Defining Consumer Protection in the Digital Age

Robin Simpson, Consumers International's (CI) Senior Policy Adviser, recently represented CI at the OECD Ministerial Meeting on The digital economy innovation, growth and social prosperity which took place in Cancun, Mexico. He spoke at the Civil Society Forum convened by the OECD Civil Society information Society Advisory Council (CSISAC) and in the main agenda panel discussion on Consumer Trust and Market Growth, chaired by the French Secretary of State for the Digital Economy Mme Axelle Lemaire. Here are his impressions.

This event was big in both senses, hundreds of delegates and a substantial agenda of great importance to consumers. Such events are infrequent, the previous one was was in Seoul in 2008 a long gap given the speed with which developments take place in this technology driven area. The OECD has a very active work programme in which we are implicated through our membership of the Committee on Consumer Policy on which I have represented CI for 10 years. It is fair to say we have a critical stance on policies adopted (see below) but equally fair to note that they encourage our input. 

I start at the end. Like many such conferences it concluded with a grand declaration almost entirely pre-cooked. National delegations undertook to: 

1. Support the free flow of information,
2.   Stimulate digital innovation and creativity,
3.  Increase broadband connectivity and …., protect consumers,
4.  Embrace the opportunities arising from emerging technologies and applications such as the Internet of Things,
5. Promote digital security risk management and the protection of privacy at the highest level of leadership
6. Stimulate and help reduce impediments to e-commerce within and across borders
7.  Take advantage of the opportunities arising from online platforms
8. Spur the employment opportunities created by the digital economy
9. Strive for all people to have the skills needed to participate in the digital economy and society

How can we possibly not like such a list of virtuous objectives? In the panel discussion chaired by Mme Lemaire, I described how the success of third party platforms has been underpinned by their acceptance of limited liability for consumers in the event of breaches of security and other ancillary supports such as dispute resolution. And I argued for the development of universal international standards for data protection and privacy. All of this is compatible with the above

But, as so often, what is most interesting about conference declarations is not so much what they include as what they do not include. Or the force with which major principles are stated…or not. CSISAC pointed out that privacy is insufficiently addressed by the declaration. Point 1 talks of ‘respecting applicable frameworks’ for privacy, point 5 seeks to  ‘promote…the protection of privacy at the highest level of leadership’. But privacy is a human right as recognised by the UN declaration on Human Rights of 1948 and the International Covenant on Civil and Political Rights 1966 and needs to be stated as such. CSISAC also made the link between such rights and the Internet of Things (IoT).

But the declaration, in mentioning the IoT, sets down no markers in that regard, including only the usual qualifier ‘appropriateness’ when considering the need for regulatory frameworks. ‘Appropriate regulation’ is frequently a euphemism for reduction of regulation, a danger in a sector which is in our view dangerously exposed  to corporate abuse as is demonstrated by our recent publication: The Internet of Things and the challenges for consumer protection. We make the point there that Intellectual property law is in danger of eclipsing consumer protection law in the digital area particularly in the IoT because software is governed by copyright law, which envisages use of products being licensed rather than the products being purchased. Licensees have far fewer protections as consumers compared with outright purchasers.

In the closing paragraphs of the statement, the national delegations ‘further declare’ that they will: ‘help preserve the fundamental openness of the Internet while concomitantly meeting certain public policy objectives, such as the protection of privacy, security, children online and intellectual property, as well as the reinforcement of trust in the Internet;’. Intellectual property is, we argue, over-protected in as much as consumers may find their computers rendered non-functional by technical protection measures in the event of their having transgressed, usually unwittingly, copyright elements within contracts of licence. Such technical measures are triggered by algorithms, not by agents of service providers and as such, escape judicial controls regarding the extent to which they are justifiable or proportionate. And in that respect, the statement as indeed the panel discussion on the Internet of Things, remained silent. 

Despite the technological razamatazz which characterised much of the conference, the discussion has not kept pace with the excessive technical measures taken against consumers that have been out there in the market place for over a decade now.

OECD E-commerce guidelines – a step forward for consumers in the digital age

Robin Simpson, Consumers International's Senior Policy Advisor discusses the recently revised OECD E-commerce guidelines and their implications for consumers.

The OECD published its revised E-commerce guidelines at the end of March. They form a useful outline for any regulator that is developing work in this area and a good starting point for consumer groups that want to evaluate the protection offered to online consumers in their country. 

First issued in 1999 after negotiation by the OECD’s Committee on Consumer Policy in which Consumers International (CI) participated, (and still does) the guidelines have made an important contribution to consumer protection, on issues such as unfair contract terms, transparency of contracts and transactions, dispute resolution machinery, all of which CI supported. 

The new guidelines contain some important additions, they extend to mobile transactions, digital content, non-monetary transactions (such as exchange of personal data), online consumer reviews and C2C platforms. The guidelines in both their 1999 and 2016 versions, are underpinned by the ‘equivalence principle’ that consumers using e-commerce should have the same level of protection as in other forms of commerce. This matters, as CI’s 2013 global survey found that online transactions often received less protection, as national legislation struggled to keep up. 

