Choice of Law for Internet Transactions: The Uneasy Case for Online Consumer Protection

Abstract

An impressively large number of consumer transactions are occurring online these days. Today, millions of consumers buy billions of dollars worth of goods online in a single year, and the numbers continue to grow. Presumably, the benefits to online purchases are all about efficiency. Vendors can conserve on the costs of maintaining stores and hiring employees to properly staff them. Consumers can conserve on the time and travel costs associated with shopping; and, unlike their offline counterparts, the online stores never close. To this extent, Internet transactions have been a huge success. Despite this success, states might not be doing all that they can to increase vendor competition and thereby decrease the prices paid by consumers. Empirical studies indicate that significant price disparities for the same or similar products still exist online. Moreover, unknown and new online vendors typically must pay an extra five to ten percent of the consumer’s purchase price to third-party intermediaries who help ensure that the transaction goes smoothly. The numbers suggest that known vendors might well take in more revenues at lower expense to provide the same goods to consumers that unknown vendors provide. This Essay explores the possibility that the market for online purchases fails to work as efficiently as it can because consumers lack trust in unknown vendors, and it argues that consumer distrust in unknown vendors can and often does take the form of categorical avoidance of other unknown vendors. This avoidance of unknown vendors as a class results from the fact that trust and distrust, as cognitive phenom-