If you thumb through Modernising Consumer Markets, the Government’s Green Paper, you may notice that only Chapter 3 has the word ‘digital’ in the title. However, as you absorb the details you soon find a paper that is extremely ambitious about data and digital markets and everything that means for modern consumers. Throughout its five chapters and 21 questions the themes of online platforms, personal data and digitisation abound.
Green papers are a starting point for stakeholder discussions and this one has really delivered, after more than a year of speculation. Modernity, data technology and redress are core themes – but as trading standards colleagues around the country read through the questions, number 16 will resonate most deeply: “What changes are needed to ensure local and national enforcers work together within an effective framework for protecting consumers?” With local services on their financial knees, that is the question most likely to spark debates within trading standards before the 4 July response deadline.
Portability and switching
There’s no surprise that a Conservative Government puts the benefits of the markets, innovation and competition at the core of its thinking. Encouragingly though, market failures are recognised in sectors such as energy, telecoms and financial services. There remains a worrying inertia to switching suppliers among vulnerable consumers who are then exposed to discriminatory higher prices and poorer service. Putting them in control and making consumer data portable between suppliers is explored as a solution in regulated markets.
Steve Playle, CTSI’s Lead Officer for Energy had some early insights and concerns: “Exploiting new technologies to benefit consumers is a noble aim. However, I am concerned that digital technology and data can be used by energy firms to exploit consumers, rather than aid them, particularly through targeted and discriminatory tariffs. For example, the smart metering programme threw up age-old problems such as energy mis-selling and aggressive tactics and has introduced new barriers to switching and choice. Questions also remain about whether vulnerable consumers fully understand new digital technologies and big business’ track record on data security has not been good.”
The sharing economy
Digital platforms bring consumer choice, speed and business innovation. Nowhere has this been more apparent than in the growth of what has become known as the ‘collaborative’ or ‘sharing’ economy or ‘peer-to-peer’ services. Apps that let consumers ‘share’ anything – from properties to cars to financial loans – grew from £2.1bn to £7.4bn in just two years, eating considerably into traditional business-to-consumer markets. The green paper asks: if legal protections are centred on consumers’ contracts with businesses, what might be needed to protect them in peer-to-peer markets?
What is also acknowledged is the growing importance of online ratings and customer reviews as a vital barometer for service quality and competition, not just in the peer-to-peer sector, but across all online platforms.
The free market online
Another interesting area for debate is the ethics of data manipulation for price personalisation – or discrimination, depending on your view. For example, how can it be that two consumers receive very different online prices for the same product or service?
In digital commerce the free-market principle that prices go to where the market can bear is set by sophisticated online algorithms and website cookies generating ‘personal prices’.
But is it ethical? Well, if you are charged more for your morning coffee than others because the chain has assessed that you really wanted it – and will probably pay more – you’re likely to be quite aggrieved. Yet, that is what happens in online markets every day. The paper questions in what circumstances such practices should be used and whether they cause harm to consumers.
CTSI’s Lead Officer for e-Commerce David MacKenzie welcomes the debate. “As the markets for online trading grow in all their guises I think it is vital we have a proper look at the protections offered to consumers,” MacKenzie says.
“There is definitely a need to ensure that consumer data is used in a much more transparent way. While changes to data protection laws will facilitate this, more can be done to show exactly how our online information is collected and used. We need to strike a proper balance that allows online markets to flourish, but not at the expense of allowing fraudulent practices or unethical manipulation of consumers”.
Although online contracts are forged in the billions every day, few consumers make themselves aware of the full details of the deals they strike.
Failing to read or understand terms can lead to consumers being duped into more expensive or longer deals when onerous buried clauses and penalties come back to bite. The paper explores how the presentation of terms, particularly key or potentially harmful terms, can aid comprehension for consumers.
The paper also hopes that a combination of the above and action from the Consumer Protection Partnership might help bring an end to the scourge known as ‘subscription traps’. These are of course the baited ‘free trial’ or ‘reduced price’ offers for everything from slimming pills to beauty products that are designed to trap unwitting consumers into lengthy subscription contracts.
Often originating on social media, consumers who hand over their card details for their ‘free’ offers may not realise they have been signed up for ongoing payment commitments. Only after seeing the strange payments leave their account do they realise they have been misled or conned.
And then there’s Chapter 4 – Improving enforcement of consumer rights. It starts by exploring the benefits of alternative dispute resolution (ADR) systems and their importance as a substitute to going to court.
Published alongside the green paper is the government’s extensive research highlighting issues hindering the current system. The green paper asks four questions about improving ADR models designed to improve take-up, quality systems, business engagement and even automatic access in the most harmful sectors.
The £10.8bn question
And so, to “strengthening our system of public enforcement” and that thorny question 16. Local services might be incredulous at the suggestion they retain 75% of all enforcement resources despite losing more than 50% of their numbers in less than a decade.
The issue, however, is that the nature of consumer detriment has changed as commerce has become digital, regional and national. It is estimated that of the £15bn of consumer detriment only £4.2bn requires a national enforcement response.
Despite this, the paper asserts there is no capacity or incentive at the local level and little power and accountability at the national level to effectively tackle it. The Government’s theoretical position is that: “a stronger system would be one in which there was a strong national body with statutory powers and duties that could provide leadership and specific expertise and lead complex national enforcement cases where necessary”.
Is that the answer? Early views from the Association of Chief Trading Standards Officers and the National Trading Standards Board are supportive of the move if it retains an integrated trading standards system and does not create a separate central delivery body
The paper also suggests this shift would allow local services to better focus on local priorities and to continue to feed intelligence to national bodies.
Worryingly though, that does little to address the current path of haemorrhaging numbers and loss of critical expertise down which trading standards is headed.
CTSI Chief Executive Leon Livermore is in no doubt: “The green paper starts some very important debates about digital markets and redress, but fundamentally our focus is on ensuring we consult widely with members, branches and stakeholders to put forward the best enforcement framework arrangements for trading standards,” Livermore says.
“What cannot be denied is that the system now has a critically reduced capacity for enforcement and continuing losses are unsustainable”.
Finally, the paper announces the intention to introduce ‘civil fining’ powers for enforcers such as the CMA and local trading standards services.
While they are not a substitute for criminal powers they are broadly welcome and augment the civil enforcement options to seek infringement cessations, redress and other enhanced measures.
Likely to be limited to a percentage of annual turnover of the business, they will be particularly welcome in large national enforcement cases. While they may provide greater choice and flexibility, the question remains, at the local level: what use are extra civil powers, without resources, when trading standards services are already struggling with their current enforcement investigations?
For CTSI, the green paper opens up timely debates across a number of important areas. There will be a need to consider deeply and consult widely. As Lead Officer experts pour over the technical questions there are fundamental issues on the enforcement arrangements for trading standards.
We need to take the opportunity to strengthen national and local relationships and ensure we develop a sustainable and effective trading standards enforcement framework – one that retains capacity and expertise.
Let the discussions begin.