CI concentrated on two key issues during the four years of negotiation:

Limited liability for consumers in the event of unauthorised or fraudulent charges. This was already recommended in the 1999 version which endorsed ‘chargeback mechanisms’ such as credit card guarantees. We argued successfully for the extension of OECD recognition to ‘escrow’ which parks consumers’ payments with third party intermediaries, such as Alipay in China, which does not release the consumer’s payment until the goods have been delivered and inspected. Such services have existed for centuries and are now spreading rapidly again through e-commerce. The OECD endorsement of limited liability was important for CI in our negotiations in ISO for a standard on mobile payments. We are happy to see it reaffirmed and extended. 

A far less happy outcome relates to digital products where we have long argued in OECD that copyright protection should not extend to disabling a consumer’s computer or other terminal through ‘technical protection measures’, a practice which currently works through software implants, often unbeknown to consumers, who may have inadvertently breached their lease contracts. We argued that if such measures are permitted, they should at least be guided by the principle of proportionality: if I park my car by mistake in your parking bay that does not give you the right to wreck it. The committee failed to reach consensus on this proposal – one delegate described it as ‘too new’ even though the principle of proportionality was spelt out in the Magna Carta, the foundation of English law, in 1250. The only protection offered by the guidelines is a very indirect suggestion that warning be given in the product/contract information. Yet it is well known that almost no-one reads end user licence agreements – they ‘tick, click and hope for the best’. 

Also disappointing to CI is brevity and vagueness of the articles on security and privacy. The guidelines ‘refer out’ to other guidelines such as those on Privacy, which will not necessarily be available to the reader. Yet security issues still inhibit many consumers especially regarding cross-border transactions. As governments continue to fail to reach agreement on ‘applicable law and jurisdiction’, (jargon for which country’s law should be applied) then, faced with insecurity, consumers will flock to third party intermediaries. 

The recently revised OECD guidelines on ‘Consumer Protection in E-commerce’ address recent developments in technology and e-commerce. One emerging area CI has conducted research on is in relation to the Internet of Things and challenges for consumer protection http://consint.info/IoTReportNews 

CI steps up campaign to improve financial consumer protection worldwide

CI, together with  our Members Which? and Consumer Reports, took the consumer voice to the G20/OECD Taskforce on financial consumer protection consultation event on 15 April, explains CI's financial services expert Nicola O'Reilly (pictured left with Norma Garcia of Consumer Reports).

This was the first event of its kind for the Taskforce which is good news for consumers as we had the opportunity to input into its work.

The occasion revealed new regulatory practices and emerging challenges in consumer protection. The subjects discussed were mobile and online payments, behavioural economics and Treating Customers Fairly (TCF).

Dominic Lindley of Which? provided an excellent presentations on TCF where he set out problems and solutions around sales incentives in financial services.

He also noted that the liabilities resulting from of misconduct such as misselling of payment protection insurance must be factored into risk and stability assessments. 

Norma Garcia of Consumer Reports (who has spent the past month based at the CI Office in London) made a really well received presentation on mobile payments.

Norma called for the uneven protections, and the privacy and security concerns relating to mobile payments, to be addressed to promote financial inclusion and improved consumer protection.

We commented on how behavioural approaches can be used to deliver effective consumer protection.

We welcomed the use of behavioural economics to gain insight into consumer behaviour – what moves and motivates consumers to act. It is a real step forward. 

We also noted that this should be built upon to deliver significant change by using behavioural approaches in a systematic way.

A one-size fits all approach is ineffective, but using segmentation to recognise distinct behavioural groups can support the development of a suite of interventions that can be used in combination to deliver effective consumer protection which benefits individuals and society.

Social marketing and behaviour change has been delivering benefits in public health for decades cutting road deaths and reducing hospital admissions, tackling addictions and reducing crime by taking a consumer-centred approach. It is great that this is being introduced into financial services too.

The day in Paris was a good opportunity to get our views heard in advance of the written consultation that the Taskforce will issue next month.

This will inform its final report to the G20 Finance ministers which will be delivered in June this year. This will be an ideal opportunity to push for further action on financial consumer protection.

We made the most of the trip to Paris where we met the Chair of FinCoNet who was very positive about increased engagement from CI in this area. We also met colleagues from UniFinance who we will be working with in our forthcoming work on sales incentives.

G20 France: financial services rules in danger of getting interesting for consumers

Robin Simpson

CI’s Senior Policy Adviser, Robin Simpson, dissects the G20 meetings in France in relation to financial consumer protection.

While protesters gathered the world over and markets threatened to go into meltdown, what was our contribution to financial consumer protection during the Northern summer and autumn of 2011? What can we tell our grandchildren?

In August, Consumers International (CI) responded to the public draft of the “high level principles on financial consumer protection and education” that an OECD Task Force drafted under the mandate of the G20. On 14 October, those principles were discussed at the high-level seminar on financial consumer protection jointly hosted by the OECD and the French G20 presidency, and addressed by our President, Jim Guest, and consumer colleagues from Hong Kong, France and our Brussels-based colleagues, BEUC.

