Online reviews in numbers – the Trustpilot Transparency Report 2021

Recently, Trustpilot published, for the first time, its Transparency Report (here). This report concerns Trustpilot's activity in 2020. Trustpilot is an online platform where consumers and businesses can share feedback (and respond to it) through online reviews. The importance of online reviews in consumer decision-making is undeniable, and information on them allows us to better understand how and why consumers use reviews. From a consumer law perspective, it is important to assess how the information conveyed through online reviews impacts the conclusion of consumer contracts. The biggest concern in this regard is the proliferation of fake reviews, often written by businesses to harm a competitor’s reputation or to boost its own reputation. Perhaps most importantly, consumer law is (and should be) concerned with how online platforms design and manage online review mechanisms.

In this context, Trustpilot’s report provides a rare insight into the collection and processing of online reviews, given that most platforms do not reveal information on this. While most of what the report contains can also be found in Trustpilot’s guidelines on online reviews (available on their website), some interesting information is revealed. In 2020, Trustpilot received around 38,000,000 reviews. Trustpilot removed over fake 2,000,000 reviews, which corresponds to almost 6% of all reviews submitted in 2020. Most of the removed fake reviews were positive reviews (4- or 5-star reviews). On average, Trustpilot’s fraud-detection automated systems review 100,000 reviews per day. Additionally, in a clear effort to increase transparency, the report explains what factors are taken into account when calculating the score of reviewer satisfaction: time span, frequency, and Bayesian average. Remarkably, Trustpilot even justifies the choice of certain methods. For instance, Trustpilot claims it uses a Bayesian average to guarantee that businesses with fewer reviews are not unfairly punished for it. Besides, Trustpilot informs that, even though they have a freemium model in place, 92% of businesses who use its platform do it for free. Trustpilot refutes claims that it favors businesses that subscribe to the paying model, by revealing that paying businesses have an average review star rating of 4.39, while non-paying businesses have an almost equal average of 4.38. These numbers also show how the average star rating is quite high, given that the rating goes from 1-5. In fact, Trustpilot reveals that 71% of their 2020 reviews gave the highest score possible to a business. As said, insights like these – particularly originating from the online platform itself – are quite rare, so reading this interesting report is highly recommended. 

German study finds no evidence of personalised pricing: does it mean it's really not an issue?

In our previous post we reported about a recent study published by BEUC containing important recommendations about the future of consumer protection in the digital age. The study engaged among others with problems of personalisation in online consumer markets, including in respect of price-setting. Data-driven price discrimination has indeed been a subject of a growing interest in the literature and law- and policy making. To recall, a new information duty concerning the existence of personalised pricing was added to the Consumer Rights Directive as part of its recent reform. Member States are now in the process of implementing the new EU provisions to their national legal systems and it is open to debate whether the adopted disclosure duty will in fact be useful for consumers (see e.g. a recent OECD study). In the meantime, an increasing number of studies explore to what extent personalisation of prices actually takes place in the (European) consumer markets.

Back in 2018, the results of the "Consumer market study on online market segmentation through personalised pricing/offers in the European Union" were published by the European Commission. The study found evidence for personalised rankings of offers, but was not able to confirm the existence of "consistent and systematic personalised pricing".

Earlier this month, a report from a similar study commissioned by the German Ministry of Justice and Consumer Protection (BMJV) was published. As part of the project, the prices charged for the same products to different consumers on leading webshops and platforms were analysed over a period of three months. To assess the relevance of user characteristics for price variations a number of factors were considered, e.g. different devices, operating systems, browsers, data protection settings, user location, browsing history and social media engagement. While certain differences were identified in relation to prices charged when booking a hotel room either through a desktop or a mobile device, overall the statistical analysis did not confirm the existence of personalised pricing in the investigated markets. Interestingly as well, if price variations were observed at all they were generally marginal and typically took form of targeted discounts.

Considered together, both studies raise the question whether personalised pricing is indeed an issue for consumer law and policy. While it is clear that granular price discrimination is possible from a technological perspective, recent findings show that such a possibility may not really be used in the market practice. This could be linked to the typically negative perception of personalised pricing among consumers, as reactions to some of the previous instances of price discrimination, or even to speculations thereof, have shown (see e.g. in relation to Amazon, Allstate, Orbitz and Uber). At the same time, for these negative perceptions to actually have a regulatory effect, recurring market studies, like the ones indicated above, seem to be needed.

