E-Commerce Regulation: Necessity, Futility, Disconnect
Existing e-commerce regulations constitute a premature and unnecessary interference in the natural evolution of commercial practices and technologies. I question not just their quality, mainly attributable to the technological ignorance of the regulator, but their very necessity. I observe the practical futility of drafting effective regulatory instruments in areas subject to continuous and unpredictable technological change. I criticize the overly homogenous approach to “everything Internet” (i.e. everything involving the Internet requires new law) as well as the creation of new regulatory spheres and legal categories. Some might claim that it is too early for a critical retrospective of this subject. Despite its relative “youth,” however, the “law of e-commerce” has developed a set of orthodox approaches. It is therefore not too early to present some heterodox views, especially given the largely unsuccessful regulatory activity in the European Union. Not just technologies but also theories about the Internet can become obsolete within a short period of time and should therefore be subject to constant revision.
The Impact of EU Unfair Contract Terms Law on U.S. Business-to-Consumer Internet Merchants
When the Court of Appeals for Versailles issued its decision in AOL France v. UFC Que Choisir2 in September 2005, it sent the message to U.S. Internet businesses that even contractual boilerplate localized for European markets may be invalid in European consumer transactions. In that case, a French consumer advocacy group challenged the terms AOL offered its French customers after AOL had made extensive revisions to its standard form contracts to respond to the concerns regarding those terms expressed in an advisory opinion by a French consumer protection agency. In 2004, a trial court invalidated nearly every term in the revised agreement; the appeals court affirmed on all counts. Subsequently, in July 2006 following concerns raised by the Office of Fair Trading (“OFT”), a United Kingdom government agency charged with “making sure markets work well for consumers,”3 Dell Corporation Limited changed its online terms and conditions to make them fairer to consumers.4 European consumer contract law had an impact in both cases. At issue for AOL France and Dell Corporation Limited was the application of France’s and the UK’s consumer contract law which is based on the Unfair Contract Terms Directive of 19945 and calls into question the validity of many of the terms that U.S. courts routinely enforce in transactions involving American consumers and merchants.
Rules and Principles: A Theory of Legal Certainty
The theory advanced is that precise rules more consistently regulate simple phenomena than principles. However, as the regulated phenomena become more complex, principles deliver more consistency than rules. A central reason is that the iterative pursuit of precision in single rules increases the imprecision of a complex system of rules. By increasing the reliance we can place on a part of the law we reduce the reliability of the law as a whole. Then it is argued that consistency in complex domains can be even better realised by an appropriate mix of rules and principles than by principles alone. A key choice here is between binding rules interpreted by non-binding principles and non-binding rules backed by binding principles. The more complex the domain, the more likely it is the latter that will deliver greater consistency. Robert Baldwin argues that the reason "Why Rules Don't Work" is that they are typically evaluated without reference to the context of their implementation. Hence we cannot understand when law is and is not consistently implemented by the police without confronting the fact that police culture is not a rulebook, but a storybook. In complex domains, when police, regulatory inspectors and judges enforce rules consistently, they do so as a result of shared sensibilities. Regulatory conversations that foreground obligatory principles buttressed by non-binding background rules is hypothesised to be the stuff of legal certainty on such complex terrain.