E-commerce legislation debated

Consumer advocates are warning that legislative action by a little-understood group could stifle the future of electronic commerce.

4 min read
As commissioners from a little-understood group convene this week, consumer advocates are warning that its vote on a major piece of proposed legislation could stifle the future of electronic commerce.

The National Conference of Commissioners of Uniform State Laws (NCCUSL) is responsible for drafting laws governing commercial transactions that legislatures are free to either adopt or reject. Were it not for this process, it would be difficult to conduct many types of business across state lines because of conflicting laws in each jurisdiction.

For years, NCCUSL has been drafting a new section of the Uniform Commercial Code that is aimed at defining the rules for the licensing of software and information online. In its current form, Article 2B's scope is enormous, spelling out everything from the legal requirements for shrink wrapping software to the terms under which contracts entered into by "electronic agents," which help users buy goods online, would be binding.

Article 2B will come up for review before the commissioners at their annual meeting, which begins Friday. Although NCCUSL has not scheduled a final vote until a year from now, consumer advocates warn that this year's tentative approval or rejection of the plan is pivotal because it will determine which sections are further revised and which will remain unchanged.

Almost since Article 2B's inception, some consumer advocates have warned that the proposed legislation could spell trouble for people transacting business online. Their laundry list of gripes is long, and often is steeped in confusing jargon referring to "electronic agents" and "fair use." Generally, however, critics say the law will tip the balance of rights in the favor of licensers, to the detriment of purchasers.

Article 2B "gives too much power to licensers to create enforceable contract terms, even when those terms are so surprising that a reasonable consumer could not have expected them in the contract, so long as the terms are not unconscionable and do not conflict with 'expressly agreed' terms," Gail Hillebrand, senior attorney for the Consumers Union, recently wrote in a letter.

Topping the list of specific worries is that information no longer will be sold, as books are now, but rather will be licensed, as most software is today. The difference is not nearly as academic as it may seem, critics warn.

They say Article 2B may embolden publishers to place licensing restrictions on the practices that they dislike most: reselling or lending their books, or even writing reviews about them. This is now permitted under federal copyright laws. Although a court of law ultimately could throw such provisions out, civil libertarians worry that have the potential to create a chilling effect on free speech and dull other rights that currently are taken for granted.

Critics also complain about liability limitations for faulty software and other digital products, as well as about sections of the article that would allow electronic agents, or specially designed software programs, to legally bind a user to a contract.

Not everyone is against the proposed legislation, however. J.D Marple, a legislative policy manager at the Business Software Association, said that, with the emergence of Internet and other types of electronic commerce during the last decade or so, the law is badly needed.

"The lack of clear guidelines for creating contracts on the Internet and creating [software] licenses in general leads to higher costs," said Marple, whose group represents Microsoft and other large software makers, which are pushing hard for Article 2B. He added that without the law some "contracts might not be enforceable."

During the past year, he said, drafters of Article 2B have worked hard to address the concerns of the law's critics, adding sections that give consumers the opportunity to reject shrink-wrap licenses without being penalized and make it clear that federal intellectual property laws are not superseded by the proposed law.

"You're still going to have courts review the question as to [intellectual property] rights under federal law," Marple added.

But Pam Samuelson, a professor at the University of California at Berkeley, remains adamant that the proposal in its current form is a bad idea.

"Even though Article 2B is aimed at stabilizing commerce, it's going to generate an awful lot of litigation," she said. In addition to concerns that purchasers will have to waive First Amendment and consumer protection rights in order to buy goods, she also faulted Article 2B for delving into topics that have yet to come into widespread use, such as electronic agents.

After NCCUSL's vote in Cleveland, a new round of drafting will start on the most controversial sections of the bill.