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Commerce Dept. Proposes Self Regulation

The heads of the U.S. Department of Commerce and the Federal Trade Commission have reiterated their commitment to let online businesses lead the way in protecting shoppers against fraud and invasions of privacy, and this month announced plans to supply more accurate Internet retail sales statistics.

“We will have strong enforcement of our existing consumer protection laws, but to be frank, we think the law should be the last line of defense,” Commerce Secretary William M. Daley told a press conference marking the end of February's national consumer protection week. “The first line should be the businesses who deal with the issues themselves.”

Daley said average government estimates of last year's online retail sales stand at about $9 billion, three times 1997 levels and greater than government projections that had forecast a doubling of e-commerce. The department now expects Internet sales to consumers to reach $30 billion in 2000.

Online commerce has boomed as major retailers have joined the ranks of early “dot-com” companies and small businesses have swarmed to the Web, Daley said. The government found that 39 percent of U.S. retailers now operate Web sites, up from 12 percent in 1997.

Daley also unveiled Commerce Census Bureau plans to separately track Internet sales in its annual retail survey. The first such survey will be available in summer 2000 and will include separate statistics for 1998 and 1999. Previously, the reports lumped together e-commerce and catalog sales.

While stressing that the government will remain diligent against deception, privacy violations and unscrupulous marketing to children, FTC chairman Robert Pitofsky questioned the viability of any congressional moves to regulate e-commerce.

“We're at the front end of a remarkably dynamic marketplace, and legislation may be rather inflexible. It may be outstripped and outdated very quickly, whereas self-regulation, if it's honored and serious, can be more flexible and adjustable.”

The Commerce Department will work with foreign governments to ensure that they “do not erect trade barriers in the guise of consumer protection,” Daley added.

Both officials emphasized that online retailers will lose business if they fail to satisfy and protect their shoppers. In a survey from the recent holiday season, 74 percent of consumers said they were satisfied with their Internet shopping experiences, but those numbers were down from 88 percent last summer. Buyers most frequently complained about slow Web sites, thin selections and improperly filled orders.

A large majority of Americans who shop online — 86 percent — said that they are concerned about personal privacy, with half expressing “very great” concerns, Daley said.

“If 86 percent of Americans can agree on anything, this is a very serious matter. They will stop shopping if their data is abused,” he said.

In the last 14 months, the FTC has brought 58 cases of fraud against firms selling goods over the Internet, and quadrupled the number of its staff who scan the Web searching for commercial deception.

While some scams use technology unique to the Net, others are merely old-fashioned fraud through a new medium.

Pitofsky cited one firm selling headsets that people could wear when they slept. The company promised buyers they would wake up having learned a foreign language, lost weight, improved their vocabulary and lost their desire for cigarettes. If the headset proved uncomfortable, customers could buy the same benefits in pill form. Though Pitofsky could not specify how many people bought the device, he said the FTC obtained $195,000 in refunds for consumers swindled in the case.

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