OECD Meeting in Ottawa to Tackle Major E-Commerce Issues

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LONDON/BRUSSELS/NEWYORK - A ministerial meeting of the 29 OECD nations in Ottawa early next month will focus on key issues affecting electronic commerce - taxation, encryption, intellectual property rights, authentication and privacy.

Even as the preparations for the conference on October 8 and 9 are being completed, a private business organization is being formed whose focus parallels the concerns the OECD ministers will address.

The Global Business Dialogue (GBD) will unite CEO level executives from the Americas, Europe-Middle East-Africa, and the Asia Pacific in addressing "the many policy issues needed to support the rapid growth of e-commerce," Bill Poulos of EDS said.

GBD will not have any direct influence on the Ottawa discussions but the fact that high carat executives from global players like Bertelsmann, Microsoft, EDS and HP are involved demonstrates the urgency of e-commerce action.

Direct marketing will have a strong representation in Ottawa with Colin Lloyd, head of the UK's DMA, Charles Prescott, international VP of the US DMA, and John Gustavson, head of the Canadian DMA (CDMA) expected to be present.

While the Organization for Economic Co-operation and Development (OECD) does not have rule- or regulation-making powers, OECD recommendations or declarations often make their way into national legislation.

"The documents that come out of the conference may not be binding, but they do commit the ministers to pursue certain policies," David Ferris of the US Council for International Business, said.

In turn, these policies will "have ramifications for business because they create precedence and put responsibilities on business which it must meet" he added.

"Industry needs to develop a self-governance model for the Internet because the Internet is characterized by rapid technological innovation and therefore is best suited for self-regulation rather than government-mandated solutions," Ferris said.

Ticking off the agenda items, Colin Lloyd of the UK DMA said, there "will be a lot of discussion on whether contracts should be considered from country of origin or country of destination.

"If I sell you something from the UK to the US and something goes wrong is your recourse through the US or UK legal systems? The DM industry has argued that it should be country of origin whereas many e-publishers who sell CDs and tapes prefer the country of destination."

A proposal submitted to the OECD earlier this summer suggested seller and buyer could decide which country's laws would apply, Alastair Tempest, director-general for public affairs at the Federation of European Direct Marketing (FEDMA), said.

But at the same time there would be "no reduction of national protection provided the consumer in his own country as a result of a contract made online," Tempest added. The inherent contradiction torpedoed the idea at least for now.

"This is dangerous stuff in a way. You can end up with all sorts of proposals which could turn into international or EU law which we wouldn't find at all acceptable," Tempest said.

Taxation is a second major issue. "Which tax regime applies when you do business internationally, country of origin or of destination?" Lloyd asked. Equally vexing is the value added tax (VAT) European governments would like to impose on all Internet transactions.

"We prefer to have this a tax free zone," Charles Prescott of the US DMA said. "It's hard to see how the Europeans could impose VAT on communications itself, and how would you monitor and police digital transactions?"

But he noted that while Governor George Pataki had declared New York State "a tax free zone" for E-commerce, Texas is trying to impose Internet taxes.

The Clinton Administration opposes new taxes in this field and the OECD had agreed on a moratorium until the Internet "settles down," Tempest said.

But few doubt that governments around the world have not given up on making the Internet a gold calf of new tax revenues. Last year proposals were made for a "byte" tax that would meter the volume of transmission.

"It would measure the size of a file passing through an interconnection to the Internet and presumably you could impose a mill rate much as you do on electricity," Prescott said. The tax would be charged the access provider who presumably would pass it on to consumers.

Opposition to this "discriminatory" tax on e-commerce was so strong that the idea was dropped - for now. Ferris of the US Council predicted that the OECD ministers would come up with a framework on e-commerce taxation, but not with concrete proposals.

Encryption is one key to Internet security, and security of Internet transaction is a major concern of businesses and consumers alike.

Standard digital signatures, for example, authenticate who you are when sending a document. "Companies need to trust each other when they do business together," Lloyd said "If you sign a contract digitally, then I know it is you and not somebody who forged your name"

Privacy and data protection are perhaps the knottiest e-commerce problems and Lloyd hopes the framework of a model contract will be adopted in Ottawa that will allow the free flow of data after October 24.

That's the EU deadline for national implantation of its data protection directive. It forbids transfer of European data to countries without adequate data protection laws. The US is one of them.

"What is being considered is whether a contract between shipper and recipient of data between country A and B will be sufficient. I hope there will be some guidance from the ministers on that,'' Lloyd said.

Prescott is more cautious on this issue. "I don't think privacy issues are ripe for resolution through ministerial action. We take the position that our self-regulation works and is effective."

European and Canadian DMAs, he noted "are more comfortable with negotiated legislative solutions than we are and they understand that our legal and political system is significantly different from theirs."

Results of the Ottawa conference and their impact on global direct marketing will be hashed out at a meeting of the International Federation of Direct Marketing Associations (IFDMA) during the DMA show in San Francisco.

As for GDB it grew out of a meeting held on June 29 in Brussels that was convened by Dr. Martin Bangemann, the EC's competition commissioner to crank up a dialogue between governments and industry on e-commerce.

Bangemann wanted industry to take the lead in making sure that development of e-commerce is "industry led and market driven," Poulos of EDS said.

The group met in July and again in August and has a steering committee meeting scheduled for September 25 in New York chaired by Thomas Middelhoff, CEO-designate of Bertelsmann, one of the European driving forces behind GBD.

The key message GBD hopes to deliver to governments is that "old style regulation may not be suitable for the information age," Poulos said. Industry and governments have to work together to find mechanisms able to support e-commerce growth and meet social needs.

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