Hello all! I hope your month is going well. Today I will be talking about an interesting BE strategy. Specifically, how it is being used for bolstering online consumer protection in Europe. Hope you enjoy!
In 2023, the European Union took a huge step—perhaps the biggest step taken by any region in the world—toward providing robust consumer protection in the digital marketplace, especially related to e-commerce. The new regulations the EU introduced didn’t just come out of thin air; they were based on the extensive research the EU has conducted in recent years. This work, in turn, was bolstered by insights from the relatively new social science of behavioral economics. One of the main objectives of the EU in coming up with these new regulations was to ensure that they directly addressed the issue of “dark patterns,” which are deceptive and manipulative design tactics that some online businesses use to influence the choices consumers make in their favor but not necessarily in the consumers’ best interests.
The essence of the EU’s regulatory move was nudging—a concept made famous by Richard Thaler and Cass Sunstein in their book “Nudge.” Nudging is about presenting choices in a way that doesn’t manipulate but clearly guides consumers toward decisions that are in their best interest. When it comes to online platforms, the core regulatory thrust involved telling these businesses not to default to pre-selected options that could lead to additional charges and undesired subscriptions, among other things. So how are the EU’s nudge directives expressed in regulation? Well, they aren’t expressed with the word “nudge,” for starters, but they heavily promote the idea of giving each “consumer” (reading between the lines, this means “EU citizen”) a better, clearer, and more beneficial path to follow when making choices.
The regulations most affecting businesses were those that mandated making cancellation processes as simple as sign-up processes. This required addressing the “roach motel” dark pattern, which lets consumers in but doesn’t let them out easily. Reports indicated a 25% reduction in consumer complaints related to online purchases by the end of 2023, which was a direct response to the payments regulatory package fulfilling its consumer protection promise. If you think about it, this rule covering dark patterns is the first of its kind to give consumers clearer rights regarding the use of deceptive practices to get them to part with their cash.
Consumer trust in e-commerce has seemingly grown as a result of the increased transparency and fairness that the new EU rules ensure in online transactions. They seem to have boosted confidence in European Union e-commerce as more and more people appear to feel secure making purchases over the internet. The new rules seem also to have given a clearer, fairer playing field to businesses of all sizes. To the extent that the success of the rules seems to have established a precedent, that is potentially interesting. It means that the EU’s experience might be able to inform consumer protection law elsewhere—especially in regions where the same sort of problems with online deceptiveness are being faced.
Additionally, choice architecture and regulatory default settings have implications that go well beyond consumer protection. They can and should be applied in other domains where consumer decision-making is pivotal, like the aforementioned areas of financial services and healthcare; the same could be said of privacy. Personally, this all seems very hopeful to me. With the growing incentivization of nudges, salience, and confidence in this e-transaction system will create a model that other countries will follow suit for.
Sources:
- European Commission. (2023). “New Consumer Protection Regulations in the Digital Market.” Retrieved from ec.europa.eu
- The Guardian. (2023). “Europe’s Crackdown on Dark Patterns: A Win for Consumers.” The Guardian Technology Section.
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