Platform economy: Consumer protection

12 September 2019

Consumer protection issues often arise from the informal production of services and insufficient transparency with regard to liability rules and resolution or redress mechanisms if problems occur in the platform economy.

Insufficient transparency on the legal status of service providers

Platforms typically state in their terms and conditions that they are only intermediaries providing a ‘matching service’, thus evading responsibilities in relation to any damage, delay or failure in the performance of the underlying service. A service provider can be either a private individual offering a service on an occasional basis or a professional trader. EU Member States apply different criteria to demarcate between professional services and peer-to-peer services, but there is no unifying approach set out in EU consumer legislation. It is, therefore, difficult for consumers to establish what their rights are and against whom to exercise them when something goes wrong in the transaction.

Liability exemptions for online intermediary service providers

The e-Commerce Directive establishes a European safe harbour regime entailing liability exemptions for online intermediary service providers. For any liability exemptions to apply, the platform must only provide an information society service. Liability exemptions are assessed on a case-by-case basis. A key criterion is whether a platform mediates between parties or simply acts as a bulletin board for information over which it has no control. The Court of Justice of the European Union (EUCJ) has to date provided some guidance on the interpretation and applicability of current EU provisions.

Forms of self-regulation to ensure service quality

Service quality concerns can be addressed, at least partly, through self-regulation, for example, via reputational ratings and monitoring mechanisms to ensure service quality. As of 2019, there is, however, insufficient evidence to show that reputational ratings and monitoring mechanisms are by themselves an adequate and reliable measure of quality and consumer protection. Data from a 2017 consumer survey-based study prepared for the European Commission indicate that reviews are unlikely to reflect the experience of all platform users, but rather to represent those of a smaller number of more involved peers. In most cases, there are also no redress mechanisms (apart from bringing a case in front of the civil courts) to enable consumers in peer-to-peer transactions to engage in dispute resolution if they are not satisfied with the service provided through platforms.

Data protection and privacy issues

Online labour platforms have access to a large volume of information about their users, which can be used in many ways and for different purposes. Without the knowledge of users, sensitive and personal information can be used by platforms to engage in behavioural advertising and marketing and price discrimination to gain a competitive advantage, with no regard for data privacy. Since the entering into force of the EU General Data Protection Regulation Directive (GDPR) on 28 May 2018, platforms must abide by the new rules on data protection and inform their users about the data they collect, the way they process it and always request explicit and informed consent for the use of such data. Monitoring of law compliance and enforcement is crucial to discourage any misuse of personal data and ensure that platforms fulfil their contractual obligations vis-à-vis consumers.

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