Australian Civil Liberties Union

Submission on Information Technology

Submission To Senate Select Committee On I.T.

Australian Civil Liberties Union,
PO Box 1137, Carlton,Vic. 3053
nedrium@netspace.net.au

The Secretary,
Senate Select Committee on Information Technologies, S1.30.1
Parliament House
CANBERRA, ACT 2600
FAX (02)6277 3830; email: it.sen@aph.gov.au

SUBMISSION TO SENATE SELECT COMMITTEE ON I.T.

The Australian Civil Liberties Union wishes to make a submission to the Senate Select Committee on Information Technologies concerning its inquiry into consumer servicing and protection on the Internet and on EFTPOS under its terms of reference:

(a) The protection of consumer information obtained through electronic transactions, including browsing on the Internet and ‘EFTPOS’ transactions.

CAVEAT EMPTOR:
The ancient rule of “caveat emptor” (let the buyer beware) still seems to apply to many of these transactions and the advent of the Internet has broadened the capacity of unscrupulous individuals to cheat and exploit consumers. These consumers need safeguards that will protect them against such exploitation and also publicise the dangers to other would-be purchasers.

INSTITUTE FOR GLOBAL PROSPERITY SCAM
Some of these disreputable organizations have worldwide scope, and can exert a great influence. One such organization warned against is Institute for Global Prosperity.At http://www. Global- prosperity.com/ a website warns about the Global Prosperity Group scam and warns that consumers have lost millions of dollars. One remedy for such dangerous scams is for government agencies, especially consumer affairs bureaux, to issue leaflets and booklets warning about such questionable organizations and to include sites on the Internet that can be tapped into for information.

AUSTRALIA CAN FOLLOW U.S. LEAD:
The United States already has these warnings in place, and Australia would do well to emulate them. One such group in the U.S. is Alliance Against Fraud in Telemarketing and Electronic Commerce(at www.fraud.org/aaft/aaftset.htm) formed by National Consumers League at www.natlconsumersleague.org which monitors groups with dangers to consumers. What is required in Australia is a nationwide linkup of consumer organization “watchdogs” that can inform the public of dangers.

Another such group is Internet Fraud Complaint Center (USA) at www.ifccfbi.ga in which the F BI and National White Collar Crime Center (NW3C) assists victims of Internet fraud; researches fraud trends and enables vulnerable groups to be assisted.

ELDERLY AMONG MOST VULNERABLE
One of the most vulnerable groups are the elderly, who are readily targeted by dishonest telemarketers and those offering bogus “special offers”. Help for old people targeted by fraud is provided by National Consumers League in the U.S., who provide a tollfree number for citizens to call and discuss the merits of particular offers (see http://www.fraud.org/ for some details) The NCL’s National Fraud Information Center, and other organizations such as the American Association of Retired Persons, the National Association of Consumer Agency Administrators, the Federal Bureau of Investigation, the Federal Trade Commission,in the United States, and Operation Phonebusters in Canada, all work together to solve elderly fraud victimisation.

INTERNET FRAUD BIG BUSINESS
According to a News Release dated 16/2/2000 at http://www.fraud.org/ consumers lost over $3.2 million to Internet fraud in 1999 in incidents reported to the National Consumers League’s Internet Fraud Watch.

ONLINE CONSUMER PROTECTION NEEDED
“Many consumers shop online and have good experiences”, said Susan Grant of the Internet Fraud Watch, “but the increases we’ve seen in both the number of complaints and the amounts of money lost point to the need for more consumer protection and increased education.” This caution should apply as much in Australia as in the United States.

FRAUD PATTERNS ANALYSED FOR U.S.
Analyzing fraud patterns in the U.S., Susan Grant said that the number one Internet fraud for 1999 was online auction sales. Other top frauds for 1999 in order, are non-auction sales of general merchandise, Internet access services, computer equipment, and software work-at-home plans.

CONSUMER PROTECTION BOOKLETS IN U.S.
“Paying with a credit card is the safest way to shop online”, said Grant, “Federal law protects credit card users if they don’t get what they were promised or if unauthorised charges are made on their accounts.” The NCL has issued a brochure to educate consumers about how to shop safely online. The “Be E-wise: How To Shop Safely Online” brochure is available on NCL’s two websites, www.nclnet.org and www.fraud.org, and by calling a toll free number in the U.S. (800-639-8140) The NCL also issues a brochure for the elderly called “They Can’t Hang Up” from their toll-free number.

HEALTH WARNINGS ON U.S. WEBSITE
Provision is made for other websites warning about other dangers for consumers.For example, www.quackwatch.com highlights dangers of alternative medicine. An argument could be made that there is a certain bias in this website in favour of orthodox medicine, since no orthodox treatments are “targeted” and it appears to assume throughout that all orthodox treatments are completely reputable, but there is no reason to believe that all orthodox methods are always the best available or that there could not be dishonesty in the orthodox medicine area, so ideally those who operate such a website should be reasonably impartial.

