The online world is malleable. And so is the customer journey of consumers, especially given all the knowledge and techniques at our disposal. And of course a commercial practice is aimed at seducing consumers. However, there are limits to seduction. The moment the decision-making ability of consumers is influenced to such an extent that an 'average consumer' makes a decision he would not have made otherwise, this boundary is crossed.
The Consumer and Market Authority (ACM) watches over this boundary. It recently published a guide 'Protecting online consumers', applying consumer rules (here: unfair commercial practices) to common influencing techniques in online decision-making environments. This guidance contains the answer to the question of when seduction turns into deception. The answer to that, you can read below.
(Please note: this blog does not address privacy)
The processing of personal data plays a major role in information gathering. Nevertheless, this guide (and therefore this blog) does not assess compliance with the General Data Protection Regulation (GDPR). However, the collection of information about consumers is a key link in the use of the various techniques illustrated in this blog.
Consumers have limited rationality, according to the ACM. After all, people are not machines that can take in all the (available) information to arrive at an optimal choice. Moreover, we are also influenced by emotion and not exclusively by objective elements. Consumers also tend to overvalue the first information they receive (the anchor effect) and stick to options that are standard (the default effect).
With this knowledge in hand and information about consumers' psychological vulnerabilities, consumers can be 'helped' to make a choice. However, it can also be misused, making it very difficult for a consumer to make an informed choice. And since the consumer is not only subject to influence, but is also "the weaker party" and, as such, has less information or expertise than the trader, his economic interests must be protected.
When is a commercial practice - the promotion, sale or supply of a product/service to a consumer - unfair? The million dollar question. In some cases, it is clear and a commercial practice is always unfair. These commercial practices are on the so-called 'black list' and relate, for example, to touting 'free' or 'free of charge', when there is indeed a cost associated with the purchase. This is also the case when it is falsely claimed that a product is available for a very limited time. Furthermore, aggressive commercial practices are also blacklisted, including creating the impression that a consumer has 'won' a prize or other benefit, when in reality there is no prize or benefit or the consumer must first incur costs to obtain it.
Outside blacklisted commercial practices, the 'unfairness' of a commercial practice depends on its relevant facts and circumstances. A one-size-fits-all answer does not actually exist in those cases, but must be assessed on a case-by-case basis. Thus, in dynamic online decision environments, the guidance now assesses in which cases the boundaries are pushed or when traders go beyond them.
In its guidance, the ACM gives a number of examples of steering that are fair, but also examples that are unfair and can therefore be an 'unfair commercial practice'. Whether this is the case always depends on the concrete circumstances of the case.
One of the core elements of a deal is price. This element is decisive when deciding on a transaction. Unlike in an 'offline shop', online merchants are much better able to experiment and differentiate with prices. After all, adjusting prices based on information (e.g. with big data and algorithms) is a snap. And web scrapping allows competitors' prices to be tracked and factored into one's own pricing. In some commercial practices, this is even done automatically.
Using these techniques and information is not 'dishonest'. However, traders should be clear about the total price of your products and/or services, including all additional costs, when using them. Is nothing about additional costs disclosed? Then a consumer does not have to pay them. The information should also be clear to the consumer; the small print at the bottom of a website is obviously not. In short, a consumer should not be "misled" by omitting information. Furthermore, the impression may not be falsely given that there is a specific price advantage when there is none or a product may be falsely offered 'free'.
With information, a merchant can also make targeted offers online and personalise them in many ways. For instance, targeted ads can be offered (after cookies have been placed) or products in a certain price segment can be shown (in connection with a previous purchase). Dynamic pricing policies can also be applied, which means so much that algorithms make an up-to-date calculation of supply and demand. Information gathered about a specific consumer can be used to offer that consumer a personalised price.
Use of these techniques is possible, but only to the extent that a consumer's economic behaviour is not disrupted. First of all, it is therefore important that a consumer is informed about an offer that has been personalised. If a consumer receives a personalised offer and this is a higher price, this should also be mentioned. Therefore, give this information only if an offer is indeed personalised. If this message is given incorrectly, it is even a blacklisted commercial practice.
A sense of urgency can be evoked in consumers when merchants indicate 'scarcity'. This can be in time or in stock. However, these messages must be accurate and complete. If a product is in limited stock, a mention of this is definitely recommended. Using a timer for a particular offer is also 'fair' according to the ACM. When such a message is factually incorrect, it wrongly creates a sense of urgency and thus misleads consumers. Constantly offering a product that is on sale is an example of this. After all, the offer is then not available on a limited basis.
Furthermore, online reviews and likes should also be truthful. Such 'social proof' influences consumer behaviour and speeds up the choice and purchase process. Falsely listing (or commissioning) recommendations can be an unfair trade practice. Neither should fake followers, fake likes or other fake rating systems be used to promote trade online. If this does happen, it is misleading to consumers.
By using certain default settings, a consumer can be moved in the direction desired by the merchant. This can be done, for instance, by checking boxes in advance. Is this the most favourable setting for the consumer? Then the consumer is maximally protected and there is no unfair commercial practice. Does the default setting move the consumer in a direction less favourable to him? Then there is a chance of an unfair commercial practice. The more disadvantageous the choice is to the consumer, the greater this likelihood becomes. The guidance emphasises that pre-ticking paid, optional additional products or services is not allowed.
Knowledge is power, that much is clear. Through knowledge and information about a consumer, traders can 'help' consumers make the right choice. The ACM also sees it this way and points out the line between seduction and deception in that context. Misuse of knowledge can lead to a fine and thus ultimately cost a trader dearly.
If you have any questions on this topic or would like to exchange views, we would be happy to be your discussion partner.