The Average Online
Consumer
A proposal for a new approach to assessing the
fairness of online advertising under the Unfair
Commercial Practices Directive
Master’s Thesis European Private Law EU Consumer Law University of Amsterdam Supervisor: C. Leone Summer semester 2017 Final version: 24.07.2017 Author: Jasmine Benning
Abstract: The Unfair Commercial Practices Directive (UCPD) contains a
normative benchmark, which depicts the average consumer as the “reasonably well-informed and reasonably observant and circumspect” consumer. It is used as a test to see whether a commercial practice is to be considered as unfair or misleading. This benchmark is called the average consumer benchmark and is used both for offline and online commercial practices. However, it has been criticized for not reflecting the reality, as it provides for a consumer image that reflects the expected behaviour of an average consumer rather than his real behaviour. As the hypothesis of this thesis is, that the socio-empirical image of the online consumer may be even further away from this normative image than the socio-empirical image of the offline consumer and therefore the average consumer notion is highly inappropriate as a test for online advertising and online behavioural advertising (OBA), this master’s thesis examines the question whether, taking into account relevant insights from consumer behavioural studies, a different approach should be applied, when assessing the fairness of online advertising under the Unfair Commercial Practices Directive, with the logical subsequent question to a positive answer to this question being “what should be the new approach and should it be provided for under a separate provision or should it be implemented through the interpretation of the courts?”. Thus, in this thesis behavioural and legal insights are used to complement each other, which makes of it a multi-disciplinary research for which the legal behavioural psychology paradigm is used. To answer the main question, first of all, the legal framework is described: the UCPD and its normative and socio-empirical average consumer benchmark. Secondly, the online and offline environment and, through behavioural insights, the characteristics of the online and offline consumer are described. Than, the need for a specific approach for the online commercial environment and OBA is discussed and finally a proposal will be made for a new approach to assessing the fairness of online advertising and OBA.
The result of this thesis is that the average consumer benchmark seems highly inappropriate as a test to assess the fairness of online advertising, since the real average online consumer is very much a different one than the normative average consumer notion assumes. Therefore two new approaches have been proposed, one for online advertising and one for OBA: For online advertising in general, a different average consumer image, than the existing image of the average consumer, who is reasonably well-informed and reasonably observant and circumspect, should be created by the ECJ, which should be implemented through its guidance and validation. Thus, two average consumer images will exist next to each other, one for the offline and one for the online world. Concerning OBA: target groups should be specified, of which some cannot be exposed to OBA.
Table of contents
1. Introduction ... 4
2. The Unfair Commercial Practices Directive ... 10
2.1. The functioning of the UCPD and its objectives ... 2.2. The normative average consumer notion ... 2.3. The socio-empirical average consumer image ... 3. The offline v. online commercial environment ... 19
4. The need for a new approach to online advertising and OBA ... 29
5. The new approach to online advertising and OBA ... 35
6. Conclusion ... 40
1. Introduction
Since the establishment of the internal market of the European Union (hereafter: EU), one of the main focuses of the European Commission (hereafter: EC) has been to increase and harmonize the level of consumer protection.1 This focus can be explained through the main objective of the EU, namely the creation and assurance of the sound functioning of the internal market, which asks for a level playing field, without barriers created by differences between national laws.2 EU consumer law contributes to this, on the one hand, because it provides for more legal certainty, since it creates a more coherent system within the EU on the field of consumer protection, which enables traders to know which rights consumers will have throughout the EU, even if they offer their goods cross-border.3 On the other hand, it provides consumers with more confidence to conclude cross-border contracts, since they are given a high level of protection, which is the same throughout the EU.4
In order to create this consumer law framework within the EU, many Directives have been adopted over the last few decades, such as the Unfair Terms Directive,5 the Unfair Commercial Practices Directive (hereafter: UCPD)6 and the Consumer Rights Directive7.8 These Directives are
1 Paolisa Nebbia and Tony Askham, EU Consumer Law (Richmond, 2004), p. 18. 2 Nebbia and Askham 2004, p. 11.
3 Jules Stuyck, ‘The court of justice and the unfair commercial practices directive’
(2015), Common Market Law Review, p. 724.
