This article is part of a work programme on the future of digital regulation at the Tony Blair Institute for Global Change. It sets out recommendations for leaders around the world to better protect consumers in the internet era, drawing on an extensive report researched and written by consumer-rights expert Liz Coll. The report can be found here.
On 15 March 1962, US President John F Kennedy gave a landmark speech advocating for a large but voiceless economic group: consumers. In what would later be encapsulated by the Consumer Bill of Rights, he outlined the case for the right to safety, right to be heard, right to choose and right to be informed. The date of the speech has since been celebrated as World Consumer Rights Day, and Kennedy’s proposals have been adopted and expanded by governments worldwide as well as organisations such as the United Nations. New rights, like the one to consumer education, have been added while existing organisations, including Consumers International, have continued to promote consumer interests on issues from the safety of baby food to plastic pollution.
While the internet has existed in some form since 1962, the consumer internet began with an e-commerce transaction in 1994. Since then, internet applications that focus on personal or household use have taken off and are almost universally popular today. These applications cater to consumers – offering street navigation or the ability to pay utility bills, for instance – unlike other applications such as recruiting or e-voting tools, which cater to businesses or governments. Digitalisation has enabled innovation at scale, from China bringing the education of almost 200 million schoolchildren online during the pandemic to M-Pesa providing financial services to customers, who were previously without access to traditional banking services, in Kenya, Tanzania and other African countries. Similarly, digitalisation can be used as a tool to empower consumers by addressing some of their concerns. The latest TBI Globalism Study, an annual survey of changing international attitudes towards technology and globalisation in 26 countries, has found that public trust in governments and technology is faltering worldwide; only 32 per cent of respondents trust government agencies with their personal data, for example.
Major stakeholders have something to gain from novel, consumer-centric digital policies. Countries can use these frameworks to accelerate digital adoption among their citizens, especially in low- and middle-income countries (LMICs). Take e-commerce, for example. With adequate consumer protections in place such as hassle-free returns, a 24/7 customer-support chat or a verified payment gateway, digital marketplaces are able to bridge trust deficits with consumers who may highly value physical touch and be apprehensive about buying unseen goods or products. In turn, increased sales will translate to more sellers coming online to take advantage of the market opportunities, thereby creating more jobs upstream in the production process. Both higher demand and supply will drive up valuations, improve exit options and increase investment in the tech ecosystem, as our Institute has outlined in this paper about the huge economic opportunities for tech startups in Africa.
Consumer rights protect people, but they can also be a lever to driving digital transformation and improving bottom lines among firms. Increasing trust in technology can create an enabling environment for the improved uptake of new business models. Take Uber, for example. In 2015, it began to offer cash as a mode of payment in India, in a historic first for a company known for its tech-savviness and integrated payment systems. The firm recognised that credit-card penetration, and therefore access to and trust in digital payments, was low in LMICs. As the pilot was successful, Uber expanded it to other and similar economies in Africa, Asia and South America. When governments and firms take steps to mandate or implement consumer rights, society benefits from the resulting digital transformation.
Nevertheless, the consumer internet is not always in step with consumer welfare. Disruptive innovation at breakneck speed, combined with permissive regulation, can create an environment in which consumer risks become embedded. This has been exacerbated by a selective approach to consumer welfare that prioritised certain measures such as low prices over privacy. Consumers have benefited significantly from so-called free products and services, such as Google Search and Facebook, but they often do not have meaningful control over their data and find it difficult to seek redress when things go wrong. The basis on which most internet consumers enter contracts with service providers is through a dubious declaration that they have read and agreed to lengthy terms and conditions.
Sixty years on, it is time to rethink how the consumer-rights framework should be updated to become a new enabler for the digital economy. A lot has changed in this period. As consumer tech expert Liz Coll’s report, “Consumer Protection as a Framework for Internet Regulation” (see below) states, the internet is now used by almost two-thirds of the global population to supplement or completely replace social, economic and consumer activity. Innovation is now needed in consumer regulation and protection to grasp the opportunities of digital transformation.
