The 2018 Consumer Scoreboard

On 12th October the European Commission published the 2018 Consumer Markets Scoreboard. The Consumer Scoreboard provides an overview of how the EU single market works for consumers. There are two kinds of Consumer Scoreboards, the Markets scoreboard and the Conditions Scoreboard which get published in alternate years. This year it is the turn for the Markets Scoreboard which monitors the performance of over 40 markets as experienced by consumers.

Here is a summary of some of the most interesting findings of the scoreboard:

• The overall positive trend of consumers' assessment of markets continues; however there is divergence between different part of the EU. Markets in Western Europe perform better, while markets in South Europe are lacking in performance. The Eastern Europe markets are the ones that show the greatest improvements.
•  Services continue to underperform in the Scoreboard with the lowest performing being banking services and real estate.
• The financial situation of consumers plays an important role in their assessment of markets as poorer consumers are, unsurprisingly more negative in their assessment.
• Choice and comparability in utility markets, and especially in electricity, is leaving consumers dissatisfied.
• The highest incident of problems reported (16.9%) was noted for telecommunications, with that percentage being even higher (20.3%) for internet services. While the performance of the markets ranges across countries, with southern countries being less satisfied, the sector continues to be a cause for concern.

Justice Commissioner Vera Jourova responded to the findings of the Scoreboard by pointing out that the 'New Deal for Consumers'and the announced measures, such as a new representative action for consumers should serve to increase consumer trust in the single market.

New Deal for Consumers: proposals on online transparency

In our earlier post we reported on the behavioural study on transparency of online platforms published by the Commission as part of its „New Deal for Consumers” package. We noted that it is hard not to agree with the general recommendations arising from the study (following up on the earlier documents published as part of the Fitness Check of the European consumer acquis and evaluation of the Consumer Rights Directive); however, for them to actually work in practice a number of detailed issues needed to be solved. Interestingly, several matters of relevance to online transparency addressed in the study have already found their way to the legislative proposals tabled on Tuesday. Should we praise the Commission for this pace of action? Let’s have a closer look at these elements of the “New Deal”.

Legislative package: basic facts

The legislative part of the “New Deal for Consumers” consists of the following two proposals:

• a proposed directive amending Directive 93/13/EEC (unfair terms), Directive 98/6/EC (price indication), Directive 2005/29/EC (unfair business-to-consumer commercial practices) and Directive 2011/83/EU (consumer rights) as regards better enforcement and modernisation of EU consumer protection rules (COM(2018) 185 final)
• a proposed directive on representative actions for the protection of the collective interests of consumers, and repealing Directive 2009/22/EC (injunctions) (COM(2018) 184 final) – to which a separate blog post will be devoted.

It is particularly the former proposal in which the new provisions regarding the “digital” sphere are contained  – mainly in the form of amendments to Directives 2005/29/EC (UCPD) and 2011/83/EU (CRD). 

As regards the transparency of online transactions, the proposed amendments affect two of the three dimensions of transparency addressed in the behavioural study: 1) the criteria for ranking and the presentational features of search results and 2) presenting the identity of contractual parties. By contrast, proposals on quality controls for consumer reviews and ratings appear to be missing.

Amendments to the UCPD

One of the ways in which the Commission plans to improve transparency of search results is via the amendment of No. 11 of Annex I to the UCPD. Acording to the new wording

11. Using editorial content in the media, or providing information to a consumer’s online search query, to promote a product where a trader has paid for the promotion without making that clear in the content or search results or by images or sounds clearly identifiable by the consumer (advertorial; paid placement or paid inclusion)

Search results marked as "Ads" on Google

would be qualified as one of the commercial practices considered to be unfair in all circumstances. This does not seem to effect a major change to the state of affairs as, indeed, the providers of leading search tools already identify paid results as such. It should be observed that the proposal does not contain any reference to factors other than direct payment which could have an impact of the placement of a search result such as corporate ties between the operator of a search engine and the supplier of the product or service.

Amendments to the CRD

While the adjustments made in the UCPD would apply to any provider of an online search tool, the amendments made to the CRD with respect to the ranking of offers and identity of contracting parties are essentially limited to "online marketplaces". The latter are defined in the proposed Artice 2(19) as "service providers which allow consumers to conclude online contracts with traders and consumers on the online marketplace’s online interface". This invites several comments.

First of all, while the Commission presents its definition of an online marketplace as "future-proof" this does not necessarily mean that it is free from doubts. Indeed, unlike definitions found in Directive 2011/83/EU on consumer ADR and in Regulation 524/201342 on consumer ODR, the new wording does not refer to a "website", but makes use of a more technologically neutral notion of an "online interface", defined by reference to the newly adopted Regulation 2018/302 on geo-blocking. At the same time, however, the proposed act does not seek to amend Article 7(3) of the CRD which refers to a "trading website". 

