Old Newzbinned

I see that Lexology carries a note on the decision in Motion Picture Association v BT [2011] EWHC 1981 (Ch) in July, ordering BT to block access to a revived "Newzbin2" web site that was enabling a large scale copyright infringement in films after an earlier site had been successfully restrained. 

The problem with services that post material on a delayed basis is that time-pressured senior lawyers can get over-excited about the 'latest' case, and miss all the discussion that occurred when it first hit the traditional and social media, none of which is summarised in the note. That's especially problematic in this particular context, given the vast lobbying effort by the 'majors' to gloss over some critical issues associated with alleged mass copyright infringement.

Specifically, the injunction was granted under section 97A of the Copyright, Designs and Patents Act 1988, which enacts the Information Society Directive (2001/29/EC) giving the High Court "power to grant an injunction against a service provider, where that service provider has actual knowledge of another person using their service to infringe copyright." 

The case shows that rightsholders have long had adequate protection for mass infringement, and underscores the waste and futility involved in passing the Digital Economy Act during the infamous Parliamentary 'wash-up' of 2010. The core provisions and site-blocking generally have been found by Ofcom to be unworkable; and the Liberal Democrats have joined the calls for the DEA to be largely repealed.

More productive efforts are focused on modernising our intellectual property rights, and it would be good to see more articles on that. 

Are 'Soaring' Mortgage Arrangement Fees Excessive?

Moneyfacts July 2007 warning

In a re-run of 2007, this time amidst persistent low interest rates, MoneySavingExpert has reported huge increases in mortgage arrangement fees. In 2007, the suggestion was that the high fees masked artificial reductions in headline interest rates. This year, the suggestion is that higher arrangement fees are being used to make up for low interest income:

"Typical mortgage rates are at a record low, and while this undoubtedly means reduced costs for consumers, lenders are partly offsetting that fall with a rise in costs to secure that deal."

Of course, that may be hard for lenders to justify in relation to regulated mortgages, on the basis of treating customers fairly, disclosure obligations or under the excessive fee provisions in the FSA's Mortgage Conduct of Business sourcebook (MCOB).

In particular:

"When determining whether a charge is excessive, a firm should consider:

(1) the amount of its charges for the services or products in question compared with charges for similar products or services on the market;

(2) the degree to which the charges are an abuse of the trust that the customer has placed in the firm; and

(3) the nature and extent of the disclosure of the charges to the customer."

But I'm sure each of the lenders has prepared some kind of explanation in case the FSA or the competition authorities inquire...

Regulating P2P Finance

From a standing start in March 2005, this year peer-to-peer finance will account for more than £100 million of loans to individuals and small businesses in the UK. The timing is perfect, given that our banks are lending less and paying lower savings rates, and new capital rules will drive further need for alternative funding.

Yet, as I noted last year, while these platforms deliver very real social and economic benefits by enabling people rather than banks to share most of the margin between savings rates and funding costs, the financial regulatory and tax framework does not directly accommodate them. So, ironically, new entrants whose business models are founded on openness, fairness, transparency and individual consumer control must spend a huge amount of time and start-up capital figuring out a regulatory path through a regime that is not only designed to force recalcitrant 'traditional' financial institutions to treat customers fairly but also subsidises their marketing efforts with favourable tax allowances.

While the various P2P providers were also considering the merits of forming a self-regulatory body to act as a focal point for more helpful enabling regulation, a further catalyst was the BIS consultation on moving responsibility for consumer credit from the OFT to the Financial Conduct Authority (the FSA's replacement). Having helped frame Zopa's positive response to that consultation, I was happy to help apply the same regulatory approach we'd suggested to a set of operating principles that could form the basis of an interim self-regulatory framework. Collaboration with both Ratesetter and Funding Circle ultimately led to the formation of the "Peer to Peer Finance Association" in July, with invitations extended to others.

The intention of the P2PFA is to enable the development of platforms that facilitate open consumer and small business participation, rather than merely 'investment clubs' or networks reserved for sophisticated investors. As a result, the term “Peer to Peer Finance” is broadly defined in the Rules to mean "any funding arrangement that comprises direct, one-to-one contracts between a single recipient and multiple providers of funds, where the majority of providers and borrowers are consumers or small businesses." The desire for scalable, open or 'mass' access is underlined by the definition of “Platform” as "an electronic system that facilitates Peer to Peer Finance." Generally, funding is likely to be in the form of simple one-to-one loans, but other instruments may evolve over time.

As stated on the Association's web site:

"The Association’s Rules and Operating Principles set out the key requirements for the transparent, fair, robust and orderly operation of peer-to-peer finance platforms and cover:

1. Senior management systems and controls;
2. Minimum capital requirements;
3. Segregation of participants’ funds;
4. Clear rules governing use of the platform, consistent with these Operating Principles;
5. Marketing and customer communications that are clear, fair and not misleading;
6. Secure and reliable IT systems;
7. Fair complaints handling; and
8. The orderly administration of contracts in the event a platform ceases to operate.

The Peer-to-Peer Finance Association is run by a Management Committee, made up of one representative from each member, with one member acting as Chairman for one year on a rotating basis. Giles Andrews, CEO of Zopa, will act as the Committee’s initial Chairman. As new members join the Association, their representative will join the Management Committee.

Membership of the Peer-to-Peer Association is subject to the Rules of the Association and members must comply with the Association’s Operating Principles."

The Rules, Bye-laws and Operating Principles are set out here.

Wither the Digital Economy Act?

Well wasn't this a shoddy little piece of Parliamentary washing-up?

A year later we're still fussing over the damn thing and, surprise, surprise: site-blocking has been abandoned as unworkable and ISPs won't have to subsidise the costs of protecting outmoded entertainment industry business models.

