4th August 2020

Dealing with disruption

The online age has opened up a new commercial arena, drastically altering traditional business models. But with consumers selling to other consumers through internet portals, investigations can be an enforcement officer’s headache.

By Michael McCaw
Freelance writer for JTS
One of the main problems we have is that pretty much all trading standards laws are based on the idea that the seller is a business
It’s clearly a problem – these businesses are not in front of enforcement officers, they’re up in the ether somewhere

The internet has revolutionised consumerism, bringing goods and services from all over the globe to our fingertips and our doorsteps. While markets have been overhauled by the global pandemic over the past few months, the past two decades have seen immeasurable expansion in choice and – in many cases almost complete – elimination of geographical monopolies.

The pace of disruption has accelerated over the past five years, with consumers trading more and more through online portals such as eBay, AirBnB, FaceBook Marketplace, Amazon, and others; by mid-2017, 62 percent of the UK had participated in the sharing economy
and 73 percent of those did so across multiple platforms.

From an enforcement and legal perspective, it’s a new challenge that is in need of serious attention, and there are no easy fixes – even the Office for National Statistics (ONS) has been forced to conduct a feasibility study to define and quantify the sharing economy. Because it is difficult to pin down, the new ecosystem doesn’t fit easily into current UK law, which to some seems outdated.

New world
“The suite of consumer laws that we have, have been written with an analogue world in mind – there’s no doubt about that, and they’ve been developed mostly from EU law,” says David Mackenzie, CTSI Lead Officer for E-commerce.

“Things like the different selling provisions, for example – the information you have to give to a buyer when selling at a distance, calculation rights, etc – it’s all really based on discussions that were had in the 1990s when it was simply a case of an ecommerce website. But now with all these different platforms it is a much more complicated picture,” he says.

While Mackenzie concedes that many European Union laws have been constructed on principles-based directives, there are still many areas that could do with fresh consideration.

“You could argue that the legislation was written for a world that has moved on, and there could be an argument for writing legislation that really attempts to tackle the world as it is now and as it is going to be,” he contends.

A major problem in applying the law is national boundaries. Many of the platforms that have sprung up to shape the sharing economy have taken advantage of the very fact that the internet removes geographical boundaries, says Peter Stonely, CTSI Lead Officer for Civil Law.
“If you look at AirBnB or Facebook, they are global brands, so their reach and their compliance requirements are complex issues and trading standards have got to make links between various bodies, and adapt their enforcement methods to deal with this,” he says. “It’s clearly a problem – these businesses are not in front of [enforcement officers], they’re up in the ether somewhere.”

Although dealing with issues that cross national boundaries is a hurdle trading standards has encountered more often in recent years, just as problematic is the question of who is responsible when things go wrong – such as when a service hasn’t been fulfilled or a product not delivered as described. Legally speaking, if a consumer sells to another consumer it is not necessarily technically a business transaction.

A matter of principle
“One of the main problems we have is that pretty much all trading standards laws are based on the idea that the seller is a business,” says Mackenzie, who points out that the definition of a business is largely principles-based – founded on questions such as throughput and whether or not something has been bought in order for it to be sold.

Mackenzie says this particular issue became a challenge when eBay gained a market, but things have become more challenging with the growth of social media and adaptive technologies.

“When does an AirBnB host letting out a room for three months of a year become a business? There’s a growing grey area in which there’s a lot of people unsure as to whether regulations apply to them or not. And even if the regulation did apply to them it can be really difficult to reach them,” he says.

Further, many of the platforms consider themselves as introducers rather than intermediaries, with rules and enforcement policies restricted to their own ecosystems.

For instance, AirBnB (which did not respond to comment for this article) has a set of standards which includes safety, security, fairness, authenticity and reliability. The company’s website asserts that it will “take the circumstances of each situation into account when reaching our enforcement decision,” but crucially admits that it has “limited discretion in our response to serious violations of the policies”.

Similarly Amazon Marketplace’s provisions include a “safe buying guarantee”, but claims can only be made within 90 days of the estimated delivery date. Facebook Marketplace also contains commercial policies, but issues still remain: just last year it was reported that knives were being sold on the platform without age verification.

On the face of it, policies such as these do much to make buyers and sellers feel protected, but for trading standards – which maintains regionally and nationally held values – internal complaints procedures and online review systems effectively stop complaints from reaching them. The challenge then for trading standards is to find information to work with, and determine who is to be held responsible for a particular matter.

Collaboration is key
In a way, enforcement officers have turned these platforms’ best asset – access – to their advantage. Given how tight resources have become, officers would have slim hopes of contacting each and every entity through the platforms to ensure higher standards, so instead they work with those platforms to communicate through them, as well as attempt to convince those platforms to adopt best practice initiatives.

“The prospect of getting a message to the many, many thousands of online retailers to have individual conversations about compliance on things like charging fairly, making sure they’re displaying things properly, can be extremely challenging,” says Mackenzie. “But we’ve had some success in getting the likes of Amazon to make some of our rules almost part of their own rules and contribute towards the general level of compliance and fairness.”

For Stonely however, the size of a number of these organisations – as well as the way they are built to rely largely on technology – makes them seemingly impregnable to external input, never mind enforcement.
“Where it goes a bit wrong is when you have to speak to a human to work out what’s going on with a problem. I’m not sure if the problems are new or different but the process takes much more time and there’s a lot more instances of problems arising,” he says.

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