New study on consumer protection in the digital age: should the burden of proof in the UCPD be reversed?

Earlier this month a very interesting report by Natali Helberger, Orla Lynskey, Hans-W. Micklitz, Peter Rott, Marijn Sax and Joanna Strycharz was published by BEUC. The study entitled "EU consumer protection 2.0: Structural asymmetries in digital consumer markets" addresses a number of topical issues concerning consumer protection in the digital age and consists of the following parts:

1. Surveillance, consent and the vulnerable consumer. Regaining citizen agency in the information economy
2. Personalised pricing and personalised commercial practices
3. A universal service framework for powerful online platforms

The first and most extensive part has a foundational nature and considers the key premises of consumer protection in view of structural asymmetries observed in digital consumer markets. Attention is paid, among others, to the concepts of digital vulnerability and consent. Following existing research, the authors remark that consumer vulnerability should not be reduced to internal characteristics, but can also be caused by external conditions, and that data-driven practices that promote exploitation of vulnerabilities can be linked to the lack of privacy. At the same time, privacy controls placed at consumers' disposal are often not effective and can lead to a false sense of security. The most ground-breaking conclusions and recommendations, however, follow from the subsequent analysis of what is described as "digital asymmetry". According to the authors, instead of focusing on the information aspect of the UCPD and the different consumer images, more weight should be attached to the structural power relations, including the power embedded in digital choice architectures controlled by online platforms. On this basis, a case is made for reversing the burden of proof in the UCPD so that effectivelly "unfairness of data exploitation strategies is presumed" (p. 77).

The second part of the study part looks more specifically at personalised pricing and advertising and the third part explores how obligations traditionally associated with services of general interest (SGI) could be applied to the platforms considered to hold a gatekeeper position.

We encourage our readers to consult this thought-provoking study, the full text of which can be found here.

Third-party funding of collective actions: is it all that bad?

Third-party litigation funding refers to an arrangement whereby a third party, who has no other connection to the litigation, finances some or all of a party's legal costs in return for a share of any proceeds of the litigation. While third-party funding solves the problem of funding the litigation and enables wider access to justice for consumers, it could lead to excessive economic costs, opportunistic and 'frivolous claims'. For these reasons, since the introduction of collective redress opportunities, there has been strong resistance in Europe towards third-party funding that was often said to lead to 'US-style' class actions. Instead, in Europe, we developed 'collective actions' that enabled the protection of consumers without the 'questionable' third-party funding.  

 

While there is no doubt the introduction of collective redress for consumers in Europe had been an important milestone in the protection of consumers, the absence of sufficient funding of these expensive litigations often undermined the effectiveness of national collective redress mechanisms. Practice showed that funding is a problem, that prompted some Member States to allow for third-party funding. 

 

This trend has been now accknowledged by the new Directive 2020/1828 on Representative Actions for the protection of collective interests of consumers that devoted Article 10 to this question. The provision leaves it up to the national legislator to introduce third-party funding laying down certain standards that such legislative measure has to comply with. Importantly, conflicts of interests should be avoided and the representative action should in no way be diverted away from the aim of protecting consumers.

A recent study published by the European Parliament (J. Saulnier et al): Responsible private funding of litigation argues for the need for effective safeguards to develop responsible third-party litigation funding in the EU. The study outlines a number of regulatory gaps and challenges that the EU must overcome to improve responsible private litigation. To this effect, it discusses various approaches to the contractual, ethical, and procedural aspects of third-party funding.  Specifically, the study highlights the main policy options at EU level – including both legislative initiatives and self-regulation – that may represent effective safeguards against the risks associated with thid-party litigation funding. The Report may be an important read for our readers interested in consumer dispute resolution and collective redress.

Somber CJEU case on package travel - Kuoni Travel (C-578/19)

(trigger warning sexual violence)

 

Yesterday, the CJEU issued a judgment in the Kuoni Travel case (C-578/19), in which the Supreme Court of the UK asked for guidance on the interpretation of certain provisions of the old Package Travel Directive (Directive 90/314). It might be (one of) the last UK consumer law case decided at the CJEU. The travellers in this case bought a package travel to Sri Lanka from Kuoni Travel. The package included return flights, and 15 nights all-inclusive accommodation in 2010. Unfortunately, the traveller was assaulted and raped by an electrician and hotel employee, wearing a staff uniform and on duty at the time. The question that arose was whether Kuoni was liable for damages to the traveller, that is whether these arose as a result of the improper performance of the package travel contract by the supplier of a service and if yes, whether exception from Article 5(2) PTD could apply - that the travel organiser is not responsible because even with all due care they could not foresee or forestall the event that had occurred.

