A Counter-Cyclical Week

The last week saw me bouncing around London, Oxford and Slough, attempting to speak at two conferences while negotiating a deal, before landing in a surreally crunch-proof hotel in Eze to celebrate the completely voluntary and utterly joyful marriage of two investment bankers.

Yes a happy, willing marriage, when we're told that divorce amongst the financial elite is all the rage, not to mention shotgun weddings involving either JP Morgan Chase, Banco Santander or Citigroup.

But the most counter-cyclical moment for me came last night, as I finally collapsed in front of BBC television 24 hour news to watch the US Congress dither over the suspiciously definitive $700bn bail-out package. Barack Obama's message to Congress from his Denver rally was to "get it done", but with one tantalising, ironic condition: to ensure that the taxpayer "gets paid back"...

Civil Law View of State's Role Slows EU Growth

Last Tuesday, I played a very small part in the closing panel discussion at the Society for Computers and Law 3rd Annual Policy Forum. The focus of the Forum was the European Commission’s painful review of the 15 or so Directives it has set up to regulate retail communications (and content/e-commerce) over the past decade.

It was an excellent event, and here is the link to the presentations.

Huge credit goes to Chris Marsden for persuading a stellar line-up of international speakers over the 2 days. Credit is also due to Mark Turner of Herbert Smith and Caroline Gould of the SCL for hosting the event and taking care of the endless practicalities.

For what they are worth, the points I made during the closing discussion were:

• The European Commission continually states its belief that regulation is required to catalyse cross-border retail markets in Europe. As it was explained to me in International Comparative Jurisprudence at law school, that’s because the European, civil law, view of the world is that people should only do what the State says is acceptable, whereas the common law view is that the law should follow to regulate commerce/behaviour as necessary to resolve market problems.

• However, while national e-commerce has surged, the evidence of the past 10 years is that the EC’s approach to cross-border markets hasn’t worked and will not do so until more the more practical obstacles to cross-border trade are cleared. As set out in my previous post, Civic Consulting found that these include language, culture, consumer preference for national products, lack of shared data on creditworthiness, tax/employment differences, difficulty in penetrating foreign markets, differences in consumer demand, lack of confidence in foreign brands, different stages of market development, lack of adequate marketing strategy.

• Regulators can play a role in early market phases. In fact, they would gain the trust and the buy-in of market participants to any regulatory measures that may eventually be required if they first helped facilitate market participants’ efforts to remove the practical obstacles to cross-border trade and learned something about the markets they’re trying to regulate along the way. Regulating first will either prove futile, or risk creating further obstacles. In the meantime, it will needlessly interfere with national markets.

Because of the jurisprudential difference I mentioned, these points seem to find favour with the common law members of the audience, rather than our civil law friends. Ironically, EC officials don’t seem to see it as within their remit to care whether or not regulation actually will deliver a single market. They simply have a mandate to churn it out in line with the EU’s single market policy, and fuss around with reviews when it doesn't work out. The practicalities are ignored. As a result, we are doomed to wait a much longer period of time for cross-border retail markets to develop, if they ever really will.

EU Choking on its Own Consumer Law

Having committed rather too late to the principles of "better regulation", it's only right that the European Commission should now seem to be choking on the dog's breakfast of consumer laws it has served up over the past 13 years (bearing in mind it takes 5 years to pass an EU directive).

Officials are reforming a plethora of electronic communications directives, and reviewing the 8 directives that make up what is (weirdly) known as the "Consumer Acquis" (which for some reason excludes the constant review of the E-commerce Directive). And, of course, it's overseeing the implementation of the Audio Visual Media Services Directive which overhauled EU television regulation in December '07.

With any luck, the Commission might realise how truly gargantuan a meal this has been for the average European citizen or small business to digest, let alone for the lawyers who have to produce bite size summaries for the busy executive's bin.

Has all this amounted to the catalyst for a cross-border consumer market that the Commission hyped, sorry, hoped? Not according to the Commission's own research. Nor could it, for the practical reasons previously mentioned. There is a facilitative role that the Commission can play, but that involves understanding the problems, their root causes and potential solutions before regulating.

More in this vein next Monday/Tuesday at the SCL's Annual Policy Forum!

UK Govt Backs Phorm PR Effort

It's one thing for the UK Government to support Phorm's challenge to personal privacy at EU level while defending its position in the face of European Commission concerns.

But it's quite another to be seen to selectively release to the media the portions of its letter to the European Commission that list the ways in which officials believe Phorm to be a good thing.

Bad Phorm, in fact.

It would seem that the authorities may have something to lose if Phorm isn't a success...

Enable Best Customers to Create Financial Services

All vendors and platform operators feel an obligation to look after their best customers. But to what extent are those customers really allowed to influence product development?

In the course of researching a presentation on the long tail of payments services for GikIII (a two day workshop on the intersections between law, technology and popular culture), I've been struck by how these observations combine to emphasise the same point:

• There is value in marketing "long tail" products if adding selection is cheap (as it is online): Anderson;
• Compared with heavy users of online retail services, light users much prefer better selling products; both prefer “hit” products more than those in the tail; but it is the heavy users who venture into the tail: Elberse;
• Successful Web 2.0 businesses are those that facilitate an 'architecture of participation': O’Reilly;
• "Lead-user product development can be a far more effective means of innovation than conventional product development in a closed system": Sheahan (citing von Hippel, of course) and giving various illustrations of the same concept in Threadless, Jones Soda, LEGO's Mindstorms Users Panel, and of course Linux.

Suggestions that even "excellent retailers" have run out of ways to improve the online shopping experience, and the only scope for real innovation is on the buy-side, are way overdone. But it must be true that improved tools for buyers as well as, e.g. 'power sellers', are an important set of features in the overall consumer experience mix. And it should also follow that enabling your prolific buyers to add to the range of products available for all buyers is a powerful step to take. Some of those products might even prove to be popular enough to work their way up the 'tail'.

In the payments context, it's interesting that recent research by Datamonitor suggests financial institutions are too mired in last century's anxieties to let their online customers loose with a bunch of web-based tools.

Seems my 2008 predictions for the SCL are still holding up nicely!