E-commerce practices raise questions about how to protect consumers in globalised digital markets

How can we better protect consumers in a globalised digital world? The Luxstyle case suggests unfair practices are not being stopped quickly enough.

A number of Consumers International’s members have contacted us regarding the practices of LuxStyle, a Danish company that was advertising through Facebook and Instagram.

The adverts directed consumers to the company’s website where they were asked to provide their postal and email addresses to get the price list for the products being advertised. The consumers were then sent the products and an invoice, despite the fact they hadn’t ordered anything. If the consumer didn’t pay the invoice, many received a letter from a debt collection agency.

Danish ombudsmen takes action

Complaints about Luxstyle were first received by the Danish Consumer Ombudsman in 2015. Further complaints were received from countries including Australia, New Zealand and Canada. Consumer authorities from Norway, Sweden, Austria, and Belgium also contacted the Danish Consumer Ombudsman and consumers in Singapore and Malaysia lodged complaints with consumer organisations.

On 25^th January 2017 LuxStyle was reported to the Danish police by the Danish Consumer Ombudsman, for breaching the Danish Marketing Practices Act section 3, in which ‘traders may not use misleading or false information or omit material information if this is likely to materially distort consumers’ or other traders’ economic behaviour on the market.’ To date we understand the Danish police have not yet brought charges.

Australian Commission issues a public warning

In January and February 2017, the Australian Competition and Consumer Commission received 127 complaints about LuxStyle and, on 2 March, issued a public warning. The ACCC Deputy Chair Delia Rickard said. “The Australian Consumer Law provides specific protection to Australian consumers.  If a business sends unsolicited goods to an Australian consumer, the consumer is not required to pay for the goods, nor is the consumer required to pay to return the goods.”

Facebook finally blocks the adverts – but not the business pages

Finally in May 2017, Facebook blocked the advertisements.  A spokesperson told Canadian news outlet CBC, "We determined that these ads violated our policy against deceptive claims and business practices, and have blocked the company from advertising on Facebook going forward. We apologize to anyone who was inconvenienced." 

Interestingly CBC noted that when it first contacted Facebook, it had been advised that the case was being investigated, and that it was only after the story was published that Facebook said it would take down the advertisement.

However when we looked on Facebook this month we could still view business pages for the products sold by Luxstyle that redirect consumers to their website. There also appear to be reviews for the products being advertised by Luxstyle and recent complaints from consumers.

Serious questions

We are pleased that Facebook recognised that these practices are deceptive, however our timeline suggests it took seven or eight months, from September 2016 to May 2017 for the Luxstyle adverts to be blocked on Facebook and Instagram. We understand the need to investigate allegations and follow procedures, but why did it take so long?

During this time Facebook groups had been set up by people who felt that they had been scammed by LuxStyle and at least eight consumer protection agencies became aware of the problem.

We are also concerned that business pages are still promoting the company’s website.

Consumers International has contacted Facebook and national consumer agencies to find out more about the issue and in particular find answers to these questions:

1. When did Facebook first become aware of the problem and what did they do about it?
2. Did the national consumer protection agencies inform Facebook and if so when, and what response did they get? Is there more that national consumer protection agencies can do to stop international practices like these in the future?
3. Finally, have these practices been effectively stopped? Why are there still Facebook business pages  that link to the company’s website? 

Any consumers affected by these practices can contact their national consumer protection agency or consumer protection organisation to understand their rights.