DANGERS FROM MULTI-LEVEL MARKETING SCHEMES
A link from www.quackwatch.com is www.mlmwatch.org/ which urges consumers to beware of multi-level marketing systems, claiming that the “vast majority of (MLM) people who become distributors do not make significant income” despite the “promises” of “riches” extended to potential joiners. Those who make the “big money” are those at the top, who can drawn on the funds flowing through the total organization, and who show little concern for “dropouts” from failed distributors as they can be replaced by fresh recruits. Little concern is shown for the sense of “failure” experienced by these dropouts, who have been exploited psychologically as well as financially.If, as critics suggest, the MLM system is set up so that few can succeed, it is destructive for them to feel themselves “failures” when the odds were against them succeeding, and they can be made aware of this through consumer affairs organizations. Other objections have been that goods are overpriced, because there has to be a profit margin high enough to pay distributors who buy at discount and get an override payment on other distributors in their organization, and that it is not as easy to recruit people as claimed.

“MULTILEVEL MIRAGE”
In an article headed “The Multilevel Mirage” by Stephen Barrett, on the Internet, it is claimed that “the entire process (of multi-level marketing) is built on a foundation of deception. The main winners are the company’s owners and the small percentage of distributors who become sales leaders. The losers are millions of Americans who waste money and absorb the misinformation.” The mlmwatch site documents latest news of problems experienced by many multi-level marketing organizations, including many influential mlm companies, including the biggest MLM giant, Amway, and well-known MLM firms such as Herbalife, Mannatech, etc. There are too many to list, but one example is Sunrider Corporation, maker of health products,whose founder and president, Tei-fu Chen and his wife Ob-Lin Chen were indicted by conspiracy, tax evasion and smuggling. In September,1997, Mr Chen was sentenced to two years in federal prison, followed by two years of supervised release including six months of home detention. Mrs Chen was sentenced to two years’ probation, including six months home detention. Financial penalties totalled $99.8 million.

U.S. BOOKS WARNING ON M.L.M.
In addition, there is a book on dangers of multi-level marketing titled False Profits:Seeking Financial and Spiritual Deliverance In Multi-Level Marketing and Pyramid Schemes, by Robert L. Fitzpatrick and Joyce K. Reynolds, from Herald Press, 1235-E East Blvd #101, Charlotte, NC 28203,USA and can be ordered online at www.falseprofits.com/FSHowToPg.html and other critiques of the MLM system which should be referred to are All That Glitters Is Not God,Breaking Free from the Sweet Deceit of Multi-Level Marketing and Consumed by Success, Reaching The Top And Finding God Wasn’t There, both by Athena Dean. Available from WinePress Publishing, 1730 Railroad Avenue,Enumclaw,WA 98622,USA(http://www.winepresspub.com) OTHER WARNINGS Some other warnings against MLM come from government organizations in the U.S. Such as FTC (Federal Trade Commission) at sites such as http://www.ftc.gov/bcp/ conline/ pubs/ alerts/ lotionalrt.htm and others.

EXAMPLE FOR AUSTRALIAN CONSUMER PROTECTION
This experience in the U.S. of areas in which consumers face dangers, and the linkup of government departments and consumer agencies in handling complaints is one that Australia could draw on for guidance.

POSSIBLE INTERNET SAFEGUARDS
There need to be adequate safeguards for financial transactions carried out over the web, to ensure that credit card numbers cannot be hacked into and that records of such transactions cannot be transferred without authorisation to third parties, such as mailing lists. By leaving “cookies” at websites, customers provide what can be a permanent record of their transactions, and it is important that other companies do not get hold of this information without approval by the persons concerned, which could lead to “spamming” or junk mail to the annoyance of the user and invasion of privacy.

ADMA ISSUES SOME GUIDELINES
The Australian Direct Marketing Association (ADMA)has issued a Standards of Practice statement at http://www.listbank.com.au/ adma1.htm which provides a guideline for transactions. There need to be appropriate penalties for disobeying honest trading practices.

”STANDARDISED PRACTICES”
There have been attempts to standardise practices to ensure that there are no “loopholes” or inconsistencies in practice that can be used to exploit consumers. One is the Internet Industry Association of Australia (INTIAA) Draft Internet Industry Code of Practice, at http://www.intiaa.asn.au/codeV2.htm and ISO (International Organisation for Standardisation) Introduction to ISO, at http://www.iso.ch/infoe/intro.html and, on a wide scale, the OECD (Organisation for Economic Cooperation and Development) Committee on Consumer Policy. Advance Programme for Round Table-A Global Marketplace for Consumers: Simplifying Customs Clearance Procedures for International Mail Order Deliveries, Sept., 1997 at http://www.oecd.org/daf/ccp/cons/marketoo.htm

PRIVACY ISSUES
Regarding
(b) the privacy and disclosure obligations of organisations that have access to consumer databases this seems to be interconnected with (c) the access by consumers to personal information held in consumer databases because unless consumers have some rights to access these personal records there can be no assurance that the organizations concerned have the details correct or that they are not using them for unauthorised purposes.

