Consumer Protection in the Age of E-Commerce, Algorithms and Big Data
Student Writer, Windsor Law LTEC Lab
J.D. Candidate, 2019
On February 6th, 2019, Windsor Law LTEC Lab, led by Professor Pascale Chapdelaine, hosted a panel discussion: “E-commerce, Algorithms, Big Data, Consumer Deception and Protection.”The panel brought together scholars, public agency analysts and officers, and experts in privacy, e-commerce, consumer protection, technology and competition law, to engage in a spirited discussion on a number of issues relating to the current e-commerce practices, with a focus on the best practices in protecting consumers.
Nowadays, artificial intelligence, big data and algorithms utilizing these technologies are everywhere, from healthcare services to retail. As with any disruption, this one brings with it both promise and potential peril. Although the use of AI and big data raise several multi-faceted issues across a wide variety of industries, its use in the e-commerce space sparks a particularly interesting discussion regarding consumer protection. Currently available data and technologies enable unprecedented levels of consumer behaviour analysis that can be used in turn to influence behaviour.
Indeed, e-commerce is becoming an increasingly common method of purchasing goods and services for many consumers. While it has been around for many years, it is only recently that online sellers have started to leverage the power of these technological advances to develop algorithms to boost their sales and online presence. Goods and services can be advertised, ordered and delivered through powerful algorithms that standardize transactions while also personalizing the customer experience in unprecedented ways. The proposition is highly seductive as it provides increased efficiency, convenience and access to information, without neglecting an improved bottom line for suppliers. However, in doing so, businesses that engage in e-commerce are engaging in a number of activities that affect both customers’ purchasing behaviour and their privacy considerations.
The distinguished panelists brought with them a wealth of expertise in fields ranging from competition law to artificial intelligence but kept their focus on e-commerce and the protection of the consumer. The panel included Niva Elkin-Koren, Founding Director of the Haifa Center for Law & Technology (HCLT) and the Co-Director of the Center for Cyber, Law, and Policy, and Professor at the University of Haifa, Faculty of Law; Vance Lockton, Strategic Policy and Research Analyst for the Office of the Privacy Commissioner of Canada; Lina Nikolova, Competition Law Officer for the Competition Bureau Canada; Marina Pavlovic, Associate Professor at the University of Ottawa’s Faculty of Law; Teresa Scassa, Canada Research Chair in Information Law and also a Professor at the University of Ottawa’s Faculty of Law; and Pascale Chapdelaine, Associate Professor at the University of Windsor’s Faculty of Law and Chair of Windsor Law LTEC Lab, who was the moderator of the panel discussion.
Here are some the questions that were asked to the panelists that led to an interesting discussion and debate.
Name one or two existing commercial practices currently happening online that raise potential issues of consumer deception. What is distinct about these new business methods or phenomena that may require us to think differently about current existing law and methods of regulation?
Professor Niva Elkin-Koren highlighted a central theme of the day’s discussion, stating that as more and more commerce shifts to the digital landscape, the focus needs to be on advertising methods and behavioural targeting in order to ensure that consumers are making informed decisions. Lina Nikolova, who discussed the role of the Competition Bureau in protecting consumers from deceptive practices, mentioned that an interesting example of deceptive marketing tactics occurs with regard to “drip pricing” methods, whereby an initial price is advertised, but fees are added to it as the purchasing process goes on. This is misleading because that first advertised price is simply not reflective of the final price. Nikolova pointed out that drip pricing is one practice, among many, that is deceptive to consumers who do not realize that their data is being collected and used.
Certain products or services can be targeted to an individual based on a whole host of factors, such as their search history, the length of time they spend on certain pages, as well as traditionally non-digital elements such as the stores they have physically shopped at, the items they have purchased, their memberships at certain facilities and so on. This is one practice, among many, that is deceptive to consumers who do not realize that their data is being collected and used. Professor Pascale Chapdelaine posited that there is conflicting evidence on the extent to which “personalized pricing” (a highly targeted form of price discrimination) is occurring. In 2016 the Organisation for Economic Co-Operation and Development (OECD) issued extensive reports on the current business practices in the e-commerce landscape, which included discriminatory pricing.Although several reports point to e-commerce as providing more fertile ground than ever for such practices, the OECD concluded there was a lack of conclusive evidence that discriminatory pricing is occurring in practice. The fact that we do not know whether certain practices are taking place is a recurring theme regarding the use of algorithms and personal data in online e-commerce, and the opacity of business practices creates challenges from a regulatory standpoint.
In considering the issue of consumer protection, it is not only important to look at these deceptive marketing methods, but also the privacy implications they may have on individuals.
What is the role of privacy law and of the Office of the Privacy Commissioner (Canada) with respect to these identified business practices? What type of protection is available to consumers? Are more safeguards required?
Vance Lockton, in his discussion of the role of the Office of the Privacy Commissioner of Canada, stated that the regulator needs to be empowered to address these issues. He suggested that we need more proactive solutions rather than complaints-based regimes. This is because, often times, the consumer may not even realize the harm that is occurring. With discriminatory pricing for example, individuals will likely only see the price they are being offered and not the prices others are being offered. As a result, an agency that is proactive and has the authority to investigate matters would be more effective in protecting consumers.
A key question that emerged in the discussion was whether there is wider societal harm resulting from privacy breaches. Professor Teresa Scassa argued that for a long time, the focus has been on individual privacy concerns. This has not been the most effective way of protecting the consumer due to the power imbalance between individual consumers and large companies, as well as the shifting of commerce to the digital landscape. The Cambridge Analytica controversyis a perfect example that demonstrates how individual privacy breaches can also have societal consequences and cause harm. Even if data is “de-identified” and cannot be connected to an individual, it can just as easily be used to profile entire groups of people based on demographics and similar behavioural patterns. Therefore, we need to begin thinking about protecting the consumer from a larger societal perspective. With regard to the Cambridge Analytica controversy, roughly 50 million Facebook profiles were harvested for personal data through a psychological test that was completed by the account holders, and this data was then used to develop psychological profiles that were potentially used to influence the 2016 US election. Professor Marina Pavlovic agreed with the societal harm approach, adding that we need to look at a more inclusive regulatory model that can enable individual citizen participation and rebuild and strengthen societal interests from the ground up.
What would be the best regulatory model to address these issues from a consumer perspective?
The panelists agreed on a number of issues and potential solutions. Most importantly, perhaps, the panelists agreed that in order to develop meaningful solutions, there has to be more uniformity between federal and provincial privacy and consumer protection laws. For example, Marina Pavlovic stated that consumer protection acts are generally the primary regulatory regimes at the provincial level. However, because not all acts cover every area of concern, there is a significant amount of fluidity. In regard to this fluidity, Vance Lockton further suggested that it may be necessary to have a federal privacy law that covers what a federal political party can do with the data it collects about individuals.
While the rise of e-commerce and targeted advertising certainly offers increased convenience to the consumer, we must always be aware of the data and algorithms working in the background to deliver this convenience. The use of these underlying technologies, if left unchecked and unregulated, can result in gradual privacy breaches that may have implications in not only consumer protection and privacy laws, but also in other areas that go to the heart of our democracy. As Pascale Chapdelaine noted in her remarks, “let there be no mistake, more than ever before, a sound consumer policy will need to factor in the broader implications of consumers’ digital footprints. The consumer and the citizen are one. “
The next time you decide to make an online purchase, just remember, there was likely a strategic chain of digital marketing events that ultimately culminated in you pressing “add to cart” – all powered by the data from your digital footprint.