Internet shopping may become an increasingly risky proposition as the shake-out in internet businesses gets under way.
Online shoppers need to be aware of the risk that they could buy products from companies that go out of business before the items are delivered.
There have already been collapses, the most prominent being that of Boo.com. Established internet operations which fail to make profits are likely to be taken over - perhaps even by off-line competitors - rather than go bust. But smaller operations that cannot secure financing are likely to go to the wall.
Concerns over the security of credit-card transactions deter many people from purchasing on the internet. But according to Ajay Patel, prin ciple lawyer for the Consumers' Association, if you are using the net to shop, the best protection against losing out to a collapsing business is to buy with a credit card. Under the Consumer Credit Act, that card operator is liable if the goods you order are not delivered.
Accountant KPMG, which handled the liquidation of Boo.com, says any customers owed money - most creditors were businesses - were directed towards their card companies.
Patel stresses the importance of using a credit card, rather than debit card, as the latter are not covered by the legislation. Despite the generous protection offered by credit cards, however, there have been disputes over refunds, particularly regarding purchases overseas. Card companies generally pay up and Barclaycard, the largest operator, says it views internet purchases as 'business as usual'. But Patel says there may be disagreements. Since internet shoppers can buy from anywhere with relative ease, it may be unwise to be too complacent about assuming a card will protect you regardless of where, and from whom, you're buying. Net shoppers should also note that the protection applies only to purchases of £100 or more and Patel says it is a matter of dispute whether this limit applies to individual items or to several simultaneous transactions with one organisation together worth £100 or more.
A second step towards protecting yourself is to check whether the company you are buying from has a policy of not debiting your account until after the goods have been dispatched. Robert Coles, head of information security at accountant KPMG, recommends deal ing with well-known, established names, which include the online operations of high street retailers.
Patel points out, however, that if you are a creditor of a collapsed online company your rights, while the same as if dealing with a collapsed offline organisation, are minimal.
'They are pretty poor when it comes to getting your hands on some cash, he says. 'As an unsecured creditor, you have to stand in line after creditors such as the Inland Revenue and the banks. If there is anything left after that, you get your share from the person dealing with the insolvency.'
Another line of defence is to look for membership of a recognised trade organisa tion that operates a compensation scheme, or accreditation by a consumer protection organisation. None are are likely to give a guarantee of solvency, however.
Webtrust, run by the Institute of Chartered Accountants, involves an audit by a firm of accountants, aimed at assessing the strength and reputability of an organisation.
The Consumers' Association also operates an accreditation scheme, called Which? Web Trader. And yet another scheme, Trust UK, has been set up, with DTI backing, to vet the various codes.
If this sounds all too complicated, you could of course just do your shopping on the high street.