4 Council Directive (EC) 2005/29 concerning unfair business-to-consumer
commercial practices in the internal market and amending Council Directive 84/450/EEC, Directive 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) no 2006/2004 of the European Parliament and of the Council [2005] OJ L149/22, art. 1.
5 Council Directive (EEC) 93/13 on unfair terms in consumer contracts [1993] OJ
L95/29.
6 Unfair Commercial Practices Directive 2005/29/EC.
7 Council Directive (EU) 2011/83 on consumer rights, amending Council Directive
93/13/EEC and Directive 1999/44/EC of the European Parliament and the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and The Council [2011] OJ L304/64.
established between the early 90s and now. However, circumstances change constantly, with one of the major changes within this timeframe being the emergence and increasing importance of the Internet, causing this period also to be referred to as “the information age”.9
Although the Internet was developed as early as the 1960, it only became available to the bigger public in the 1990s and even then, the computer and thereby the Internet, was mainly used for work-purposes.10 Nowadays, however, the computer has developed to a “home-technology”11 and with this elaboration, new uses of the Internet have commenced: the first commercial website ever was developed in 1994,12 and Facebook, which can be seen as the beginning of the Social Media era, was introduced ten years later, in 2004.13 Since then, the online commercial and social environment have increased more and more, creating a generation, which uses the Internet for almost everything.14 With this growing importance of the Internet, online sales and advertising have highly increased.15 Furthermore, the commercial environment has changed, because of the different options the Internet offers both to consumers and advertisers.16 Because of this new field, that had to be regulated, many new Directives were introduced to protect online consumers, even before the Internet became available for family households.17 Nevertheless, some Directives, which were created without the digital market in mind, remained applicable
9 Susan A. Brown, ‘Household technology adoption, use, and impacts: Past,
present and future’ (2008), Springer Science + Business Media, p. 397.
10 Brown 2008, p. 398. 11 Ibid. p. 398.
12 Andrej Savin and Jan Trzaskowski, Research Handbook on EU Internet Law
(Research Handbooks in European Law, Edward Elgar, Cheltenham 2014), p. 358.
13 Savin and Trzaskowski 2014, p. 412. 14 Ibid. p. 358.
15 Ibid. p. 412. 16 Ibid. p. 358. 17 Ibid. p. 358.
to the online environment too.18 One of these, is Directive 2005/29/EC on Unfair Commercial Practices, which was enacted in 2005, in a time where the Internet did exist, however, had not yet gained the importance it now has and had not developed to what it is now.19 Nonetheless, according to article 3(1) UCPD its scope is very broad, including both offline and online commercial practices, as long as the contract has been concluded in a business-to-consumer situation.
In this Directive, a benchmark has been incorporated, which has to be used by the national courts of the EU, as a test, in order to assess the fairness of a commercial practice.20 This average consumer benchmark, as this normative notion is called, is addressed in recital 18 UCPD, in which the average consumer is characterized as the consumer “who is reasonably well-informed and reasonably observant and circumspect”. This definition has been derived from the Gut Springenheide and Tusky case (hereafter: Gut Springenheide case),21 which precedes the UCPD, but nevertheless was determined by the European Court of Justice (hereafter: ECJ) to be adequate for this Directive.22 It reflects what we expect a consumer to be, rather than what he really is, and therefore it cannot be seen as a statistic notion.23 Nevertheless, this notion has been criticized for providing for an unrealistic image of the real average consumer, as it sets the standard to high.24
Furthermore, since some groups of consumers, such as target groups or vulnerable consumers may need more protection when a commercial
18 Rafal Manko, ‘Contract law and the Digital Single Market: Towards a new EU
online consumer sales law?’ (2015), <http://www.europarl.europa.eu> accessed 3 April 2017, p. 8.
