Consumers play the most significant role in a business’s value chain. They drive the sales of a business and affect, whether directly or indirectly, the profit margin of the company. As a consequence, businesses, and particularly e-commerce businesses, should carefully understand the needs of their consumers and ensure their security.
To identify challenges, we should diagnose the three stages of the consumer–business relationship in which consumer protection issues in e-commerce can be identified:
- Before purchasing, consumers need relevant and accurate information about the goods and services they are enticed to purchase. However, since information asymmetry is prominent in e-commerce due to the open network’s nature, consumers are vulnerable to misleading and deceptive conduct.
- When the consumer takes a decision to purchase a good or a service, the most common challenges that occur during purchase include unfair contract terms, online payment security and data protection and privacy.
- Once the purchase is done, consumers may also have difficulties reaching providers or communicating with businesses. Various concerns may arise such as liability, the return of goods, and refunds when goods are not delivered.
It is therefore interesting to explore the difficulties faced by consumers in all stages of doing business, and the potential measures implemented to protect online consumers.
- At the ‘pre-purchase’ level
Selling to a consumer without face-to-face contact is quite challenging. In fact, one of the most common concerns a consumer faces is the difficulty of establishing the identity and location of a provider of products or services online. The consumers’ right to adequate information that enables them to make informed choices according to their own wishes and needs, is thus crucial.
Many jurisdictions identify challenges such as misleading information on actual and total prices, effective interest rates, and consumer rights under the relevant national law (UNCTAD, 2017). The Organization for Economic Co-operation and Development (OECD) even requires businesses engaged in e-commerce to provide consumers with clear and timely information about the business, the goods or services, and the terms and conditions relevant to the transaction, in addition to helping consumers contact them easily.
Unfair commercial practices
Since web-based environments are propitious to unfair commercial practices, consumers trust less the digital markets, which constitute a barrier to e-commerce development. Moreover, the impersonality of e-commerce weakens the relationship between providers and consumers, thereby increasing consumers’ vulnerability (UNCTAD, 2017).
For instance, in seeking to gain a competitive advantage over competitors, merchants may resort to unfair commercial practices that influence the transactional decisions of consumers. The exaggeration of the quality, the misrepresentation of goods and services, and the provision of untruthful information to consumers using aggressive marketing techniques might prevent consumers from making informed choices.
To limit unfair competition, many initiatives were put in place. In France, a legal framework was set to standardize the rules for fair, clear, and transparent information, by which platforms must abide, including enabling reviews, ranking, and de-ranking and disclosure (Law No. 2016-1321, 2016). In the United States, the Federal Trade Commission Act prohibits “unfair or deceptive acts or practices in or affecting commerce”. It also developed a guideline on how to make clear disclosures in digital advertising.
- At the ‘purchase’ level
Unfair contract terms
By definition, a contract term is considered unfair whenever the requirements of good faith aren’t respected, causing a significant imbalance in the parties’ rights and obligations, to the detriment of the consumer.
To evade unfair terms, businesses should provide clear, concise, and easy to understand contract terms and conditions that promote good business practices and ensure easy access to such information (OECD recommendations).
The European Union directive on unfair terms in consumer contracts, stresses the notion of good faith in order to prevent significant imbalances in the rights and obligations of consumers and traders. It also requires contract terms to be drafted in plain and intelligible language so that ambiguities are interpreted in favor of consumers.
Online payment security and data protection
With technological developments, online and mobile payments in e-commerce are expanding.
Payments are now made via the Internet, using computers or mobile devices, through an existing personal account, usually a bank account, credit card or debit cards, or a payment service provider (UNCTAD, 2017). However, when providing payments online, consumers can be subject to security risks, and their data can actually be accessible to unauthorized third parties without their consent. Because personal data is valuable for online businesses (as it contributes to market intelligence and enables consumer profiling), personal information about consumers are frequently collected and traded by providers and intermediaries.
It is thus important to adopt practices that are lawful, transparent, and fair, and that enable the consumer’s participation and choice while also providing reasonable security safeguards (OECD recommendations).
Furthermore, poor internet networks, along with other technical challenges such as delays in receipt of payments by traders, unjustified invoices, irreversible payments, late confirmations, may also arise, affecting customer’s trust.
The OECD calls upon governments to develop national policies that promote transparent processes for the confirmation, cancellation, return, and refund of transactions to ensure a minimum level of consumer protection for e-commerce payments.
- At the ‘post-purchasing’ level
Dispute resolution and redress
Dispute resolution is the process of resolving a recurrent challenge or a conflict by meeting at least some of each side’s needs and addressing their interests. In particular, conventional dispute resolution systems in e-commerce, involve difficulties in terms of applicable law and jurisdiction. This stimulates the development of alternative mechanisms, which offer easier, faster and less expensive out-of-court solutions to disputes between consumers and traders, such as mediation, arbitration, conciliation, ombudsmen, and complaints boards.
Redress refers to the process of offering consumers the right to complain and provide them with services that resolve disputes. However, challenges in redress may emerge from a lack of clarity regarding liability when a problem occurs.
For this reason, governments are urged to ensure that consumer protection enforcement authorities and other relevant bodies are capable of facilitating redress for consumers.
Protection of children and e-commerce
Governments are urged to address the case of children and vulnerable consumers by adopting measures that monitor and limit children’s mobile and online payments for goods and services.
The above offers a brief overview of recurrent matters e-commerce businesses should be aware of. If you are operating an e-commerce business yourself, you can always Book a Consultation with a lawyer to make sure you’re on the right track or subscribe to our E-Commerce Kit.