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

Abstract

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 phenomena, are subject to the same biases and limitations as are other cognitive phenomena. Unknown vendors often are willing to incur some costs to signal their trustworthiness to individual consumers. Unless the other unknown vendors adopt similar trust-promoting practices, however, the unknown vendor who incurs these costs might not experience a proportionate increase in consumer trust. Instead, the investing vendor can continue to be plagued by consumers' categorical resistance to unknown vendors. Put differently, consumer distrust of unknown vendors represents a negative externality that the actions of a single vendor are often powerless to resolve.