Keeping pace with a changing environment: What this means for enforcers
The Digital Age has ripped up the rule book on consumer behaviour – and the way consumers make decisions continues to change.
We are now seeing a wave of new innovations – and are presented with both opportunities and risks we have not encountered before.
The advent of smartphones means that we can access the internet whenever and wherever we want. The smartphone revolution has introduced new and more efficient ways to communicate, to share our thoughts, feelings and menu choices with the world.
Online reviews are the new word of mouth that 54% of adult consumers use before making purchases. Having the internet in your pocket means you feel you should be able to shop anywhere, at any time, and buy from the widest range of providers.
Smartphone apps have made online purchasing possible at the click of a button – now, mobile payment systems linked to smart phones and smart watches are competing with more traditional payment methods, and making consumer transactions faster and smoother.
People are also using social media, especially Twitter, as a way of engaging with businesses, for example if a product or service is not up to standard. With a forum that is so public, you often get an instant response.
So our smartphones are a communication tool, a research tool and wallet, all in one.
Elsewhere in the marketplace we are witnessing the rapid uptake of digital banking, both online and through mobile apps – including mobile payments, with some banks allowing online account opening and identification.
The sharing economy – which some prefer to call the access economy – has given rise to services such as Uber and Airbnb. And we’ve seen that anything as disruptive to the established order as these new services cannot expect a uniformly easy ride.
Innovations are coming through all the time. An app has just been launched which helps you manage prescriptions – you tell the app your medication details and the doctor with whom you are registered, and it does the rest – getting the medicines approved and sent to your door. You can also consult a doctor online via various sites. These intensely private ‘transactions’ and conversations, which people may have doubted could ever work in a digital setting, are becoming the norm as people place increasing trust in the services available online.
How we should respond as an agency
These rapid changes pose challenges for consumer authorities and policymakers alike: what are the key considerations that should inform the approach to intervention in such a fast moving sector?
Technology can create powerful opportunities in the realm of consumer decision-making. The Competition and Markets Authority’s (CMA) ongoing investigations in retail banking and energy have been giving particular consideration to the potential of online comparison tools to empower consumers.
In our retail banking investigation, we are looking at how price comparison websites can securely access consumers’ data to enable them to compare products to ensure they get the best deal, based on their own circumstances. We are also looking at ways for consumers to receive targeted information, for example through text messaging, to prompt them to review their current service at times when they are most likely to act on it – such as when charges are imminent.
In our investigation into the energy market we are considering initiatives aimed at putting in front of consumers more visible and accurate information about their consumption. These include a programme to provide customers with specific cost information to prompt them to engage with the competitive market.
These are just 2 sectors in which new technology is helping to inform and empower consumers, and strengthen their engagement with the market.
Ensuring technology companies observe the rules of the game
While allowing space to innovate is vital, it is also important, particularly in a time of rapid change, to ensure that technology companies and other new service providers are fully aware of their consumer protection obligations. Sometimes this can mean strong enforcement action by authorities such as the CMA and our ICPEN partners. In other cases, it can be enough to cause a developing sector to pause to consider consumer issues and initiate changes to behaviours before they are embedded.
Last year, the CMA published a call for information about online reviews and endorsements. Consumers find these online services very helpful - as I mentioned earlier, over half of all UK consumers use reviews.
However, we also saw a number of practices that we thought had the potential to mislead consumers and damage trust – potentially eroding benefits in the long term. We therefore launched 3 new cases aimed at tackling these practices, and in recent weeks have announced our results:
- in February we announced that 5 review sites have agreed to improve their practices – which should help to ensure that genuine reviews are published in a fair way
- in March we announced enforcement action against a marketing company that that had written fake reviews for 86 businesses across 26 review sites
- earlier this week we announced enforcement action against 3 businesses involved in arranging undisclosed product promotions
In addition, the joint work done in 2013 to 2015 by enforcers from across many jurisdictions, including the CMA and its predecessor the Office of Fair Trading, had a significant effect in causing the children’s online games industry to wake up to, and engage with, its consumer protection obligations. In December 2013 the European Consumer Protection Cooperation (CPC) network agreed a common position setting out that, among other things, consumers should not be charged without their explicit consent. And the pressure from CMA, CPC and ICPEN members resulted in Apple and Google making important changes to their payment authorisation systems.
In addition, changes in technology have the potential to tempt companies to engage in defensive practices which restrict competition. The CMA has taken cases involving providers of bathroom fittings and catering equipment relating to alleged minimum prices set by manufacturers for internet sales, which effectively limit the ability of retailers of these products to charge below a specified price level online. These cases are ongoing, with no final conclusion yet about whether these practices are illegal. They do nevertheless illustrate the potential for business innovation to provoke behaviour which is not to the benefit of consumers.
Using new technologies to optimise our own work
It is not just consumers who can benefit from new technology. As enforcers, there are significant benefits which we can achieve through investing in new technologies to optimise our own work.
The growth of social media as a platform for consumers to express their views creates a powerful source of intelligence, enabling us to spot trends and prioritise our resources.
At the CMA we have recently started to use social media monitoring software. For organisations such as ours, this type of intelligence tool can help with a broad range of activity. It’s early days, but experience suggests that it might help us with:
- initial scoping to see how widespread problems appear to be in particular markets
- finding up-to-date examples of specific issues
- identifying where consumers and other online communities look for information and advice
New technologies can also accelerate the speed from problem identification to resolution. During the online reviews call for information we piloted a number of new digital approaches:
- We commissioned real-time qualitative research that tracked consumer use of online tools. This enabled us to gather valuable insights into how consumers use these tools and was influential in shaping our proposed approach.
- We gathered information by starting discussion threads on forums, and taking part in the CMA’s first Twitter hashtag conversation – the latter enabled us to take part in real-time evidence gathering with a group (beauty bloggers) who until then had not engaged with the consultation. This allowed us to engage with a ‘hard to reach’ group by going to them, rather than expecting them to come to us.
Engaging with consumers, enforcers and businesses internationally to deliver outcomes
At the CMA, we are increasing our use of social media to communicate our messages with the wider world.
Last year we launched a campaign to ensure students knew what to look out for when comparing higher education institutions and were aware of their rights as consumers.
This was a target audience which would most probably not have heard of the CMA, let alone be following us on Twitter. We worked with key partners including the Student Loans Company and the National Union of Students; and using their established networks and credibility were able to reach a far wider audience than we could have aspired to on our own; indeed, it remains one of our most successful CMA campaigns to date.
As an enforcement network, the work of ICPEN, and the ability to collaborate across jurisdictions towards a common goal, is hugely important in an era of increasing cross-border transactions with large multinational companies. This international collaboration is something we at the CMA value extremely highly and is something which has been invaluable in helping us to achieve our objectives.
Last year we announced the conclusion of an investigation into car rental. This was the culmination of a European-wide project, working closely with the European Commission, our EU counterparts and the network of European Consumer Centres, to engage with representatives of the EU car rental industry to address key issues affecting consumers across Europe. This collaborative work resulted in 5 leading companies, which represent around two-thirds of the UK and EU markets, committing to improving the way they deal with their customers both in the UK and abroad.
It is important that we continue to operate in this collaborative way and we very much welcome the international project on online reviews and endorsements, led by colleagues from Australia and Denmark, and look forward to the publication of ICPEN’s international principles for these sectors later this year.
I’m confident that together we can ride this new wave of technology, allowing the innovation that offers so much opportunity to consumers and markets to thrive, whilst ensuring that consumers across the globe remain properly informed and protected.