Consumer protection (Driving force)

The research project ‘Future scenarios of platform work’ explores the economic, labour market and societal impacts of two types of platform work – platform-determined routine work and worker-initiated moderately skilled platform work – by 2030. The project identified eight key driving forces deemed to substantially influence the development of these two types of platform work. These driving forces and associated hypotheses were used to derive potential platform work scenarios, and, from these, pointers were developed on what policy could do to make a desirable future happen and to avoid an undesirable one. This is the definition of one of the eight key driving forces identified.

 

Consumer protection refers to the terms and conditions set out in regulatory frameworks guaranteeing the transparency of transactions and the welfare and rights of consumers. It covers rules on liabilities and responsibilities for the performance of the underlying service (including failure to deliver the service or any damage incurred in the transaction), information rights as to the legal capacity of the service provider and, not least, the use of sensitive and personal information. 

As with any other participants in the single market, labour platforms are subject to the EU consumer acquis and bound by a host of European directives regulating market behaviours and consumer issues. The most relevant directives in this regard are the Consumer Rights Directive (2011/83/EU), the Services in the Internal Market Directive (2006/123/EC), the Electronic Commerce Directive (2000/31/EC) and the Unfair Commercial Practices Directive (2005/29/EC). Yet, the applicability of such directives and regulations is not always obvious or sufficiently clear to consumers. 

The importance of ensuring a high level of consumer protection is emphasised in the resolution on the European Commission’s communication A European agenda for the collaborative economy, which was adopted by the European Parliament in June 2017 (2017/2003(INI)). In this resolution, the Parliament regretted the communication ‘did not bring sufficient clarity about the applicability of existing EU legislation to different collaborative economy models’ (p. 10) and called on the Member States and the Commission to intensify efforts to enforce compliance with existing legislation.

Consumer protection concerns

Consumer protection issues often arise from the informal provision of services and the insufficient transparency with regard to liability rules and resolution or redress mechanisms if problems occur in the delivery of services mediated through platforms. Platforms typically state in their terms and conditions that they are mere intermediaries providing a ‘matching service’, thus evading responsibilities in relation to any damage, delay or failure in the performance of the service. As it stands, it is not sufficiently clear whether platforms are liable for damages and insurance claims in the case of accidents, or for the security or quality of the service provided. 

In addition, many platforms do not oblige service providers to provide any information about their legal status. A service provider can be either a private individual offering a service on an occasional basis or a professional trader. This status determines the rights and entitlements of consumers in case of an incident. In the absence of clarity over the status of the service provider, it is difficult for consumers to establish what their rights are and against whom to exercise them when something goes wrong in the transaction. 

Another important issue related to consumer protection concerns data protection and privacy. 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 might be used by platforms to engage in behavioural advertising, marketing and price discrimination to gain a competitive advantage. 

Since the EU General Data Protection Regulation Directive (GDPR) entered into force on 28 May 2018, platforms have to abide by the new rules on data protection and inform their users about the data they collect and the way they process it, and they are obliged to always request the explicit and informed consent for the use of such data. The GDPR in addition limits the use of algorithms to target individuals and gives users the right to change, delete or transfer their personal data to another data user or controller. Monitoring of compliance and enforcement of the law is crucial to discourage any misuse of personal data and ensure that platforms fulfil their contractual obligations vis-à-vis consumers.
 

Trends 

Consumer protection concerns can be classified into three many categories:

  • service quality and liability issues
  • damage claims in case of accidents
  • data protection and privacy issues

Service quality issues

Service quality concerns can be addressed, at least partly, through self-regulation, for example, via reputational ratings and monitoring mechanisms to ensure service quality (Eurofound, 2018). For example, Uber allows consumers to track the GPS path of rides to check whether the driver is taking the shortest route (Koopman et al, 2015), but no redress mechanism is envisaged for the extra costs incurred in case the driver opts for the longer route. As of mid-2019, there is insufficient evidence that reputational ratings and monitoring mechanisms are by themselves an adequate and reliable means 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 (European Commission, 2017). In most cases, there are also no redress mechanisms that enable consumers in peer-to-peer transactions to engage in dispute resolution if they are not satisfied with the service provided through platforms, apart from bringing a case in front of the civil courts.  