SELF REGULATION AIM OF SOME
Some large organizations such as Netsavvy Communications, which set up the Sell It! Website for e-commerce seem to aim at self-regulation. Their privacy statement at http:// sellitontheweb. com professes a commitment to privacy, frequently using an “opt-out” provision if consumers are dissatisfied. They do warn that “this site makes a message board available to its users. Please remember that any information that is disclosed in these areas becomes public information and you should exercise caution when deciding to disclose your personal information.” Once again, this is a kind of self-regulation.

When it comes to government regulation, however, this area seems to overlap with the concerns shown by the ACLU in its submission to the Privacy Amendment (Private Sector) Bill 2000.

PRIVACY ISSUES IN PRIVACY AMENDMENT BILL
The ACLU would like to reiterate many of the concerns shown in the Privacy submission and make a few added observations.

RESTRICTIONS ON GROWTH OF DATA NEEDED
The ACLU believes the bill will not adequately deal with access to and corrections to data by citizens on whom data is held, with function creep, with remedies for invasion of privacy, with consent to data being forwarded to agencies, or data banks not connected with the original collection of information, and with the many problems associated with data banks such as ACXIOM and CrimeNet.

SETTING LIMITS
Acxiom says it will remove an individual’s name, home or particular data base but it is hard to know if you are in it. There are many problems in law: should companies be required to disclose to customers what they pass on to others? Should individuals be able to obtain consumer profiles from data companies? Who should have the final power to arbitrate disputes? Should people have a right of redress if companies provide false or misleading reports? How should the laws deal with information already collected?

MOVING OFFSHORE CAN OBVIATE AUSTRALIAN LAW
Some data agencies are based outside Australia, and this could make regulation hard to administer. One example is a report that CrimeNet, which has lists of people that committed crime, has been indicted for contempt of court and now is reportedly considering moving offshore to sell to an overseas interest outside Australian jurisdiction where it could release names or report on cases with impunity. To take another example, when attempts were made to restrict pornography, most pornographic sites moved offshore out of reach of Australian control.

ONUS ON INFORMATION GATHERER
So much information is available it is hard to police it, but one suggestion is to require the information-gatherer to require permission for later use.

ACLU WEBSITE ARTICLES
The ACLU article headed “Kerry Packer, Axciom and Privacy” sets out some problems associated with data banks and possible safeguards, online at the ACLU website http://go.to/aclu An article on the website headed “Big Brother Controls” deals with privacy issues generally, and “The Nanny State” warns against the growth of government control.

SOME SAFEGUARDS
The ACLU has suggested that the privacy bill before federal parliament lacks adequate safeguards. Breaches of privacy should be a federal offence, privacy commissioners should have more authority, and have more potent audit powers over the suggested database.

MEDICAL CONFIDENTIALITY
Access is a concern to the ACLU in the breakdown of the tradition of medical confidentiality of patients by the recommendation for a proposed national database which could be readily tapped into by other persons. The appeal of such a national database is that computerised facilities allow the ready compilation of myriads of private data to be called on in showing national medical statistics, health trends in society, and it could track patients who go from one doctor to another.

AMA ENDORSES CONFIDENTIALITY
Although such a national database has been backed by federal and state health ministers, it has been opposed by the Australian Medical Association as an invasion of privacy and a breach of medical confidentiality.

An idea more acceptable to the AMA is a computer record the size of a computer card which could be carried by individual patients but it should be the patients’ own decision whether or not to have such a card. This may guarantee personal privacy better than a national database.

PUBLIC ACCESS TO SECRET HOSPITAL RECORDS
According to the Melbourne newspaper, “The Age” 20/7/00, the Victorian Health Minister,John Thwaites, announced a plan to make public hospital records available to determine infection rates and individual patients would be guaranteed access to their own personal medical records, announced in the Victorian Government’s Health Services Policy Review Mr Thwaites said that supplying hospital records would not involve mentioning individual doctors or patients in the pursuit of Performance objectives. “Their aim is to find system-wide problems, not to establish a league table of individual doctors.”

“These sweeping reforms will make the health system more open and accountable and patients will be more confident in the system if they have more information available to them”, he said.

Such a system could have some merit, especially when it is considered that people must currently use freedom of information records to get hospital records.

Instead of being just a closed record, such computer listed records can be made available. Other recommendations accepted by the Victorian government included provision of an Internet site listing hospital waiting list lengths and ending the current bed cap on private hospitals and day procedure centres. A consumer call centre will be given a trial.

ROLE OF E.F.A.
A significant role is played by the Internet watchdog E.F.A. (Electronic Frontiers Australia) in outlining the need to police the Internet properly.

In devising any system of the Internet to protect consumers while, at the same time, ensuring adequate free speech on the Internet, such an Internet “watchdog” should be consulted by government and the proper balance maintained between protecting consumers on the Net while at the same time, preserving the potential provided by the Internet for fostering and developing the Western tradition of free speech and freedom to communicate ideas freely.