19 Manko 2015, p. 8.
20 Commission Staff, ‘Guidance on the Implementation/Application of Directive
2005/29/EC on Unfair Commercial Practices’ (Working Document), SWD (2016) 163 final, 25 May 2016, p. 41.
21 Case C-210/96 Gut Springenheide GmbH and Rudolf Tusky v Oberkreisdirektor des Kreises Steinfurt – Amt für Lebensmittelüberwachung (ECJ 16 July 1998). 22 SWD (2016) 163 final, p. 42.
23 Ibid. p. 42.
24 Rossella Incardona and Christina Poncibò, ‘The average consumer, the unfair
commercial practices directive, and the cognitive revolution’ (2007), Springer Science + Business Media, p. 35.
practice is directed specifically at them, two additional benchmarks where added in recital 18 UCPD: the ‘target group benchmark’ and the ‘vulnerable consumer benchmark’. These notions provide, that if a commercial practice is targeted at a specific group or particularly affects a group of vulnerable consumers, the fairness of this commercial practice should be tested, based on the effect it will have on the average consumer of this group.25
The average consumer benchmark is based on the offline commercial environment.26 Nevertheless, as the UCPD is applicable to offline as well as online commercial practices, this average consumer notion is used to assess the fairness of both offline and online commercial practices, although these commercial environments may be significantly different.27 These differences derive, for example, from the new options available to advertisers offered to them by the Internet, such as profiling: a technique, which gives them the opportunity to target their commercial practices directly at one specific consumer from whom they know that they are interested, which is called online behavioural advertising (hereafter: OBA).28 Furthermore, online consumer behaviour could differ from offline consumer behaviour: the online consumer may not be as “reasonably well-informed and reasonably observant and circumspect” as the average consumer benchmark assumes.29 The latter can be examined with the help of behavioural studies, looking into the differences between offline and online consumer behaviour and finding out whether the normative consumer notion corresponds to the online socio-empirical reality.
25 Stuyck 2015, p. 740.
26 The average consumer benchmark has been derived from the case C-210/96, also
known as the Gut Springenheide case, which concerned eggs marketed as “six-grain” eggs, although the chicken did not get fed these six grains solely, which was considered as misleading the average consumer. This practice was an offline commercial practice.
27 Savin and Trzaskowski 2014, p. 355. 28 Ibid. p. 383.
29 Angela Daly, ‘The Internet, User Autonomy and EU Law’ (2016),
<https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2780789> accessed 25 May 2017, p. 16.
In other words, as the online commercial environment and the behaviour of online consumers may differ significantly from its offline counterparts, this average consumer benchmark, although not being a statistic but rather a normative notion, may not be fitted for the online environment. Furthermore, doubts have already been raised about its well-fittedness to the offline consumer, and online consumer behaviour may be even further away from the expectations created by this benchmark. Therefore the main question of this thesis will be whether, taking into account relevant insights from consumer behavioural studies, a different approach should be applied, when assessing the fairness of online advertising under the Unfair Commercial Practices Directive, with the logical subsequent question to a positive answer to this question being “what should be the new approach and should it be provided for under a separate provision or should it be implemented through the interpretation of the courts?” To narrow down the scope, this thesis will focus on advertising with a special concern for OBA, rather than discussing commercial practices in general, for which research such as the one in this thesis may also be needed. Moreover, the interest in OBA can be explained, as this is a relatively new advertising technique, which causes new problems with regard to online consumer protection. Thus, in accordance with the main question, this thesis will provide for a critical evaluative view towards the existing legal system dealing with online commercial practices and it will include a proposal for a new approach to assessing the fairness of online advertisements under the UCPD. This potential new approach is of importance, because the Internet, and therefore the online commercial environment, is expected to gain in importance even further, and therefore the right protection for online consumers should be assured.30 However, in order to be able to answer the main question, first of all, the functioning of the UCPD, its aim and the average consumer benchmark should be described to identify the legal
30 Eurostat, ‘Internet access and use statistics – households and individuals’,
framework in which the main question of this thesis is of importance. Secondly, with the objective of disclosing the differences between the online and offline commercial environment, as well as the behaviour of the consumer in both situations, their characteristics should be assessed. Namely, this will make it possible to make a distinction between both “consuming worlds”, which is of importance to be able to determine, whether these situations are significantly different and therefore would need separate approaches. Furthermore, these insights enable the decision on the effectiveness of the existing average consumer benchmark for the online world. Therefore, for this chapter, consumer behavioural insights are used, which makes this thesis a multi-disciplinary research, using both legal and behavioural insights. Therefore the scientific methodology of this research is the legal behavioural psychology paradigm. These first two chapters will mainly be of descriptive nature.