Pursuant to the contract, Kuoni limited its responsibility as follows:

‘due to fault on [that company’s] part, or that of [its] agents or suppliers, any part of [the] holiday arrangements booked before … departure from the UK is not as described in the brochure, or not of a reasonable standard, or if [the other contracting party] or any member of [his or her] party is killed or injured as a result of an activity forming part of those holiday arrangements’ and, secondly, that Kuoni does not ‘accept responsibility if and to the extent that any failure of [the] holiday arrangements, or death or injury is not caused by any fault [on the part of the company], or [that of its] agents or suppliers; is caused by [the other contracting party] … or is due to unforeseen circumstances which, even with all due care, [the company] or [its] agents or suppliers could not have anticipated or avoided’. 

High Court of Justice and Court of Appeal both dismissed consumers' claim on the basis that Kuoni accepted responsibility for its agents and employees in the performance of 'holiday arrangements', which should not encompass actions by a member of the hotel's maintenance staf. This would according to the court also fall within the scope of the PTD, as it did not aim to regulate the conduct by employees or agents of the travel organiser, where that conduct was not part 'of the role in which he was employed'. The Supreme Court, however, highlighted the fact that the hotel staff's member was guiding the traveller to the reception which could be perceived as a service falling within the scope of the 'holiday arrangements' (para 21, 51), and therefore an assault that occurred could be seen as an improper performance of the contract.

The CJEU first reminds the fact that Article 5(3) PTD prohibits travel organisers and/or retailers who are responsible towards consumers for the performance of the package travel contract to exclude their liability by means of a contractual clause (para 34). Article 5(2) PTD provides an exhaustive set of such exclusions. The liability extends to the proper performance of obligations under the contract by suppliers of services, who are however not defined in the directive (para 35). 

Suppliers of services

The linguistic and purposeful interpretation of this notion leads to the determination that a supplier of services is a natural or legal person who provides services for remuneration (paras 38-40). An employee of a supplier (here maintenance staff member in a hotel) could not however be a supplier of a service, both due to not having concluded a contract with the travel organiser and having an employment contract (rather than of provision of services, per definition) (paras 41-42). However, as suppliers of services may use their employees to perform the obligations from the package travel contract, and the travel organiser has the ultimate responsibility for the proper performance thereof, their liability should cover acts committed by employees of the supplier of services (paras 45-48).

Exemption from Article 5(2) PTD 

The CJEU interprets the exemption as applying to 

'events which cannot be foreseen, irrespective of whether they are usual, or from events which cannot be forestalled, irrespective of whether they are foreseeable or usual' (para 59)

This exemption is a separate ground to force majeure, as well (para 58). What is similar, however, is that the event that occurred must have been outside the sphere of control of the travel organiser or the service supplier (para 60) as Article 5(2) PTD generally requires the absence of fault. Clearly, this does not apply here as acts of an employee of a supplier of service fall within that sphere of control (para 61).

 

Whilst the judgment should lead to damages being awarded to travellers, it is really necessary to note the time frames here. The event occurred in 2010. The case went through all instances in the UK courts, whilst the reference to the CJEU could have been made sooner. The CJEU also took its sweet time in replying, as the case was brought in in July 2019.

Regarding the judgment itself, it may have harsh consequences for travel organisers, as it does not leave much space for limiting their liability. Similarly to the interpretation of 'extraordinary circumstances' under the Regulation 261/2004 on air passenger rights, what is crucial is what could be seen as remaining within the sphere of control of travel organisers and the inclination will be to see that sphere as quite broad.

Facilitating Sustainable Consumption through Private Law - call for papers

Dr Joasia Luzak (University of Exeter) and Prof Marco Loos (University of Amsterdam) are guest editors of a special issue of an open access journal Laws (by MDPI). They are inviting authors to send in their papers on the topic: 'Facilitating Sustainable Consumption through Private Law'. 

The deadline for submission of interest/ abstracts is June 30, 2021 (to j.luzak (at) exeter.ac.uk and m.b.m.loos (at) uva.nl)

The deadline for submission of full papers: October 15, 2021.