Secondly, the decisive function of an "online marketplace" consists in "allowing consumers to conclude online contracts on the online marketplace’s online interface". This seems to suggest that a service provider only qulifies as an online marketplace if the actual contract is concluded by means of the software  provided (website, mobile app), thus excluding webites which merely identify the relevant customers and suppliers.

Thirdly, the definition of an online marketplace refers to the contract concluded by consumers "with traders and consumers". This seems to put an end to a debate whether something like a "consumer-to-consumer contract" can exist. The relevant debate, however, is not limited to the question whether someone who actually sells a good or provides a service can be called a "consumer". This seemingly minor change in wording might also be difficult to reconcile with some national provisions in which a consumer status is intrinsically linked to the professional capacity of his counter-party (see, for example, Article 22[1] of the Polish Civil Code). 

The specific transparency provisions for online marketplaces are found in the proposed Article 6a of the CRD. According to this provision: 

Before a consumer is bound by a distance contract, or any corresponding offer, on an online marketplace, the online marketplace shall in addition provide the following information:

(a) the main parameters determining ranking of offers presented to the consumer as result of his search query on the online marketplace;

(b) whether the third party offering the goods, services or digital content is a trader or not, on the basis of the declaration of that third party to the online marketplace;

(c) whether consumer rights stemming from Union consumer legislation apply or not to the contract concluded; and 

(d) where the contract is concluded with a trader, which trader is responsible for ensuring the application of consumer rights stemming from Union consumer legislation in relation to the contract. This requirement is without prejudice to the responsibility that the online marketplace may have or may assume with regard to specific elements of the contract.

Concluding thought

Improving online transprency clearly belongs to the rationale of legislative proposals submitted by the Commission earlier this week. The specific proposals made promise to bring more clarity to consumers, but do not address all the identified problems. If the proposed directive was to be adopted in the current form, a further question might be asked as to the extent to which Member States could still intervene in ensure transparency of online platforms (considering the full harmonisation nature of both the UCPD and the CRD). The current wording of the proposals also leaves a range of interpretative questions open. Should these not be addressed in the legislative process, this important task will, once again, be left to the Court of Justice. 

Behavioural study on transparency of online platforms - let's try this again

Aside the New Deal for consumers, parts of which we have already commented on (see POLITICO publishes draft Commission proposal on collective redress for European consumers), and which we will keep on discussing in the coming days further, the Commission has also published today an interesting behavioural study on the transparency of online platforms (executive summary may be found here, the whole final report - here). Admittedly, I have not yet read the 206 pages long final report fully, but having studied the executive summary and checked a thing or two in the final report, here are some of my thoughts on the study.

The study focused on the possibilities of improving transparency of online platforms (such as Airbnb or Amazon) due to their potential for 'posing significant risks to consumer protection and market competition'. However, out of the three examined areas (criteria for ranking and presentational features of search results; presenting identity of contractual parties; quality controls on consumer reviews and ratings) only the first one could be presented as more unique for online platforms than other websites. Generally, establishing the identity of a counterparty online (regardless of the use of a platform) and the quality of the controls they use (rankings, endorsements) is problematic for most internet users. The question then is whether the Commission intends to extrapolate the findings from the online platform study to other online websites and consumer protection whilst using them.

The geographical scope of the study was limited to 4 countries (Germany, Poland, Spain and the UK); some of the biggest European countries in terms of population and size. Can we expect the results to then be representative for the EU?

Further methodological evaluation of the study is probably best left to the experts, but I do wonder e.g. whether the names chosen for restaurants and hotels that were being compared have been consulted with communication specialists as to not biasing consumers at the get-go.

In any case, the overall finding of the study: that online transparency is clearly in the interests of consumers - is hardly surprising or new. I guess it is always good to receive a confirmation thereof though. The study suggest that to achieve greater transparency:

- criteria used to order search results should be apparent to consumers and it should be possible to re-order search results using a range of criteria;

- consumers' awareness of the identity of contractual parties and their understanding of legal implications should be raised;

- platforms should be encouraged to implement quality controls for improved authenticity and greater number of reviews.

Again, hardly groundbreaking suggestions. It would be more noteworthy if the Commission indicated specifically how these objectives could be achieved (should we not start finally talking e.g. about particular font sizes and information placement?). Moreover, these suggestions could be misused by online platforms and traders. E.g. it is relatively easy (technically speaking) to introduce a search criteria 'popularity' to a platform, but what does it signify? The amount of clicks on a particular link or the amount of transactions concluded with the given product/service provider? It the clicks counted, it would not be surprising if a particular product or service was 'popular' because it was listed first when the measurement started. There are ample opportunities then to still not provide transparent information to consumers even by following the Commission's recommendations.