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E-commerce

History in an overview

E-commerce is a quite new phenomenon, however not as new as one could suppose. It owes its worldwide popularity among ordinary people to two occurrences. First of them is amazing explosion of personal computers’ popularity and accessibility. Second is rapid growth of two most important (at least for e-commerce) Internet services: born in late eighties e-mail and originated in 1993 World Wide Web (WWW).

The “stage” was ready in the year 1994 (first computer program allowing to use web-pages) and from then on the development (at least from the point of view of e-commerce) has, most of all, quantitative nature – more and more consumers using the Internet, and being able to process constantly growing amounts of data. Since them e-commerce continuously grows.

How fast it’s growing may be shown by two rules first – so called Moor’s law saying that every 18 months computing powers of computers doubles2, even more surprising are results of researches of the US Department of Commerce showing that every 100 days the amount of data transferred over the Internet doubles!3

Defining electronic commerce

The meaning of the term electronic commerce is an ambiguous one, what makes it even more confusing is fact that it is all but homogenous phenomenon, its definitions may vary from extremely broad ones treating e-commerce as a synonym of information society services, to very narrow like “Business interactions and transactions carried out over the Internet4 what would cover only a fragment of those services.

Subjects involved.

Descriptive definition of electronic commerce could characterize it as interactions between businesses, administration and consumers on the platform of the Internet.5

As regards subjects entering transactions – traditionally four kinds of e-commerce are distinguished – so-called Business to business (B2B), business to consumer (B2C), business to administration (B2A) and consumer to administration (C2A) e-commerce. I’m going however to limit the scope of my thesis only to mutual relations between businesses and consumers, what equals to B2C e-commerce.6

Nature of interaction.

As I’ve already mentioned the E-commerce Directive (2000/31) practically equates e-commerce with information society services what eliminates requirement of transactional nature of interaction. However as I believe for the purpose of describing consumer protection within e-commerce much more suitable would be definition: “trade that actually takes place over the Internet, usually through a buyer visiting a seller’s website and making a transaction there.”7

Every natural person plays in society many different roles, one of them being that of a consumer. One of conditions necessary to qualify such a person as a consumer is the nature of transaction he participates in. Consequently it would be unpractical to use for a purpose if this thesis a wide definition of electronic commerce (not limited to transactions conducted by means of Internet) because it would not allow to qualify concerned subjects as consumers (entrepreneurs).

Information society services.

Generally all the area of consumer protection in e-commerce lies within the area of information society services. Fundamental for e-commerce directive 2000/31 (on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market) does not create its own definition. We owe such definition to an earlier directive -98/34 or to be more exact directive 98/48 which among other amendments enriched directive 98/34 with definition of information society services.

It defined them as: any service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services.

Consequently three conditions must be simultaneously met – the service must be provided:

  • at a distance – without the parties being simultaneously present,
  • by electronic means – initially sent and received at its destination by means of electronic equipment for the processing (including digital compression) and storage of data, and entirely transmitted, conveyed and received by wire, by radio, by optical means or by other electromagnetic means,
  • at the individual request of a recipient of services – through the transmission of data on individual request. This requirement excludes for example television and radio broadcasting but not services which are transmitted point to point, such as video-on-demand.

These services are not solely restricted to services giving rise to on-line contracting but also, so far as they represent an economic activity, extend to services which are not remunerated by those who receive them.

On the other hand the use of electronic mail or equivalent individual communications for instance by natural persons acting outside their trade, business or profession including their use for the conclusion of contracts between such persons is not an information society service.

Notion of information society services in Polish legal system

Provisions of directive on electronic commerce have been implemented into the Polish legal system by several acts. The most significant of them is the Act on services provided by electronic means (Dz.U.2002.144.1204). Services provided by electronic means, as defined in article 2.4 of this act, may be treated as a synonym of the notion information society services used in directive 2000/31.8

Kinds of e-commerce.

With constantly growing technical possibilities the online world is closing in its diversity and complexity to that firm, offline one. Now when the Internet renders it possible to buy shares, order pizza or choose in a rich offer of real estates it’s becoming more and more difficult to systematize different branches of e-commerce. The two main options are division based on the object of transactions or on their subjects.

If we tried to pursue the first possibility the most obvious would be dividing all objects among intangibles that can be delivered online and the later concerned with tangible goods that can be ordered online but which require traditional delivery. Trade with the former constituting typical online transactions is being called direct e-commerce while dealing with the later (atypical online transactions) is being called indirect e-commerce.