Message from the Guest Editors 

In this Special Issue, we would like to focus on the discussion of rules, which would accommodate sustainable consumption, leading to a structural change of consumer lifestyles and allowing to fulfil global commitments. We refer here to the UN 2030 Agenda for Sustainable Development, including specifically UN Sustainable Development Goal 12 (SDG-12), relating to sustainable production and consumption, as well as the European Commission’s New Consumer Agenda prioritising the green transition.

The contributions to this Special Issue may discuss various areas of private law that could either help empower consumers to reach for ‘the green transition’ or motivate producers and traders to use new materials, products or engage in new business practices. Any areas of private law that could help with the promotion of more sustainable consumption could be discussed in the contributions to this Special Issue, whether it would be sales or services contracts, online or offline contracts, contract or tort law, substantive or procedural rules, etc. We leave it to our contributors to decide and discuss whether and how this could be achieved, e.g. by: 

• reframing the current rules on:  
• consumer information,  
• non-conformity,  
• remedies, or 
• designing new rules around the concepts of:  
• product safety  
• product liability, or 
• banning or preventing planned obsolescence,  
• encouraging updates and upgrades of goods and digital content,  
• relating consumer rights to corporate social responsibility claims and policies.

With this Special Issue we plan to further contribute to the growing body of academic work in this area, continuing the discussion on various regulatory and self-regulatory solutions. We especially welcome contributions with an interdisciplinary angle.

A digital Euro?

Amid the rapid digitalization of our lives accelerated by the current pandemic, the European Central Bank (ECB) in cooperation with the European Commission is contemplating the introduction of the digital Euro. They are jointly reviewing a broad range of policy, legal and technical questions that are necessary for the introduction of the digital Euro, as well as their respective mandates and independences provided for in the Treaties. 

The digital euro would not be a cryptocurrency. A digital euro would combine the efficiency of a digital payment instrument with the safety of central bank money. In the words of the ECB, it would still be euro, a digital version of banknotes complementing and not replacing cash payments.

See the ECB's Report on a digital euro for more details.

The decision on the introduction of the digital euro will be announced later this year.

Covid-19's impact on consumer behaviour patterns

Last week the Commission published the new Key Consumer 2020 data following from the

Consumer Scoreboard 2020, which documents the changes in consumer behaviour during the pandemic, as it was conducted at the end of 2020. Interestingly, one of the emphasised by the report conclusions revolves around 'greener' consumption choices that have been made (see the press release here). This follows from the findings that 

• 56% of consumers said that 'environmental concerns influenced their purchasing decisions', 
• 67% - 'bought products that were better for the environment, even if such products were more expensive', and
• 81% - 'shopped closer to home and supported local businesses 

Other interesting findings indicate the increase in the amount of consumers shopping online, unsurprisingly, as well as more concerns about the ability to timely pay bills. The latter may have contributed to the noted consumers' reluctance to make a major purchase. Covid-19 delayed also consumers in making travel plans.

What does not seem to have been influenced by the pandemic is the high level of trust consumers have in retailers. The extra time spent at homes during the pandemic also did not seem to have encouraged consumers to read upon their consumer rights - as only 27% showed the knowledge thereof. Consumers remain also reluctant to take actions when there are issues with their transactions.

New energy labels start rolling out

 Since 1 March, a number of household appliances need to be labelled according to a new scale. The change is, in essence, an update of the previous energy efficiency labelling scheme, which had been tweaked over time but looked a bit like it was lagging behind technological developments. Where until last month, thus, fridges could be awarded a A+++ label, meaning a fridge getting a single A was hardly the most energy efficient on the market, the new scale will go from A to G. Further, the scores themselves have been adjusted to enhance the efficiency requirements.

The remake had been in the cards for quite some time - the Commission had already received a 

detailed report in 2014.  According to that study, consumers were not really confused by the old scale; however, it did appear that the least attentive consumers were slightly more sensitive to the difference. Since more careful consumers probably rely on their own research rather than (only) on the labels, it could be that the new scale will help assist consumer decisions over all. 

While the new rules have been welcomed by consumer organisations, criticism has been raised in respect of the somewhat relaxed timing the new rules follow: only a few appliances will immediately display the new labels, with the transition being due to end in 2025 with boilers. 

It is, as ever, not obvious that energy efficiency labelling is a sufficient instrument to lead consumers to make more sustainable choices - beyond achieving some personal savings. In order to boost the effect of these measures and their implementation, it may be worth mentioning that BEUC and other organisations have an ongoing project aimed at communicating not only with consumers but also with other stakeholders. 

