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Consumer Inertia: The Need for Re-examining CCI’s Concept of “User Choice”

Author: Diyaa Kuntal Desai

Attorney at Commercial Law Advisers

 

I. Introduction


We have come to rely increasingly on the services of the likes of Google, Facebook, WhatsApp, and Amazon. Although they may seem free of cost as there is no monetary fee charged for their usage, we end up “paying” for these platforms by providing them with a massive amount of our data, including IP address, cookies, location, search history and possibly extracted data from emails for Google and user posts and “likes” history for Facebook.

The success models of such platforms hinge on these extensive data collection practices by helping them create “consumer commercialisation potential”, which is ultimately monetised by the platform through, for example, advertising. It also enables a better assessment of consumer demands and preferences to provide a more personalised consumer experience. Unfortunately, many agree to such practices without realising that they may be trading off their privacy for digital convenience. Some may not even view sharing their data as a “cost” they have to pay.


The issue of “data” as a source of market dominance and as a tool for abusing dominance has recently come to the fore, with antitrust authorities around the world, including in India, grappling with issues surrounding the excessive price consumers pay with their data for the use of online platforms. The Competition Commission of India (“CCI”) has recognised how information collected from the users contributed to ‘big-data’ analysis and revenue to Google and has further perused its potential anti-competitive implications. Similarly, the CCI has apprehended the need for antitrust scrutiny in WhatsApp’s excessive data collection.


Recognising access to data as a form of competitive advantage, the Competition Law Review Committee (“CLRC”) has stated that the ability of such platforms to monetise their services and also obtain additional funds to improve the quality of their free services to attract even more users could constitute a barrier to entry in digital markets. While the validity of data collection and sharing practices may traditionally seem to fall exclusively within the domain of data privacy laws, there is a growing awareness that such practices also constitute a market failure warranting the intervention of antitrust authorities.


II. Consumer Inertia and Need for Anti-Trust Intervention


The propensity of consumers to impulsively accept such practices was discussed at length in the UK Competition and Markets Authority’s (“CMA”) market study on Online Platforms and Digital Advertising. It noted that online choice architecture, such as the number of steps needed to cancel a subscription or whether an option is selected by default, is relevant to the competition policy as it significantly affects consumers and markets. Consumers interact differently with the digital world, i.e. they are accustomed to their needs being met instantly, have shorter attention spans, and cannot tolerate delays in an otherwise seamless user experience.


The result is that since many are unaware of what they are agreeing to, they may be more susceptible to unfair conditions or dark patterns employed by dominant digital platforms. For example, platforms may give users the freedom to establish their privacy settings but make the interface unduly complex or veiled, or the default privacy options are chosen “badly” with the initial setting sharing personal information, forcing users to opt-out of the status quo.

This is similar to the concept of “consumer inertia”, which suggests that consumers stay passive and refrain from taking an action that changes the status quo, affecting their ability to act rationally. It follows that for most consumers, reading through verbose conditions of use is a task that is time-consuming, causing them to act more quickly, and skim through conditions rather than truly reading them. This affects their ability to make an informed decision and, in turn, give meaningful consent.


III. CCI's Test of "User Choice"


Although the CCI has emphasised the need for “user choice” in accepting data collection and sharing practices of WhatsApp, its decision-making process lacks consideration of consumer inertia.


In 2016, WhatsApp’s revised privacy policy mandated users to share their data with Facebook for several purposes, including targeted advertising. However, within thirty days of the amended conditions going into effect, users were given the option to opt out of such sharing mechanism. The CCI decided against a finding of abuse of dominance under Section 4(2)(a)(i) of the Competition Act, 2002. Noting the existence of “user choice” in the acceptance of the revised conditions, it was of the opinion that WhatsApp had not imposed any “unfair or discriminatory condition” in the purchase or sale of its services. Here, the CCI posited a test of user choice consisting of an ‘explicit element’, i.e. the user being explicitly provided with an opt-out choice without limiting their ability to access the service.


This decision centred on the existence of ‘user choice’ but did not delve into how the opt-out mechanism was structured and whether WhatsApp would be required to take measures to overcome the inertia of users in de-selecting the default option. Especially since the opt-out could only be exercised after the revised conditions finally went into effect, users were likely to forget that they had accepted certain terms before unless reminded and prompted to exercise their choice through, perhaps, in-app notifications.


While the 2016 policy at least had an opt-out option, WhatsApp updated its privacy policy and terms of use in early 2021 under which it mandated the users to agree to share data regarding their communications with WhatsApp business accounts for various purposes, including advertising by Facebook. Users were not only given until May 2021 to accept the policy as a condition for continued use of messaging service but were also bombarded with frequent in-app notifications asking them to accept such conditions until then. In response, the CCI ordered an investigation into WhatsApp’s policies based on a prima facie opinion that WhatsApp had abused its dominance.


Based on CCI’s previous decisions, the 2021 policy might be a clear-cut case of abuse of dominance. However, if WhatsApp decides to eventually present its users with a choice as it has to its European Union (“EU”) users, the existing understanding of user consent may have its limitations in dealing with more complex issues.


For instance, although EU users have an option to not accept the revised terms of use because of the General Data Protection Regulation, WhatsApp’s persistent in-app notifications pressuring users to accept its revised terms and conditions and privacy policy are under fire from consumer protection agencies. In this case, while user choice may be present, the likelihood of users to give in and accept such persuasive practices should be a factor in determining whether an entity has abused its dominance in obtaining acceptance.


IV. Consumer Inertia in EU Anti-Trust Cases


Recent EU antitrust cases have acknowledged this consumer behaviour and have scrutinised the default option’s potential to foreclose competition.


Consumer inertia was one of the factors considered by the EU Commission (“Commission”) in the Internet Explorer case, where it held that the tying of Microsoft’s web browser, Internet Explorer, to its client’s PC operating system, Windows constituted an abuse of its dominant position. The Commission noted that although users could freely download competing web browsers, such as Apple’s Safari, Google’s Chrome and Mozilla’s Firefox, it found that there was simply an inertia involved in downloading another browser.


In the more recent case of Google Shopping, the Commission found that Google had abused its dominant position by favouring its own comparison shopping service (Google Shopping) over competing comparison shopping services on its general search page. Results from Google Shopping would be more prominently placed at the very top of the page, while results from its competitors were demoted on the page.


Here again, an essential factor that weighed in on the Commission’s decision was that consumers would typically only click the highest ranked results on the list, particularly those appearing on the first webpage. While it did not explicitly refer to consumer inertia, it recognised the disincentive to scroll through more than the first page and an incentive to focus on the first couple of results on the results page.


Although these cases relate to tying, the Commission advanced a broad understanding of online consumer behaviour and how dominant entities have exploited impassive consumers’ reliance on default options. This understanding can be applied to other cases of unfair conditions, including excessive data collection.


V. Conclusion


The CCI could take a cue from the EU authorities and apply a more nuanced understanding of consumer behaviour in the digital world while evaluating dark patterns or similar forms of manipulation employed by dominant entities that undermine data privacy and user choice. While platforms may offer users privacy controls and opt-out choices, the way these control mechanisms are implemented can significantly affect users’ choices and their privacy outcomes.

Further, even while the existing competition law framework may be sufficient to tackle anti-competitive data collection and sharing, comprehensive data protection legislation providing more clarity on user consent still needs to be implemented to complement the existing framework.


 

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