While indirect e-commerce concerns usual standard contracts like for instance sale of goods, albeit conducted by electronic means of communication, scope of direct e-commerce is slightly more difficult to determine. The list of potential objects of such transactions constantly grows as more and more gods appears to be digitalizeable. The most obvious example here would be computer software however rapid career is made also by music, e-books, movies, etc… J. Barta and R. Markiewicz in their book distinguish within direct e-commerce such services as:

  • sale of information,
  • providing access to online databases,
  • providing access to services on-demand like for instance video-on-demand,
  • organization of newsgroups or bulletin boards (BBS),
  • providing access to the Internet,
  • providing direct mailing (sending specified subscribed materials),
  • sale of software to the final user.9

Whereas electronic trading of physical goods and services represents an evolution of present ways of trading, capitalizing on new possibilities offered by technology to improve efficiency in terms of lower costs and effectiveness in terms of widening market. The trading of electronic material (software, video, music, images, multimedia, etc.) represents a revolutionary new way of trading, for which the full commercial transaction cycle:

  • advertising and promotion,
  • facilitation of contacts between traders,
  • provision of market intelligence,
  • ordering,
  • payment,
  • transport,
  • delivery,
  • post sale support

can be conducted simultaneously via the same network (including delivery)10.

As I’ve mentioned before – it is also possible to make division basing on the subjects participating in transactions. Slightly simplifying, there could be distinguished three categories of potential participants: businesses, consumers and administration.

Business-business (written sometimes shortly as B2B) e-commerce, being the oldest form of e-commerce, involves interactions between one company and its trading partners, such as suppliers and large customers. B2B e-commerce applications include online marketplaces, auctions, claim processing, order management and Internet-based procurements11.

Business to consumer (E-retailing) involves the processing of retail economic transactions through electronic communication.

Consumer to Business, it’s another form of retail where customer presents his offer to a company. Like in case of company Priceline.com, where customer who has unused ticket can make an online offer to this company and than it decides whether to accept or reject it.12

Consumer to consumer – this category based on direct link between private buyers and sellers quite recently became unexpectedly a great success. However it shares a common feature with some troublesome elements in Mendeleev’s periodic table – it does not exist in clear form. Consumers must be supported by a means of a platform provided by an Internet Service Provider like for instance Yahoo! or E-bay.com, or Allegro.pl in Poland, who helps them to meet each other, thus it is always “contaminated” by B2C element. Such transactions very often have a character of Internet auctions. This category of transactions owes its rapidly increasing popularity to very low prices which cannot be found anywhere else, they may be achieved thanks to extremely low operating costs.13

Business to administration (Relations with administration), this category covers all transactions between companies and government organizations. For example in the USA the details of forthcoming government procurements are publicized over the Internet and companies can respond electronically.

Consumer to administration – it is another, recently emerged, category – nonetheless its growth is quite remarkable. Development of this and previous category is summarized in Benchmarking Report prepared by the Commission14. For the purpose of benchmarking Member States have agreed to a common list of 20 basic public services, 12 for citizens and 8 for businesses.

Practical applications.

Despite the fact that presented above systematization of e-commerce already gives some impression of its practical application, I’ll sacrifice just a few lines to slightly develop this subject.

Chronologically the oldest and still very significant application is Electronic Data Interchange (EDI). It’s a comparatively new manner of doing business. Rather than submitting a written purchase order, a company transmits it electronically to the computer of the supplier. The supplier ships the product accompanied by an electronic bill of lading and transmits an electronic invoice. Even the payment can be handled electronically.15

EDI’s advantage is that it can use existing, relatively low speed telecommunication networks, at relatively low cost.

Product data (for example design and engineering data), is much more complex, and is thus beyond capacity of EDI. For this purpose was developed a system called Continuous Acquisition Life-cycle Support (CALS).

Even if not really significant for my master thesis, these two manners of doing business, as being crucial for efficient interactions between enterprises, are very significant for global e-commerce as accordingly to information provided by Director General of the Information Society DG in his speech from 20th January 199916 80% of online trade belongs to B2B category and while online trade in 1998 it constituted 8% of world trade in 2000 it was estimated to reach 50% of overall world trade.

Despite these impressive figures, for the sake of my thesis’ topic I’ll concentrate on e-commerce’s applications involving consumers. The greatest role play here retail sale of consumer goods, nevertheless there are also many others all of which may be generally qualified as information society services like: finance, share trading, pre and post sale support, legal service, and last but not least health. It may come as a surprise but health-related information on the Internet is among the most frequently accessed information on the Web. A recent US survey showed that teenagers and young adults consult the Web for health-related information as much as they download music and play games online, and more often than they shop online!

Also health professionals use the Internet more and more as a means to communicate with their patients. The results of two surveys show that considerable progress has been made in Internet take-up by general practitioners. In June 2001, 60% of all primary care providers were equipped with an Internet connection, compared to 48% in May 2000. In the same period, much more common has become communication with patients via e-mail17.