Liability issues 

Another related issue concerns the attribution of liabilities for the performance (or underperformance) of the service, as platform’s business model typically blurs the boundaries between a professional and non-professional service provider. 

Member States apply different criteria to distinguish between professional services and peer-to-peer services, but there is no unifying approach set out in EU consumer legislation. As a general orientation, the communication A European agenda for the collaborative economy identifies three criteria as important for the classification of the service as professional: the frequency of the service provision, the profit-seeking motive, and the level of turnover or income generated from the transaction. The more frequent, profit-driven the service provision and the higher the level of income generated, the more likely the service can be classified as professional and the provider as a professional trader. Survey data show that, from their end, consumers have limited knowledge about their rights in peer-to-peer transactions (Table 1) (European Commission, 2017). Even if they are aware of their rights, the limited information they might have on the platform worker might hamper their proper assessment of the status of the worker as a professional as opposed to a non-professional service provider. Accordingly, platforms might need to be charged with some responsibility to collect and provide such information.

Table 1: Knowledge of rights among consumers of peer-to-peer services (%)
  Know exactly Not sure if I know Don't know N/A
Knowledge of rights when something goes wrong 34.0 44.0 15.7   6.3
Knowledge of who is responsible when something goes wrong 36.0 42.7 15.0  6.3
Knowledge of the responsibility of the platform in case of a problem with a provider of a service or a product 30.8 43.7 18.8 6.6
Knowledge of the right to get compensation or be reimbursed if something goes wrong 33.3 40.9 18.9 6.9

Source: European Commission, 2017

Insight from consumers’ opinions also comes from the Special Eurobarometer survey on online platforms. One-third of respondents to this reported that they usually read the terms and conditions of online platforms, but only around one in five (19%) usually take them into account (European Commission, 2016b). More than half of online platforms users (56%) do not usually read them. 

The fact that the consumer acquis does not explicitly recognise the role of intermediaries does not prevent platforms from complying with information duties vis-a-vis users about the professional or non-professional capacity of their service providers. However, in practice, platforms may act differently than they describe in their terms and conditions and act as an exclusive contract partner towards the client. In addition, the Consumer Rights Directive does not provide any specific sanction for a breach of the information duty. It is left to the Member States to determine an adequate and proportionate penalty applicable to infringements of national provisions. Furthermore, the Electronic 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. 

In the European agenda for the collaborative economy, the European Commission establishes that whether a platform can benefit from liability exemptions needs to be assessed on a case-by-case basis. A key criterion is whether a platform intermediates between parties or simply acts as a bulletin board for information over which it has no control. In this regard, the Court of Justice of the European Union (CJEU) has provided some guidance on the interpretation and applicability of current EU provisions with a landmark ruling on the legal status of Uber in Spain (Court of Justice of the European Union, 2017; The Guardian, 2017). As Uber creates a market for urban transport by non-professional drivers, acting as a de facto transport company, the ruling established that the service it offers cannot be classified as an information society service and therefore the liability exemptions granted by the Electronic Commerce Directive do not apply. The CJEU’s ruling has implications for the applicability of the current provisions in other Member States. 

The other consumer protection concern regards accidents or damage incurred in the service provision and the lack of clarity with regard to the insurance coverage. In the case of Uber, the company insurance generally applies when a passenger is in the vehicle and the app is on, while the driver’s own insurance applies when his app is off or there is no passenger in the car (Koopman et al, 2015). However, it is not often the case that the platform provides any insurance coverage, and it is unclear which party in the transaction is responsible and liable for damage and accidents. Furthermore, some platform activities do not formally fit into individual or commercial types of insurance. A related issue is that service providers (whether professional or non-professional) are generally not required to provide any certification or qualification to provide the service in a safe way, therefore shifting the risk on to the consumer. 