Subsequently the need for a separate approach for the online commercial environment is discussed by raising the question, whether the existing notion is significantly inappropriate for this online climate or whether it is flexible enough to be applied to both situations. The latter is what is assumed so far by the ECJ,31 but in this chapter it will be argued against this. And finally a proposal will be made for a new approach to assessing the fairness of online advertising. As these last two chapters are the answer to the main question, these will be of evaluative character, using the insights gained throughout the descriptive research to explain the outcome of this thesis.
31 In case law concerning the question about the fairness of, or likeliness to mislead
of online advertisement, the average consumer benchmark is applied as well. See for example the case C-562/15, Carrefour Hypermarchés SAS v ITM Alimentaire
2. The Unfair Commercial Practices Directive
The idea of fair competition goes back to the creation of the EU.32 However, in the initial legal regime, the focus was on the trader, rather than on the consumer: the idea was, that the trader should be protected against unfair competition of other traders in order to improve the functioning of the internal market.33 Though, over time the focus shifted, as nowadays consumer protection has gained in importance within the unfair competition control framework, which made it part of the EU consumer law framework.34 This focus on the consumer, as the weaker party in the contractual relationship, is clearly present in the UCPD that has been enacted in 2005 in the light of fair competition within the EU, as it only applies to business-to-consumer (hereafter: B2C) contexts and its main aim is to protect the economic interests of the consumer.35This Directive is the first complete legal instrument, dealing with misleading, unfair and comparative commercial practices, within a B2C context, however, not within a business-to-business one.36 According to recital 3 and 4 UCPD, it got enacted because its precursor, Directive 84/450/EEC concerning misleading advertising,37 did not provide for enough legal certainty, since it aimed at minimum harmonization and only covered misleading advertising.38 Therefore the UCPD, next to its broader scope, creates a maximum harmonization regime, ensuring in the first place
32 See the EC Treaty (Treaty of Rome, as amended), preamble.
33 Norbert Reich and others, European Consumer Law (Ius communitatis Series,
Volume 5, 2nd edn Intersentia, Cambridge 2014), p. 70.
34 Reich and others 2014, p. 71. 35 Ibid. p. 75.
36 Ibid. p. 75.
37 Council Directive (EEC) 84/450 relating to the approximation of the laws,
regulations and administrative provisions of the Member States concerning misleading advertising [1984] OJ L250/17.
38 Willem H. Van Boom, ‘Unfair Commercial Practices’ (2016),
<https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2709911> accessed 23 May 2017, p. 2.
the sound functioning of the internal market.39 However, the UCPD has two other aims: first of all, it provides consumers with more confidence to conclude cross-border contracts, through the creation of a high level of consumer protection, which is the same throughout the EU, and secondly, it encourages traders to make use of the options offered to them by the internal market, as a coherent system for unfair competition control exists.40 Another underlying objective, according to recital 8 UCPD however, is the development of fair competition on the internal market.41
This system, over the years, has proven to be a solid base for unfair competition control within the EU.42 However, over the last few years online advertising has gained in importance and it has developed in a way, which could make the UCPD ill-suited as an instrument that ensures the fairness of it, as online sales may impose different, online-specific problems, which the online consumer is not protected enough against by the UCPD.43 Nevertheless, as the UCPD, at this moment, is the instrument that applies to online advertisements, it is of interest to clarify the legal framework in which the main question of this thesis is of importance, namely the UCPD and its average consumer benchmark, how it functions and what its aim is, in order to be able to determine, whether the purpose of the UCPD is achieved, when applying it to online advertising or whether it should be dealt with in a different way. Furthermore, it is of importance, that the average consumer benchmark is adequate, because it is expanding to other areas of consumer law due to the influence of the ECJ.