BUT! I cannot fathom a decision to charge on individual citizens £20 for appealing "every notification letter received from their ISP, and against every instance of infringement identified" by a copyright owner. It's all very well to say that this will discourage vexatious appeals and that the individual can recover the £20 if their appeal is successful. But where is the constraint on the mistaken, vexatious or groundless issue of infringement notices? Will it cost £20 per notice to complain about that? Can they all be heard together? These things could arrive like confetti, effectively reversing the burden of proof and obliging the indivdual to underwrite a multiplicity of appeals.

My sense is that there will be not be a significant number of appeals. But, on the flip-side (as it were), rights owners who avail themselves of this process will find their material shunned altogether, for the reasons discussed in Henry Jenkins' "Convergence Culture". Rights owners who don't understand that are doomed.

I can't imagine what Kafkaesque process Ofcom is being forced to envisage in order to bring this monster to life, but I understand we'll find out "shortly".

Image from LoveMarks.

How Not To Deal With A Regulator

The 'Big Six' energy providers are actually threatening to steal the regulatory limelight from UK retail banks - which is no mean feat. Ofgem says it has levied a total of £12.5m in fines this year already. In the past few weeks alone, SSE and Scottish Power have found themselves under scrutiny from MPs. And British Gas has complained publicly that it's recent fine of £2.5m for complaints mishandling is "totally disproportionate", seeming to suggest they should've been given credit for having to spend £4m fixing the problem.

But you'd expect a little more humility from a company that is raising consumer gas and electricity prices at an average of 18% and 16% respectively, and contributed £270m of its parent's £1.3bn profit for the first half of this year. 

Ofgem explains that its complaint handling regulations include the following requirements ("the breaches Ofgem found against British Gas in this case are in bold):

• a common definition of a complaint between (sic) energy suppliers;
• a requirement for suppliers to record complaints upon receipt and follow up contact with the customer after the initial complaint;
• a requirement for suppliers to have a complaints handling procedure and be able to explain to customers how they can make a complaint;
• a requirement to signpost customers to the Energy Ombudsman if the complaint is not resolved;
• a requirement to deal with consumer complaints in an efficient and timely manner, and allocate sufficient resources to do this;
• a requirement to publish information on complaints."

Here's an explanation of Ofgem's industry governance arrangements.

And here's where to complain if you are a consumer or small business (once you've given the provider a chance to resolve the dispute).

Meanwhile, Ofgem says that it's:

"currently investigating Npower and EDF Energy for complaint handling; Scottish Power, Scottish and Southern Energy, EDF Energy and Npower for misselling; and is undertaking two investigations into Scottish Power for potentially misleading marketing and the difference between its Standard Credit and Direct Debit Tariffs."

I'm sure the suspects are bound to accept any adverse findings with good grace...

Private Sheriffs in Cyberspace and Counter-regulation

Zittrain's Rule-making quadrant

What better task for a rainy Saturday than extracting the 'blawg' posts from Pragmatist and placing a link to them on a dedicated Blawg where they belong?

Here's my response to a Zittrain lecture in May 2009, that appears to have stood the test of time.

Counter-Regulation And Consumer Empowerment

In 2006, I speculated in an article for the Society for Computers and Law, entitled "Counter-regulation", that the government would one day require offline businesses to implement the benefits of successful online business models. They would do this, I suggested, because successful online businesses "will have demonstrated to most consumers the inadequacies in the business models of their offline counterparts" whose customers will realise they're at a disadvantage compared to consumers dealing online.

That day certainly arrived in April, if not before, when the UK government announced its "Consumer Empowerment Strategy". The policy "aims to put consumers in charge so that they are better able to get the best deals for themselves, individually and collectively." As part of the strategy, "the Government wants to work with [service providers and retailers] to come up with a solution that allows consumers to access [purchasing] information, analyse it according to their own preferences and make better choices."

However, in Better Choices: Better Deals, the Government makes it refreshingly clear (at p.5) that a new legislative programme is not the best way to achieve consumer empowerment. Instead, it is relying on "a wide range of new programmes that have been developed in partnership with businesses, consumer groups and regulators" against a background of normal regulatory enforcement.

It is also refreshing to see that the Government has gone to considerable lengths to try to understand the overall context before announcing policy. As a result, Better Choices: Better Deals is a treasure trove of statistics, behavioural insights, and research - and an inspiring read, rather than an irritating one. There are numerous proposals (see pp.6-7 and Annex A of Better Choices: Better Deals), some of which are the product of thematic regulatory work and some of which go beyond the way many online businesses operate today. Indeed, the semantic web is central to the Government's vision. Of course, the list is not exhaustive - the document is step one in in an attempt to foster collaborative effort across the community, not a creaking regulatory panacea of the kind favoured by the European Commission. These proposals include:

• the 'mydata' [since renamed 'midata'] project to enable consumers to access information about their purchases, analyse it according to their own preferences and use that information to make better purchasing decisions;

• e-statements for credit cards, to provide the last 12 months of transaction data in a portable electronic format;

• clear information about the lowest energy tariff on energy bills;

• changes to Energy Performance Certificates and how they are presented;

• improving the provision of product information about cars and other products from a health and environmental standpoint;

• encouraging local collective purchasing deals;

• making available more complaints and performance data about businesses, regulators, government departments and public service providers;

• figuring out how in-store shoppers can access consumer feedback normally only available online;

• a new resolution scheme for e-commerce disputes;

• a review on how to empower very vulnerable consumers.

Of course, our day-to-day consumer activities tend to require combinations of data held by both public and private sector organisations. So it's encouraging that great progress is also being made on the Open Government data initiative.

Image from 1Million1Shot.