Data protection

With regard to data protection, survey data indicate that transparency about the data that platforms collect and how they are used is an important concern for consumers engaging in peer-to-peer transactions (European Commission, 2017). According to a recent Eurobarometer survey, 67% of Europeans are aware of the new GDPR rules (European Commission, 2019c). A previous Eurobarometer survey on online platforms reported that over 70% of internet and online platform users in the EU were concerned about the data collected about them on the internet (European Commission, 2016b). As of mid-2020, it may be too early to assess to what extent platform businesses abide by the new rules and whether they are effective in protecting the rights of users of online platforms. There are Data Protection Authorities (DPAs) in each Member State responsible for data protection compliance and law enforcement. The DPAs have the power to impose fines of up to 4% of a company’s annual turnover. According to Eurobarometer data, 57% of respondents are aware that such an authority exists in their own country. Some experts argue, however, that this decentralised approach to law enforcement and compliance by means of national authorities may not be the most effective when dealing with global operators (such as Uber), and cross-border collaboration is therefore essential to ensure effective and adequate regulation (see, for example, Strowel and Vergote, 2019). 

Platform-specific regulations

As part of recent policy developments on issues related to consumer protection, new EU regulations on platform-to-business relations entered into force in July 2019 and are applicable as of January 2020. The new set of rules is aimed at creating a fair, transparent and predictable business environment for smaller businesses and traders when using online platforms (European Commission, 2019a). The EU has also set up a dedicated Online Platform Observatory to monitor the evolution of the market and the effective implementation of the rules.

The new regulation follows the 2018/334 EC recommendation on measures to effectively tackle illegal content online (European Commission, 2018). It specifically covers ‘online platform intermediaries and general online search engines that provide their services to businesses established in the EU and that offer goods or services to consumers located in the EU’ (European Commission, 2019b). The new rules are expected to improve trust, predictability and legal certainty in the online business environment, and, from a consumer perspective, they will also lead to greater choice, better quality and lower prices for goods and services provided via online platforms. In the Commission’s view, consumers will benefit from increased transparency, as the identity of the business offering the goods and services will be more visible. Consumers will be able to see where general search results are influenced by a payment, which will enable them to make more informed choices.

Hypotheses

The project applied a foresight methodology to derive possible future scenarios. As part of this, at least two realistic and mutually exclusive hypotheses were drafted for each of the key drivers to depict their potential future development.

Three hypotheses were identified for this driver. 

1. Platform transparency

Consumer protection is harmonised and data protection and privacy is regulated across all Member States. The regulation clarifies that the worker bears all responsibilities and liabilities towards the client, depending on their legal capacity or status. This involves establishing clear criteria or specific thresholds to determine at what point an individual becomes a professional service provider and defining legal liabilities for the performance of the service, including liabilities in case of accident or damage.

Professional service providers are required to comply with the same standards as the ‘traditional’ firms operating in the same market. The platform does not have any responsibility or liability but is required to provide information on the legal capacity or status of the worker (private individual versus professional provider) towards the client and the therewith related liabilities of the worker towards the client. 

Coordinated enforcement of the provisions exists: designated authorities are tasked with monitoring service providers to ensure they undertake appropriate training or have the required qualifications for delivering the service to consumers in a safe way. The use of forms of self-regulation (for example, rating systems) is encouraged at EU level to address consumers’ concerns regarding the quality of the service and safety of the service provision. To this effect, guidelines are issued to ensure that rating systems are designed in an unbiased way so that they reflect the actual judgments of consumers.

2. Platform liability

Consumer protection is harmonised across all Member States. The regulation clearly assigns responsibilities and liabilities towards the client to the platform. The platform might subsequently hold the workers responsible, but in no case is the worker immediately responsible or liable towards the client.

3. No common approach

There are divergent approaches across the Member States as to the applicability of the EU consumer acquis and data protection regulations. The CJEU has a prominent role in clarifying most controversial EU law elements, with implications for the applicability of EU provisions throughout the whole EU territory. In some Member States, the competence of national consumer protection authorities is expanded to cover platform-mediated peer-to-peer transactions.

 

Information sources

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