The report explains why the advantages of the consumer internet cannot be maximised without responsive and effective consumer protection. This does not just mean existing consumers in the digital economy who are at risk but also those who will enter it in the future and face lax protections. Challenges like mass-data collection, expensive enforcement, underinvestment in consumer-protection mechanisms and cross-border cooperation make it hard to place consumers at the centre of digital markets. But the prize for doing so could be huge and extend to sustainable digitalisation, informed choice, lower prices, increased convenience and more.
Consumer protection is a broad concept covering competition, online harms, privacy, liability and sustainability issues across regulation, corporate practices and legal frameworks. The solutions to consumer protection challenges must similarly be multifaceted. Even as President Kennedy gave us the modern idea that the consumer includes us all, we should still recognise that a consumer is more than an individual end user and that interactions encompass more scenarios than those in which the transaction is direct and obvious.
To achieve this, the report presents an extensive digital toolbox from which policymakers and tech firms can draw to create consumer-centric responses to legal, regulatory and enforcement issues. It lays out the basics of consumer protection and its evolution, from President Kennedy’s speech to present-day United Nations guidelines. It stresses how consumer rights can help address both long-standing pre-internet challenges, such as the influencing of government on matters of industry policy, and novel internet challenges including smart products. The report also highlights the existing institutional mechanisms for consumer protections as well as the guidelines they provide, such as the Organisation for Economic Cooperation and Development (OECD)’s e-commerce guidelines.
Additionally, the report explains how challenges in the digital economy affect not only consumers but also citizens in the digital society through a spill-over effect. It describes practical applications of the consumer-protections framework including policy and institutional recommendations, digital applications and policy proposals. Finally, it urges consideration of the consumer-rights framework beyond the consumer internet, such as the second- and third-degree impacts on society or the environment.
Seven Recommendations: How Leaders Can Future-Proof Digital Economies
Given the significant developments in the digital economy over the past 60 years, the most important action that governments can take to ensure their citizens are protected online is to overhaul legislation. The first step is to examine existing legislation for the unintended consequences of digital developments. For example, remove outdated laws that may limit access to technology or prevent firms from capitalising on the benefits of innovation. The second step is to enact new legislation that is consumer-centric. This could take the form of legal obligations or targeted legislation to protect more vulnerable members of society, including children. The third step is to proactively enforce these measures. To improve enforcement, agencies need better data to prioritise problems, which can be secured by spreading awareness of consumers’ rights and from international cooperation.
1. Remove legal impediments that are holding back consumer digitalisation.
Governments should create an enabling environment for firms to work to a consumer-first approach. This means ensuring that fiscal measures, including taxes and subsidies, do not inhibit consumer advancement. Our report lays out examples in which governments have used fiscal measures to accelerate digitalisation initiatives for consumers and citizens. Kenya and Colombia, for example, dropped a “luxury” tax for mobiles and ICT essentials to make them more affordable, acknowledging that they are essential goods in their own right as well as enabling technologies for other services.
2. Enact consumer-protection agendas that are responsive to end users.
Participatory approaches to the development of legislation are important to keep pace with the scale and speed of technological innovation. Tech companies respond to user demand at pace, but existing consumer frameworks do not respond and adapt to consumer risks and concerns at the same speed. There are multiple ways to do this, with tech firms currently trying focus groups, surveys and user-research teams. A more community-centric approach, however, may include civic representation on standards bodies or the boards of tech firms.
3. Implement broad legal obligations for companies on access and protection.
The European Consumer Organisation (BEUC) describes a “digital asymmetry” at the heart of the relationship between suppliers and consumers. This reflects the imbalance in power, knowledge and agency in digital markets versus physical ones. Consumer-protection frameworks offer an opportunity to rebalance responsibility and resolve this dynamic, which inherently places consumers in a vulnerable position.
