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IP: Privacy, Other Issues Post Difficulty for E-Commerce Meeting

From: [email protected]
Subject: IP: Privacy, Other Issues Post Difficulty for E-Commerce Meeting
Date: Fri, 09 Oct 1998 09:38:25 -0500
To: [email protected]

Source:  USIA

08 October 1998 


(U.S. position outlined at OECD conference in Ottawa)  (840)
By Bruce Odessey
USIA Staff Correspondent

Ottawa -- As ministers from industrialized countries met to work out
ways for promoting electronic commerce, differences persisted on a
number of issues, especially privacy.

When the Organization for Economic Cooperation and Development (OECD)
Ministerial Conference in Ottawa ends October 9, either the ministers
will produce a communique demonstrating some sort of agreement or the
Canadian minister presiding will produce a communique demonstrating
continued disagreement.

In an October 8 address to the conference, U.S. Secretary of Commerce
William Daley called privacy "the make-or-break issue for all of
electronic commerce." At issue are the potential for abuse of credit
card numbers and confidential medical and other private information by
unscrupulous businesses.

Daley was confident that the privacy and other consumer protection
issues would be resolved.

In a panel session, President Clinton's adviser Ira Magaziner
described the U.S. vision for protecting consumer privacy on the
Internet, a vision reliant on industry self-regulation, not government

In each country, he said, some independent private sector organization
would develop a privacy code of conduct and authorize a graphic seal
of approval for web sites that pledge to follow that code. The
participating web site would have to notify potential buyers about
what information it would collect about the buyer and how it would use
it. The buyer would have the choice not to make a purchase under those

In addition, Magaziner said, consumers would have the ability to
settle complaints about privacy abuse through the organization, which
would also conduct routine audits to assure compliance by its web site

Already 70 percent of relevant U.S. businesses conducting electronic
commerce have agreed to participate in this program once it becomes
established in the next few months, he said.

Magaziner compared the U.S. approach with the European Union (EU)
approach, which establishes government privacy regulation from the
beginning. In fact, a EU privacy directive scheduled to enter into
force in two weeks, prohibiting flows of electronic data about EU
nationals to countries that have no similar regulation, threatens some
disruption of data flows to U.S. companies. Secretary Daley said he
remains hopeful the two sides will avert any disruption.

"To be frank, we must succeed or millions of transactions between the
United States and Europe may be blocked," he said.

Magaziner argued that the U.S. vision of an alliance of independent
organizations for protecting consumer privacy operating in different
countries would achieve the flexibility required for the rapidly
evolving business of electronic commerce in a way that governments
could not.

"None of us know where this is headed," he said. "We have to be very
cautious before we act" to impose government regulation that could
stifle the expansion of this new technology soon after its birth.

The OECD secretariat draft proposal on privacy recognizes the
different approaches to privacy and other consumer protection issues
-- government regulation and industry self-regulation -- and suggests
ways for both to exist. While some EU representatives grumbled that
the OECD draft pays too little heed to consumers, Secretary Daley was

"I welcome this commitment to work together to find common ground on
this issue," Daley said. "We believe that our self-regulatory approach
can co-exist with approaches taken by other governments.

"To be honest, it won't be easy," he said. "But with careful thought
and hard work, we can get the job done."

Privacy is but one in a set of issues concerned about building
consumer trust in electronic commerce. Conference participants
acknowledged that the level of trust remains low for most consumers,
who hesitate to commit their credit card numbers to cyberspace.

One of those issues concerns authentication of information exchanged
by parties to an e-commerce deal; another concerns enforcement of
contracts; another concerns the use of encryption for authentication
and privacy. No one expects final answers to emerge at Ottawa.

Another area of controversy the ministers are tackling concerns
taxation of e-commerce transactions. At an October 8 panel, U.S.
Internal Revenue Service Commissioner Charles Rossotti said a
discussion the day earlier among government and business participants
pointed to some consensus emerging at least about broad principles.

First, he said, there was consensus that definition was needed about
where products delivered by the Internet are consumed, especially for
intangible products like services.

Second, he said, participants wanted to promote the availability of
electronic taxpayer services, including electronic tax filing and
provision of tax information and guidance on the Internet.

Third, he said, taxes should be collected in a way that does not
disadvantage those who comply and tax authorities should aim to
prevent cheating by electronic means.

Fourth, he said, existing international tax rules should be clarified
for their application to electronic commerce, especially potential
problems caused by the location of information servers.
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