I understand also that TrustUK has received inquiries from the Australian National Office of the Information Economy, and has established contacts not only in Europe but in Japan, the United States and Canada. Of course, the Government are closely involved, through the Organisation for Economic Co-operation and Development and through bilateral talks with many countries.

In the run-up to Christmas, when more consumers are likely to venture into internet shopping for the first time, it is especially important for consumers to follow sensible dos and don'ts. First, people should shop with sites that they trust—the ones that they know because they know the shops, and those that might have been personally recommended or are members of approved codes and display the TrustUK brand. We would advise consumers to shop around for the best deals, and the internet makes it much easier to do that. We suggest that consumers check refund policies and remember that in most cases, thanks to the distance selling directive, they now have the legal right to cancel within seven days. Of course, consumers should check delivery times and find out whether there are any extra charges on top of the delivery charge, such as VAT or customs duties. They should also pay by credit card and look for the padlock symbol at the bottom right of the screen—

The motion having been made at half-past Two o'clock, and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at Three o'clock.