One way to achieve this could be by enforcing legal obligations, such as duty of care and universal service. As the report states, the draft UK Online Safety Bill is based on the idea that platforms owe a duty of care to their users, or that they should be made responsible for understanding the intended and unintended consequences of their products, and should therefore act in a way that does not harm users. Universal Service Obligations (USOs) mandate the provision of a service to all consumers regardless of profitability. For developing countries with limited resources, the concept of universal access may be more viable, whereby consumers have access to a crucial service within a reasonable distance, not necessarily direct service provision.
4. Tailor legislation to subsets of consumers, for example, children.
Tailoring standards and legislation to treat consumers fairly must involve recognising the specific challenges that children face online. This is especially important in demographically varied, developing countries, including those in Africa, a continent on which two of every five children will be born by 2050. Enacting child-specific legislation today will give these countries a say in how their future consumers are protected when they eventually enter digital markets.
The UK’s age-appropriate design code is a data-protection code of practice for online services, such as apps, online games, and web and social-media sites, likely to be accessed by children. Even before coming into force on 2 September 2021, the code drove changes in behaviour among social networks, including YouTube, TikTok and Instagram, which began defaulting to private accounts for young users. Instagram also followed suit in other countries, illustrating the code’s ripple effect. The code includes 15 standards, including data minimisation and parental controls, and is now being developed into an international voluntary standard. It is the blueprint for similar legislative agendas in Ireland, Australia, Canada and the US. Adopting the code is a simple but effective way for countries with low legislative capacity to protect children online. Similarly, as the report explains, California’s “Eraser Button” law requires websites to allow people aged under 18 to permanently erase their content to prevent teenagers from being tied into this content as they grow older.
5. Collect and analyse better consumer data sets.
Analysing data about consumer concerns and recognising the groups that are disproportionately impacted would enable more legislative resources being devoted towards them. To move towards this, the first step is to collect data on digital markets and their associated impacts on consumers. For example, if you see an increase in cyber-security threats in the country, you can craft targeted counteractions by recognising who the target is. Are the threats localised to a particular region, industry or firm, for instance? Such analyses can be conducted while respecting privacy by using self-reported data. A US agency, the Federal Trade Commission, found that consumer fraud disproportionately impacts communities of colour, so it has adopted measures like varying the channels through which it distributes consumer education to ensure it reaches all affected people.
6. Educate and empower consumers through open-source initiatives.
Access to information and redress will be wasted if consumers do not actively educate themselves and speak out against errant actors. Participation could take the form of public collaboration on initiatives realised through open-source building or cooperatives. To participate effectively, consumers need access to, control over and/or ownership of their own data. This is fundamental from a privacy perspective but also allows the switching and interoperability that enable competition. Our report describes government initiatives to enable this, like the midata programme in the UK, Green and Blue Button schemes in the US and Mes Infos in France.
7. Invest in cross-border cooperation.
Leaders should consider international cooperation at three levels: bilateral, regional and multilateral. The digital economy transcends borders, yet there is a huge chasm in consumer protections by country. Multiple organisations are working to address this, and the report identifies several that governments would find it useful to collaborate with. This means incorporating consumer rights into trade deals and regional frameworks.
This is being pursued in various ways at the national, multilateral and global levels. The FTC seeks to protect American consumers globally through information-sharing, investigative assistance, cross-border jurisdictional authority and enforcement relationships. In practice, this takes the form of laws such as the US Safe Web Act, which allows the US to share confidential information on consumer matters with foreign jurisdictions, subject to appropriate safeguards, to prevent cross-border fraud. As our report also sets out, it can also take the form of international agreements: competition agencies in the UK, Canada, the US, Australia and New Zealand recently signed an agreement to cooperate on investigations.
This is particularly important for LMICs where governments must deal with global companies outside their regulatory purview selling to their citizens within their borders. Without organisation and cooperation, LMICs have less leverage and negotiating power. Cross-border cooperation among national regulators is increasingly critical in a world where tech firms do not obey traditional geographic or industry boundaries.