39 Hugh Collins, ‘The Unfair Commercial Practices Directive’ (2005), European
Review of Contract Law, p. 418.
40 Collins 2005, p. 418.
41 Bram Duivenvoorde, ‘The Consumer Benchmarks in the Unfair Commercial
Practices Directive’ (DPhil thesis, University of Amsterdam 2014), p. 1.
42 Reich and others 2014, p. 75. 43 Manko 2015, p. 8.
2.1. The functioning of the UCPD and its objectives
The UCPD, according to article 5(1), prohibits unfair commercial practices, which have been defined in article 5(2)(a) and (b) as a commercial practice that is “contrary to the requirements of professional diligence” and “materially distorts or is likely to materially distort the economic behaviour with regard to the product of the average consumer whom it reaches or to whom it is addressed, or of the average member of the group when a commercial practice is directed to a particular group of consumers.” To this definition article 5(4) adds four specific forms of unfair commercial practices: misleading actions and misleading omissions are prohibited, according to article 6 and 7 UCPD. Furthermore, aggressive commercial practices and the use of harassment, coercion and undue influence are forbidden in line with article 8 and 9 UCPD. In addition, a blacklist of commercial practices, which should be considered unfair under all circumstances, has been added in Annex I, pursuant to article 5(5).
The scope of the UCPD is not limited by any means, except for the requirement that the contract is concluded in a B2C situation, pursuant to article 3(1) UCPD.44 This B2C commercial practice is defined in article 2(d) as meaning “any act, omission, course of conduct or representation, commercial communication including advertising and marketing, by a trader, directly connected with the promotion, sale or supply of a product to consumers”.
As is clear from these articles, the wording, and therefore the scope of the Directive, is very broad, including both offline and online commercial practices, in any market sector.45 What is of importance however, is that the practice can influence a consumer in a B2C context and that it is misleading or unfair and therefore is likely to materially distort the economic behaviour of the average consumer whom it reaches. This consumer is defined in
44 Collins 2005, p. 418.
article 2(a) as “any natural person who, in commercial practices covered by this Directive, is acting for purposes which are outside his trade, business, craft or profession” and the trader is described in article 2(b) UCPD as “ any natural or legal person who, in commercial practices covered by this Directive, is acting for purposes relating to his trade, business, craft or profession and anyone acting in the name of or on behalf of a trader”.
The main objective of the UCPD thus, is the protection of the consumers’ economic interests, by making sure that unfair commercial practices are prohibited.46 In order to test, whether a commercial practice is to be considered as unfair, an average consumer notion is incorporated in recital 18 and article 5(b) – 8 UCPD, which is used by the courts as a benchmark.47 The definition, however, can only be found in the recitals and therefore it is not binding. The ECJ, in the first place, developed this average consumer benchmark to make sure that national protective laws did not form a barrier to the EU internal market.48 Since it got incorporated in the UCPD however, it has gained importance for the protection of consumers.49
2.2. The normative average consumer notion
In order for deciding organs to be able to decide on whether a commercial practice is misleading or unfair, a benchmark got incorporated in the UCPD, to ensure decisional harmony and give the courts something to hold on to in making their decision: pursuant to recital 18 UCPD “to permit the effective application of the protection contained in [the Directive]”. This incorporation in the UCPD made it the first legal instrument to codify this average consumer benchmark, although it existed for a longer time
46 Reich and others 2014, p. 77.
47 Bram Duivenvoorde, ‘The Protection of Vulnerable Consumers under the Unfair
Commercial Practices Directive’ (2013), Euvr, p. 70.
