unctad.org | Sludge, nudge and other consumer trends
Sludge, nudge and other consumer trends
06 December 2018
Consumer Protection
If you have ever ordered takeout, booked a hotel, shopped, or connected via a dating app online, you are a consumer, buying on a digital platform - and you have rights.


When online purchases go well, everyone – enterprise and end-user – is happy.

But when they go wrong, what can you do and who can help?

Protecting consumer rights and empowering consumers to stand up for their rights is the focus of the only truly global forum for discussing consumer issues, which meets annually at UNCTAD.  

They are tasked by the United Nations General Assembly to be a beacon of protection for consumers globally. 

This November, the forum assembled for the UNCTAD Ad Hoc Expert Group Meeting on Consumer Protection Law and Policy in Geneva, Switzerland, to discuss emerging global trends and challenges.

Consumer Protection

A major discussion point was consumer protection and digital platforms.

“The profusion of online offerings and e-commerce carry with them enormous benefits, but also the risk of harm,” said UNCTAD’s head of competition and consumer policies, Teresa Moreira.

Children, vulnerable and disadvantaged people and those without technological savvy are at most risk, she said.

“But it is not only these, but all consumers who must be protected.”

Defining the frontiers of consumer law as online horizons mushroom is challenging, especially for developing countries new to e-commerce.

The issues to tackle are also big: cross-border e-commerce, peer-to-peer transactions, data protection, trust, and digital literacy. 

So too are the bottom lines.

Soaring flows of data and information generate more economic value than the global goods trade, UNCTAD reported in 2016.

In 2014, international flow of data contributed $2.8 trillion to the global economy, more than a third of all global trade flows.

There are other spinoffs.

George Lusty, senior director for consumer enforcement at the United Kingdom Competition and Markets Authority (CMA), said endorsements and online reviews affect $29.3 billion’s worth of purchases annually.

Mr. Lusty was walking the meeting through consumer protection trends impacting the UK, presenting compelling examples of where consumer protection was upheld in online dating, gambling, and booking services cases.

He says e-commerce’s impacts are significant, from influencing behaviour to harvesting personal data, but need to be managed to protect consumers.

The principle that online consumers should enjoy a level of protection equivalent to offline consumers is enshrined in the United Nations Guidelines for Consumer Protection.

Nudge or don’t budge

Behavioural insights can help.

Amplified by big data, they show how consumers buy their goods and services, especially online, says Mr. Lusty, but they also reveal factors influencing online shopping decision-making.

“Consumers may not be made aware of particular factors influencing their decisions, or realize they are being manipulated in ways they don’t understand, leading them to take decisions they otherwise would not have.”

Many online transactions are, for example, influenced by celebrities and stars of social media, says Mr. Lusty, a type of nudge marketing.

Nudging is marketing that deliberately manipulates how choices are presented to consumers.

“But sludge practices, or harmfully nudging consumers to buy, can be a problem – especially online where consumers get caught in subscription traps, are forced into constant in-app purchases, or where countdowns in the online purchase window cause anxiety and pressure to buy.”

Mr. Lusty thinks much can be done by aligning the algorithm at the point of code.

He used the example of a purchase journey on hotel booking meta-sites to illustrate how algorithms are often not transparent, aggregating availability, scarcity, and demand with factors such as commission price tags, in seemingly real time.  

“Consumers often feel like they have left a website with a bargain. But the role algorithms play in curating these results can amount to a black box – even for the people who set them up – about the relative factors that weigh into the ejection of a particular set of search results.”

“Consumers using digital platforms need to be informed, protected and included in the algorithm,” said Mr. Lusty. “There is a rare opportunity to make algorithms consumer compliant by design, from the outset, especially in developing countries.”

“The issue of vulnerability also remains a key theme for the CMA,” said Mr. Lusty, highlighting the increased uptake of gambling among children in the UK, drawn in by animation and graphics, ostensibly to create a new generation of gamblers.

Private lives

Algorithms, personal data and the privacy of consumers is also a concern for Thomas Blöink, deputy director general of consumer policy at the German Federal Ministry of Justice and Consumer Protection.

He said the era of all-embracing digitalization has advantages, but also new challenges and risks for consumer rights.

He underlined the importance of deciding how to uphold existing consumer rights in the digital era and develop personal data and privacy protection rights as a result.

“Consumer trust, empowerment and protection are key to the realization of the benefits of the digital economy,” he said.

“Consumer data is at the core of e-commerce. It is considered the oil of the 21st century. Data is a value in itself.”

“Economies and enterprises are increasingly interested in data protection because it creates trust in e-commerce. Therefore, it is to the advantage of enterprises to look at data protection issues.”

But, Mr. Blöink said, gaps in the protection of consumer data and privacy, and the role of artificial intelligence, posed serious dangers for democracy and the rule of law.

“Algorithms may be decisive in the categorization of data and automatic decision making. An algorithm may draw its own conclusions from certain analytical and statistical observations,” he said, asking what the cost was to the consumer.

“If the consumer is not aware of the collection of their data, cannot control such collection, and suffers unjustified disadvantages and reduced choice as a consequence of the use of their personal data for profiling, what are the impacts?”

Mr. Blöink pointed to the protections incorporated in the European Union’s General Data Protection Regulation (GDPR), which he called a “huge milestone for data protection”, and which came into force in May 2018, as a primary tool to inform future privacy and data protection debates.

“This issue of data protection will not go away. It will increase in its importance and we should put some work into this field.”

Shaping and improving consumer policies

While the GDPR is more ambitious, detailed and specific than the UN consumer protection guidelines, they still call for privacy protection and the global free flow of information, said Ms. Moreira.

“They also call on businesses to protect consumer privacy through a combination of appropriate control, security, transparency and consumer consent mechanisms,” she said.

These discussion helped the UNCTAD Ad Hoc Expert Group Meeting on Consumer Protection Law and Policy address the trends.

The aim, said Ms. Moreira, is to find the means of better implementing the guidelines. Its work is supported by the OECD and its Toolkit For Protecting Digital Consumers.

The discussions will also inform preparations for the Eighth United Nations Review Conference, which will address consumer protection issues and report to the General Assembly.

E-commerce, and its opportunities and challenges, is a hot topic ahead of the Africa eCommerce Week in Nairobi, where the consumer and making e-commerce work effectively on the continent will be discussed.


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