The Tide Is High... - AG Szpunar on rights of passengers in maritime transport in Irish Ferries (C-570/19)

AG Szpunar issued an interesting opinion today in the case Irish Ferries (C-570/19), which required interpretation of Regulation 1177/2010 concerning the rights of passengers when travelling by sea and inland waterway. With the majority of the attention of the courts on the interpretation of the provisions of Regulation 261/2004 awarding air passengers with various rights in case of flights delays and cancellations, as well as denied boarding, passengers of other modes of transport might have felt forgotten. Well, perhaps the tide is now changing for passengers of maritime transport.

Just by looking at the provisions of Regulation 1177/2010 we can see many similarities to Regulation 261/2004. In case of interrupted maritime travel, passengers are also supposed to be properly informed by their carriers about this, have a right to assistance (refreshments and snacks, as well as overnight accommodation, although the latter right is limited, see Art 17(2)), as well as a right to re-routing and reimbursement (Art 18). There is also a right to compensation in case of a delay in arrival - Article 19 - with the extraordinary circumstance releasing the carrier from this obligation, e.g. bad weather conditions or other circumstances which could not have been avoided even if all reasonable measures had been taken (Art 20(4)).

In Irish Ferries a vessel that was to serve a particular maritime route - Dublin (Ireland) and Cherbourg (France) - was not built and deployed on time, despite expectations to the contrary. This meant that although the route has been advertised and tickets for journeys on this ferry have been sold, the company found itself a vessel short and decided to cancel previously made bookings. Affected passengers were notified 7-12 weeks in advance, received full reimbursement or a re-booking option. In the case re-routing was chosen, passengers did not have to pay any additional costs if the ticket price was higher for the new journey, but they were not compensated e.g. for traveling to/from the alternative port of departure (para 24). Passengers who chose to travel via the UK through a land bridge could claim compensation for their fuel costs (paras 29-31). The contested part was that Irish Ferries decided that the awarding passengers with the right to re-routing and reimbursement was mutually exclusive with paying them compensation for a delay. They claimed that Art 18 and 19 did not apply simultaneously.

The Irish National Transport Authority considered that Irish Ferries should have paid compensation to passengers whose journey was delayed - in compliance with Art 19 - and should have compensated all additional costs related to re-routing - in compliance with Art 18.

AG Szpunar's advice is first that Regulation 1177/2010 indeed applies to this case scenario (see for the detailed analysis paras 45-74). 

Second, he confirms that re-routing should come at no additional costs to passengers, and costs of travel to/from alternative ports of embarkation and disembarkation should be included in this (paras 84-85, 94). 

Third, AG Szpunar confirms that passengers who have been re-routed may claim compensation in the delay of arriving at their final destination, contrary to passengers who chose reimbursement (para 108). Both the legislative history as well as other provisions of the Regulation, e.g. Recital 14, indicate this (paras 105-106). The delay should be calculated by comparing the arrival time laid down in the contract and the actual time of arrival at the final destination - and not at the port of disembarkation (paras 115-116).

The compensation amounts to 25% of the ticket price, and the ticket price should be seen as encompassing all additional optional services chosen by the passenger (e.g. for a booking of a cabin, or a kennel, or access to premium lounges) (para 124). This differs from a standard, flat-rate compensation that air passengers are granted under Regulation 261/2004 (para 125). However, AG Szpunar recognised the option for maritime carriers to separate clearly services provided under the contract that are not part of 'passenger services', which would exclude them from the ticket price (para 126).

Further, the late delivery of the vessel does not amount to extraordinary circumstances, as it should be seen as being inherent in the normal exercise of the activity of the carrier. The concept of extraordinary circumstances is thus the same as under Regulation 261/2004 (paras 134-135). (see for more elaboration on the test under the given circumstances: paras 138-157).

The last two findings pertain to who has jurisdiction over enforcing Regulation 1177/2010 and whether the claim for a right to compensation is time-barred if the passenger did not demand it within two months from the date on which the transport was supposed to be performed.

This is a detailed case law as it explores a new terrain of passengers' rights and treads carefully on it. The interpretation of various provisions of Regulation 1177/2010 is very much welcomed, as it not only introduces more legal certainty to this field, but also allows for an easier comparison between rights of passengers of various modes of transportation. Let's see what the CJEU will have to say in this case!