48 Duivenvoorde 2013, p. 70. 49 Reich and others 2014, p. 71.
already,50 as it has been developed by the ECJ in the Gut Springenheide case. Nevertheless, it is still relevant for this Directive.51
In paragraph 31 of this case, the average consumer was defined as one “who is reasonably well-informed and reasonably observant and circumspect”. This notion, as the ECJ also made clear by using the words “presumed expectations”,52 is a normative image of the average consumer, depicting what we expect the average consumer to behave like, rather than providing for a real image. Therefore the courts should apply it “without ordering an expert’s report or commissioning a consumer research poll”.53 Furthermore, it can be found in recital 18 UCPD and in article 5(b) UCPD, as a benchmark, according to which the courts should decide on the fairness of a commercial practice.54 The average consumer notion thus functions as a test, which courts should apply to determine whether a consumer would be mislead by a commercial practice.55 As follows, a court, in order to decide on the fairness of a commercial practice, should “take into account the presumed expectations which it evokes in an average consumer, who is reasonably well-informed and reasonably observant and circumspect.”56 Who is the average consumer in a specific situation, however, is left to the national courts to decide, since this may depend on social, linguistic and cultural factors.57 This creates a situation in which the average consumer notion may be applied differently in every Member State and every case.58 It can even be, that a commercial practice is considered unfair in one Member State, but fair in another, which can be regarded as a problem,
50 Mateja Durovic, ‘European Law on Unfair Commercial Practices and Contract
Law’ (2016), 79(6) MLR, p. 1143. 51 SWD (2016) 163 final, p. 42. 52 C-210/96, [31]. 53 Ibid. [31]. 54 SWD (2016) 163 final, p. 41. 55 Duivenvoorde 2013, p. 69-70. 56 C-210/96, [37]. 57 SWD (2016) 163 final, p. 46.
58 Vanessa Mak, ‘Standards of Protection: In Search of the ‘Average Consumer’ of
EU Law in the Proposal for a Consumer Rights Directive’ (2011), European Review of Private Law, p. 29.
especially in the case of online advertising, since these commercial practices reach people all over the world in different languages, but advertise in the same way.59 This weakens the legal certainty, which the notion of the average consumer tries to reach.60
Another weak point of this average consumer test, which devalues the high level of consumer protection offered by the UCPD, is the fact that, in the first place, the UCPD does not deviate between types of consumers. Therefore, vulnerable consumers are not protected in a better way than other consumers, but rather in the same way as the average consumer, since the test used, is a normative and not a statistically based one: if the commercial practice is found not to mislead an average consumer, a more vulnerable consumer in principle will not be protected against it too, because the test is based on the expected behaviour of an average consumer.61 A commercial practice thus should not be tested against a vulnerable consumer, even though a vulnerable consumer is affected by it, as it would “create an unjustified barrier to trade”.62
However, pursuant to recital 18 and 19 UCPD, some groups of consumers need more protection than the protection offered by this average consumer notion when the commercial practice is directed specifically at them. Therefore a second and third consumer notion, the ‘target group benchmark’ and the ‘vulnerable consumer benchmark’ were added in article 5(2)(b) and 5(3).63 These provide that if a commercial practice is targeted at a specific group, respectively particularly affects a group of vulnerable consumers, such as children: if a commercial practice is “likely to materially distort the economic behaviour with regard to the product [...] of the average member of the group when a commercial practice is directed to a particular group of consumers”, or is “likely to materially distort the economic behaviour only 59 Mak 2010, p. 29. 60 Ibid. p. 29. 61 Duivenvoorde 2013, p. 70. 62 SWD (2016) 163 final, p. 42. 63 Durovic 2016, p. 1143.
