1. Trustwrap: The Importance of Legal Rules to E-Commerce and Internet Privacy Professor Peter P. Swire Moritz College of Law The Ohio State University Enforcing Privacy Rights Symposium November 15, 2002

2. Overview n Tylenol and trust n Trustwrap & the E-Commerce winners n Implications for Internet privacy laws n Conclusion

3. I. Tylenol and Trust n The 1980s Tylenol episode n Johnson & Johnson response – Remove from shelves – Build trust into every transaction n Outside plastic wrap n Foil seal n Caplets, not capsules

4. Tylenol and E-Commerce n Youve heard of shrinkwrap and clickwrap n Meet trustwrap n What sorts of trustwrap work for E-commerce?

5. II. Trustwrap & the E-Commerce Winners n What we used to think would win: – Online e-cash – Pure Internet plays – Unmediated matching of buyers and sellers n Lack of mediation worked: – Left handed corkscrews – 712 sites for them on Google

6. What really won? n Credit cards beat e-cash – $50 rule – Dispute resolution is built in n Our first example of trustwrap

7. Pure Internet plays? n Rise of the clicks and bricks n Brands, solidity, and trust n Trade-ins, complaints, customer service – All the same day – Or, can use the Net as with a pure play n Jurisdiction and choice of law favor consumers – Hard to deny local consumer protection laws if have a large store there

8. The end of intermediaries? n eBay as the big winner n The initial dream of community and feedback as sufficient

9. eBay as Shadow Legal System n Buyer protection against non-delivery n Seller protection against non-payment n Seller protection against outages n Rules for limiting free speech (feedback) n Anti-shill rules n Dispute resolution n Criminal enforcement against fraud n Lots more

10. The winners in E-Commerce n Johnson & Johnson created trustwrap – Tylenol priced much higher than generic n Trustwrap has helped online survival amidst the dot-bombs – Credit cards – Clicks and bricks – eBay

11. Winners in E-Commerce n The trustwrap that is winning in the marketplace has important legal guarantees to consumer – Credit card rules – Jurisdiction and consumer protection rules – All the eBay rules

12. III. Implications for Internet Privacy n Initial prophets of E-Commerce thought that legal rules: – Would descriptively not be important to E- Commerce – Would prescriptively be bad, causing more harm than good n Instead, legal rules have been associated with the big winners for Internet commerce

13. Was Internet Self-Regulation a Big Mistake? n Perhaps. Prof. Schwartz & others have argued from the start that E-Commerce would work better with legal guarantees for privacy n I suggest that the arguments for Internet privacy legislation are stronger now than in the late 1990s

14. Self-regulation and the 1990s 15 % privacy notices in 1998 to 88% notices in 2000 -- fast progress Less consensus and experience then with fair information practices Less experience with laws and sensitive data. Now have HIPAA, GLB, COPPA More risk of serious error during start-up phase of E-Commerce. Remember push technology?

15. Stronger Case Today for Internet Privacy Legislation n Greater consensus now on elements of good Internet privacy policies n Progress has stalled n Trustwrap and the surprising degree to which legal guarantees have been associated with the E-Commerce winners

16. Conclusion n The self-regulatory motto was let the marketplace decide n In a funny way it has n It has decided that enforceable legal guarantees are more important to successful E-Commerce than many would have expected n For a conference on enforcing privacy rights, thats an important message