Ahead of World Consumer Rights Day on March 15, consumer and internet law expert Dr Christina Riefa looks at how online retailers could play fairer...
Consumer protection law often lags behind new technology. However, consumers are in a good position to effect change precisely because most online models now rely on consumers’ data. It is not feasible for any online business to function without in-depth knowledge of its customers’ habits and preferences. The once unbalanced relationship between the trader and the consumer may be about to shift.
Because data is currency, online platforms and retail websites should want to engage more fairly with their customers. Their custom not only fuels direct revenues, but their data also enables the platforms to a) tailor offering and sell more than they would otherwise and b) use the data to generate revenue streams by renting or selling the data to aggregators. These can be powerful arguments to push tech companies to change if consumer demand can be pulled from suppliers that do not give consumers a high level of protection.
Yet we still see a real imbalance. Algorithms can be so complex that even data collectors can be at odds to explain exactly how the data gathered is used to build profiles. Even the simplest technologies can empower traders to discriminate between consumers. Suppliers can collect data on consumers and charge different prices, making use of their preferences. If consumers want to regain control, we must educate them about the risks the technology poses, and/or legislate to avoid extreme manipulations of data to consumers’ disadvantage.
Newer technologies such as blockchain may disrupt the current digital market and enable consumers to keep hold of their data and transact safely and directly. It has the potential to underpin the next level of the sharing economy, where intermediaries no longer need to process financial transactions. Blockchain is capable of ensuring high levels of security through a decentralised network. It also enables reliable authentication of the payment source.
Openbazaar is one example of how technology can enable consumer transactions without the fees normally reserved for the intermediary. Yet the role and liabilities of such platforms are still unclear. Unfortunately, consumer rights are largely ignored on these platforms. This is because sellers come from multiple jurisdictions, with varying levels of protection. It is also because the platform template itself does not offer the possibility to document and provide the information normally required in a typical e-commerce transaction (at least under European law).
Resolving problems that cut across borders
This leads us to perhaps one of the most pressing issues to empower consumers worldwide: dispute resolution in the digital sphere. Without enforcement, private or public consumer protection is not worth the paper it is written on. It is therefore essential that consumers can obtain redress where required. Knowledge of available consumer rights is the first hurdle. A European Union survey showed most online consumers were unaware of their rights. And cross-border dispute resolution, in its infancy, does not allow effective and cheap ways for consumers to return goods and get their money back swiftly and affordably. Unfortunately, when consumers buy cross borders, they risk:
- Finding that their contract is subject to a foreign law
- Potentially having a foreign court hear the dispute
- The contract preventing them from seeking redress in a state sponsored forum
In Europe, these inconveniences are somewhat avoided. This is thanks to regulations favouring the law of the consumer’s domicile. Also, a prohibition on unfair terms applies to arbitration and jurisdictions clauses. However, trust in Alternative Dispute Resolution and courts by European consumers is problematic. The Consumer Conditions Scoreboard also notes no clear improvement in consumers' trust in out of court resolution since 2010. Meanwhile complaints to the European Consumer Centres Network are rising. One of the main reasons for not complaining is the assumption a satisfactory solution is unlikely.
Access to justice is an international preoccupation. An OECD report in 2006 highlights the importance of cross-border dispute resolution mechanisms. More recently, the United Nations Commission on International Trade Law is developing procedural rules on online dispute resolution. Its latest output is aligned to the European ODR model, although at first glance, not as protective, returning us to one of our first points: the difficulty protecting consumers where levels of protection and development of technology are so disparate.
While the size of the task is immense, the rise of digital marketplaces means businesses rely on consumers more than ever and so it is with optimism I conclude marketplaces can become fairer and we can all feel the benefits of a better digital world.
This blog was first published by Consumers International as a guest blog for their World Consumer Rights Day 2018 blog series.