of a clearly identifiable group of consumers who are particularly vulnerable to the practice or the underlying product because of their mental or physical infirmity, age or credulity in a way which the trader could reasonably be expected to foresee”, the fairness of the practice should be determined based on the effect it will have on the average consumer of this group.64
So although vulnerable consumers are not offered better protection than other consumers, these benchmarks, in a way, do offer a higher level of protection to vulnerable consumers, if they are particularly affected and the commercial practice is likely to distort their economic behaviour.65 Nevertheless, this kind of protection is only offered to very few consumers due to the requirements set.66
Thus there are three benchmarks incorporated in the UCPD: On the one hand, if a practice is not targeted at a specific group, nor particularly affects a vulnerable group of consumers, it should be decided on the fairness of the commercial practice by using the notion of the average consumer, who is reasonably well-informed and reasonably observant and circumspect. This is the principal benchmark.67 On the other hand, if a commercial practice is targeted at a specific group of consumers or if it particularly affects a group of vulnerable consumers, the fairness should be assessed from the orientation of the average consumer of this specific group, who may be less well-informed, observant and circumspect.68 These latter benchmarks serve as a supplement to the principal average consumer benchmark, to make sure every consumer is protected in the right way.69
What should be kept in mind however, is that this notion of the average consumer is not a test which should be based on statistics, but rather it is a normative image, characterizing the expected behaviour and leaving room
64 Stuyck 2015, p. 740.
65 Reich and others 2014, p. 94. 66 Duivenvoorde 2013, p. 71. 67 Duivenvoorde 2014, p. 2. 68 Ibid. p. 1.
for common sense, giving the one judging and applying the benchmark the necessary space to make use of his own instincts and judge on his own insights and knowledge.70 This normative image of the average consumer may however be very different from the socio-empirical reality; the real behaviour of an average consumer, especially of the online average consumer, may not correspond to the expectations set this benchmark.
2.3. The socio-empirical average consumer image
As the average consumer benchmark is argued by some people not to correspond to the actual average consumer, the EC, in a behavioural research on consumer vulnerability,71 focused on the socio-empirical image of the EU consumer by studying consumer behaviour of all 28 Member States of the EU and Norway and Iceland.72
Through reviews, consultations, interviews, surveys and behavioural experiments, and thus by the use of both self-reporting of consumers and observation of behaviour, this study formed an image of the real European consumer. This lead to the following socio-empirical image of the real average consumer:73 the average consumer “feels quite informed about prices, declares that he/she reads communication from the Internet, banking and energy providers (but admits to have only glanced over it or skim read it), and states that he/she does not rely on information from advertisements only.“74 Besides, most of the interrogated consumers report to find themselves to make reasonable decisions, to not take risks very often and to know what is to be trusted about the information in an advertisement.75 Nevertheless, the consumer has trouble in comparing offers with each other
70 SWD (2016) 163 final, p. 42.
71 European Commission, ‘Consumer vulnerability across key markets in the
European Union’ (Final Report), EACH/2013/CP/08, January 2016.
72 EACH/2013/CP/08, p. 23. 73 Ibid. p. 27.
74 Ibid. p. 160. 75 Ibid. p. 160.
and choosing the best service or product to purchase.76 The latter became clear, as the study was divided into five dimensions, according to which the vulnerability of the consumer was measured: “heighten ed risk of negative outcomes or impacts on well-being”, “having characteristics that limit ability to maximise well-being”, having difficulty in obtaining or assimilating information”, “higher susceptibility to marketing practices” and “inability or failure to buy, choose or access suitable products”.77 In this latter category, in contrast to the other ones, consumers do feel vulnerable and therefore, in any event, on this point the average consumer notion does not reflect the reality.78 In other dimensions, consumers of some countries did feel vulnerable too, creating some variation within the study,79 which can be explained through social, linguistic and cultural factors.80 But overall, from this study it became clear, that the average consumer benchmark does, to a big extent, match the real average consumer, but this real consumer always “feel[s] vulnerable to some extent”81 and therefore the average consumer notion creates expectations of the consumer that mostly reflect reality, but on some points may be too high.82
However, this average consumer benchmark is used in a situation in which consumers exist, which might be even further away from the normative image: namely, it is used for online commercial practices too.83 Therefore in the next chapter, behavioural insights are used, to characterize the socio-empirical online consumer image, which will make it possible to decide on the effectiveness and adequateness of the existing average consumer benchmark for the online world.
