ISPs liable like any other trader - consumer advocate

An internet service provider has no right to claim special status outside that of any other trader and has to abide by the same consumer laws, says Consumers Institute spokesman David Russell.

An internet service provider has no right to claim special status outside that of any other trader and has to abide by the same consumer laws, says Consumers Institute spokesman David Russell, even if that means being held liable for the loss of email messages.

The Consumer Protection (Definition of Goods and Services) Bill, now before Parliament’s Commerce select committee, clarifies the meaning of the terms “good” and “service” to include telecommunications and software as well as electricity, and makes them clearly subject in the same way as more material goods and services to the provisions of the Consumer Guarantees Act, the Fair Trading Act and the Sale of Goods Act.

The government decided to draft the bill following a 1998 High Court case between the Electricity Supply Association and the Commerce Commission in which electricity and its supply was held not to come within the definition of goods and services in consumer law.

Such laws give consumers a good deal of power of redress if an item or service offered for sale does not perform according to the undertakings given, or, Russell points out, is not up to the general standards of performance obtainable in the industry.

InternetNZ vice-president Rick Shera says the bill, if passed, would make ISPs responsible for network problems that were out of their control.

But in this they are no different from any other business, Russell argues. “Any trader is at the end of a chain of supply. Suppose Fisher & Paykel were to buy a batch of poor-quality steel from an overseas supplier and make washing machines out of it, and some of those machines failed because of the steel. Not only would F&P be liable, so would the retailer who sold the machine to the customer. There is no reason why ISPs should be considered differently from any other trader."

Whether a complaint would stand up or not would depend on whether the ISP had failed to provide a “reasonable” standard of service, and that would be judged against the level of service obtainable in the industry in general, he says.

So an ISP may not be liable for loss of a single email, if such emails routinely go missing from routes through any typical ISP.

Shera argues that the ISP could even be liable for consequential damages. If a customer is selling a painting, an email offering a high price is held up, and the customer sells at a lower price, the customer could sue the ISP for the difference. "ISPs shouldn't be put in that position."

A trader can contract out of the Consumer Guarantees Act when dealing with a business, providing sufficient notice is given at “every place of the suppliers’ business” – a definition which itself might be difficult with an ISP, and would presumably include various parts of its website.

This should shield ISPs from consequential damage actions relating to a business-to-business deal, Russell says; “but if I am buying the picture for my own personal enjoyment and don’t intend to trade it, the consumer protection law applies”.

Submissions on the bill closed earlier this month.

TUANZ head Ernie Newman said yesterday he had not had a chance to examine the bill, and Itanz director Jim O’Neill was unavailable to comment.

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