"The open structure of the Internet marketplace is not mirrored by a sufficiently transparent regulatory framework," said Jyoti Banerjee, chairman of the Task Force e-commerce group.

"Businesses do not understand their regulatory obligations regarding e-commerce and mistakenly believe that there may be additional regulations with which they need to comply," he added.

The Task Force is determined that regulation should not infringe the ability of the Internet to grow. Its chairman, Lord Haskins, said at the launch of the Regulating Cyberspace report last Thursday that the Internet was a classic example where self-regulation is needed. He said that any regulatory interference by government should be done "with a light touch" in order to help it to grow.

The report recommends that small businesses, their representative bodies and government departments including the Department of Trade & Industry and the Data Protection Commissioner should provide "clear accurate information" about how existing consumer protection rights are applied to online transactions.

It also suggests that criteria for a hallmark enabling consumers to know that goods bought on the Internet come from a recognized source should be established. Smaller businesses trading on the Internet would have the added incentive, should they take up the hallmark, of having a distinct advantage over other UK and European companies not taking part in such schemes.

Pointing towards the Task Force's five principles of good regulation, Banerjee said: "This is a good opportunity to apply some of our thinking to a new area of emerging regulation."

He recommended, however, that any regulation would need to be flexible to address the constantly changing needs of the Internet.

The government has 60 days from last Thursday (Dec. 14) to respond to the Task Force report.

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