Separate to considering the legal terms and conditions that organisations ask consumer customers to sign up to, consumer experts and regulatory authorities are increasingly considering the impact of ‘online choice architecture’ (“OCA”), ie the design of websites, apps and devices that influence consumer behaviour and that leads a consumer, either deliberately or unintentionally, towards certain decisions or actions. The UK’s Competitions and Markets Authority (“CMA”) has this month released its Discussion Paper on Online Choice Architecture, setting out its research and evidence as to how digital design can harm competition and consumers. This will be of interest to any organisations with and online presence, selling or interacting with consumers and indicates a stronger focus from the CMA on online customer journeys and ‘softer’ practices, beyond the legal terms and other documentary analyses which organisations often expect to be the CMA’s greater concern.
Types of Online Choice Architecture
The discussion papers sets out three broad categories of OCA:
- Choice Structure: the design and presentation of options and includes things like setting defaults and bundling as well as sensory manipulation* and dark nudging*
- Choice Information: the content and framing of information provided, and includes things like reference pricing and framing but also drip pricing* and complex language*
- Choice Pressure: the indirect influence of choices and includes things like prompts and reminders, and personalisation
Note that academics suggest that some practices, e.g. those highlighted with * above, are almost always harmful, where some of these practices will only be harmful in certain circumstances.
Potential to harm consumers and competition
The paper goes on to discuss ways that OCA can harm or distort consumer behaviours (e.g. by purchasing unneeded or unsuitable products) or by way distortion or weakening competition (by shifting the incentive to compete on the product or services attributes, toward less beneficial elements such as creating a pressure to buy). Perhaps most importantly the paper sets out the particular issue where a business who has significant market power uses OCA to maintain, leverage or exploit their market position.
Next steps expected from the CMA
While authorities and regulatory bodies have already taken steps to address the potential harms of OCA, the Discussion Paper sets out the CMA’s further priorities:
- Addressing OCA practices through its ongoing work, by challenging OCA practices that mislead and harm consumers or undermine their trust and confidence in online markets. This is a clear statement of intent from the CMA that it intends to review and may double down on these practices uses its full range of regulatory powers;
- Seeking to determine the prevalence of harmful OCA practices through research into how harmful OCA practices are in different UK sectors, using a combination of behavioural science, data science and other methods;
- Collaborating with other to refine views on OCA, including engagement bilateral and multilateral engagement with other authorities and regulators, including the European Commission (a particular point of note post Brexit that the CMA may continue to benchmark with and against non-UK regulators); and
- Raising consumer and business awareness of OCA practices, using awareness campaigns around harmful practices (so businesses may expect their customers to become wiser to the OCA practices being implemented)
Next steps for business
The CMA notes that OCA remains a key focus area and actively encourages business, if not doing so already, to conduct compliance programmes including behavioural audits or other forms of self-assessment to determine whether their use of OCA is consistent with consumer protection and competition law.
With that in mind we would recommend organisations should, in addition to ensuring their legal terms and conditions are clear, transparent, and comply with existing consumer protection regimes, look beyond this more ‘document focussed’ view to the legal and compliance framework around customer journeys and also consider how consumers practically interact with their apps, websites and interfaces as a whole.
This will include conducting compliance analyses against key regimes and legislation such as the Consumer Rights Act, Consumer Protection From Unfair Trading Regulations, Customer Contract (Information, Cancellation and Additional Charges) Regulations and associated regulations, E-Commerce Regulations, as well advertising regimes, for example the Advertising Standard Agency’s Code of Non-broadcast Advertising and Direct & Promotional Marketing.
Information presented and steps taken during customer journeys should be clear, transparent and drafted in Plain English, and ensure these do not inadvertently create misleading or unfair terms in the relevant contract. There will also invariably be sector based rules to consider too, particularly in highly regulated sectors such as financial services, insurance, alcohol sales or gambling.
Frequently online customer journeys are created for international platforms. Replicable and consistent user experiences are preferred. Planning and review should take into account creating compliance across multiple jurisdictions and regimes.