 I say ‘discussed’ because they were not actually delivered publicly until after the conference, being endorsed by the meeting of the G20 ministers of finance over the weekend of 14-15 October.

 Despite being in the bizarre position of discussing a set of principles that we were not allowed to see, we nevertheless expressed our disappointment. The language is weak, the principles are described as “voluntary”, and “non-binding”, there are multiple insertions of terms such as “as appropriate”, “where applicable and possible” etc to qualify each of them, and there is not a single reference to the financial crisis. There is no reference to product suitability, to minimum standards, and the language around bank deposit guarantees for consumers is very ambiguous, as is the language on international cooperation.

To our astonishment, the OECD Secretary General and the Deputy Secretary General indicated agreement with our criticisms of the weakness of the language, but indicated that this was the best they could get past the government members of the Task Force. Why were we astonished? Because the starting point of the conference was praise lavished onto the work of the Task Force by the Secretary General and by the French Minister of Finance Francois Baroin.

So, were the principles worth endorsing at all? Apart from reiteration of long-standing OECD policies on disclosure and education, there is some progress on issues of conflict of interest between service providers and their customers, some mention of opening up regulation, and some very thin commitments to equitable treatment of consumers, redress and competition. All of these need beefing up.

This is where it gets interesting. The actual terms of the endorsement on 15 October were as follows: The ministers “endorsed the FSB report and the common principles on financial consumer protection prepared by OECD with FSB and call for further work on implementation issues”. The Financial Stability Board report, Consumer finance protection with particular focus on credit, was not discussed at the 14 October conference, which was a pity as it does make reference to “product suitability”, to “benchmarks for financial products”, and most explicitly of all, to the need for “an international organization of regulators to take the lead on global financial consumer protection efforts”.

This does give us something to work on, as does the ministerial call for further work on implementation issues. One of the more encouraging presentations at the 14 October conference came from the Mexican Deputy Finance Minister Gerardo Rodrigues who, representing Mexico in its capacity as next president of the G20, committed to a practical programme of work on implementation. The closer to the practicalities, the more the endless qualifications will appear to signify lack of true commitment. We look to the G20 leaders meeting at the Cannes summit this week to strengthen the commitment to reform.

One thing is for sure – the industry is not going to reform itself. On 14 October, the President of the French banking federation told the OECD conference that consumers should become responsible and realise that there is no such thing as a ‘free lunch’ (his exact words in English). Only four days before, the Franco-Belgian Bank Dexia, faced with collapse, received a EUR90 billion government-funded guarantee. Quite a few free lunches there.

What do you think? Comment below.

Interns speak up at the OECD meeting on industry-led regulation

Ane (left) and Ileana (right)

Ileana Søndergaard and Ane Hagtvedt, interns at Consumers International, have their say at the OECD. 

As Public Health Nutrition and Food Policy students yet to hand in their bachelor theses, getting an invitation to attend an OECD meeting in Paris is a big thing. Having worked at Consumers International (CI) this autumn researching countries’ regulation of the marketing of food to children, we got the chance to get a taste of how the organisations, the industry and the governments that we write about in our papers act in ‘real life’.

The project at CI gave us the chance to see how a number of organisations function and how they collaborate with each other. However, the OECD is one of those organisations that you as a student, hear about, read about and reference. Period. You never really imagine that you yourself will ever have anything to do with them – at least not for a few more years.

Therefore, it was a great opportunity for us to be able to attend the Committee on Consumer Policy's meeting on industry-led regulation. Here we got to witness a range of different stakeholders presenting differing interests and see those stakeholders both clash and collaborate with each other.

What surprised us most about the experience was that nothing that was said at the meeting really surprised us. The various stakeholders took their expected stands, including industry, with their 'there are no bad foods – only bad diets' argument, and that self-regulation indeed is feasible in the case of marketing to children.

After hearing this and after having been attentive and alert, but quiet, we just had to say something – this was a discussion we didn’t want to miss without putting in our two cents, too. Of course, after hearing everyone else deliver their statements and opinions in the most diplomatic of ways, we knew we had to be at least as humble as our fellow more experienced participants.

With a bit of hidden nervousness and hearts beating a bit faster than usual, we said what we thought was lacking in the debate: the codes that industry offer tend to be rather vague and confuse rather than send a much needed clear message. We also gave some examples of cases where there is a great need for improvement.

We finished speaking. And this is what we found the most interesting: we felt like we had been heard. The OECD is apparently not as ‘heavy’ and stiff as we had originally envisioned. Yes, their reports can be ‘weighty’ at times – we will admit that. But in reality it is an organisation a lot more fluid, flexible and transparent than one would think.

The fact that the committee is represented by participants from very different backgrounds – both in terms of nationality and profession is a great benefit. This, along with the admirable work done by many of the committee representatives, leaves us with a sense that things are in fact moving in the right direction.