76 EACH/2013/CP/08, p. 151. 77 Ibid. p. 149-151.
78 Ibid. p. 149. 79 Ibid. p. 152.
80 Case C-220/98, Estée Lauder Cosmestics GmbH & Co. OHG v Lancaster Group GmbH (ECJ 13 January 2000), [29].
81 EACH/2013/CP/08, p. 152. 82 Ibid. p. 138-139.
3. The offline v. online commercial environment
The image of the average consumer, as the reasonably well-informed and reasonably observant and circumspect consumer, was created by the ECJ in the Gut Springenheide case, which concerned an offline commercial practice.84 However, since the UCPD is applicable to offline as well as online commercial practices, this average consumer notion is used, not only for commercial practices such as the one in the Gut Springenheide case, but in the case of online commercial practices too.85 It could be, that this does not constitute any problems, since this notion is a normative and not a statistic one. However, circumstances have changes over the last few years, especially for the online world, and it could be that this new situation made the benchmark ill-suited as a test to protect the online consumer against unfair online advertisements, as the online consumer may not be as reasonably well-informed, observant and circumspect and innovations such as OBA may make the online consumer more vulnerable.The accessibility and use of the Internet by consumers have increased immensely and advertisers are making use of the new options available to them such as consumer profiling, which offers them new ways of advertising, targeted specifically at the consumer seeing the advertisement:86 From 2007 till 2016 the accessibility of the Internet to European households has already increased from 55 to 85 percent and the prognosis is that it will keep increasing.87 Furthermore, advertising is influenced by the emergence of the Internet, which is clearly visible in new advertising techniques such as OBA.88 Moreover, the online consumer may not be the same as the offline one and the real online consumer may even be further away from the normative average consumer image provided for in
84 C-210/96.
85 Savin and Trzaskowski 2014, p. 355. 86 Ibid. p. 383.
87 Eurostat, ‘Internet access and use statistics – households and individuals’. 88 Savin and Trzaskowski 2014, p. 358.
the UCPD, than the offline one is.89 This raises the question, whether the average consumer benchmark is well-suited as a test to assess the fairness of online advertising and in particular OBA.
Therefore, this chapter will focus on what characterizes the online commercial environment and online consumer behaviour in comparison to the offline world, to see whether it is accurate that the average consumer benchmark is used as a test for both offline and online commercial practices. In doing so, a distinction is made between, online advertising in general, such as information on a product on a website, and OBA, such as advertising at the side of Facebook, which is highly individualized and specified at the particular Facebook-user.
One of the main reasons for offering consumer protection is the fact that the consumer is in a weaker position in relation to the trader.90 This weaker position results mainly from the information asymmetry between the consumer and the professional, which also forms the basis for the UCPD.91 Besides, it is clear from behavioural studies, that consumers do not always behave the way they “should”, to act in their own interests and therefore they should be protected against themselves and their irrational behaviour:92 They tend to see their own abilities in a way that is too positive, which leads to them not seeing the risks involved.93 Furthermore, their decision-making is influenced by the circumstances and therefore their preferences may differ from situation to situation.94 It is thus clear, that consumers do not always act rationally, as different factors may influence them, although the
89 Daly 2016, p. 16.
90 Bettina Heiderhoff and Reiner Schulze, Verbraucherrecht und Verbraucherverhalten: Consumer Law and Consumer Behaviour (Europäisches
Privatrecht, Volume 44, 1st edn Nomos, Baden-Baden 2016), p. 33. 91 Heiderhoff and Schulze 2016, p. 33.
92 Ibid. p. 45.
93 Avishalom Tor, ‘Some Challenges facing a behaviourally-informed approach to
the Directive on Unfair Commercial Practices’ in Tihamér Toht (ed), Unfair
commercial practices: The long road to harmonized law enforcement (Pázmány
Press, Budapest 2013), p. 10.
average consumer benchmark seems to assume the rationality of the consumer.95 This is a general problem that arises both in the online and offline commercial environment. However, the online world may contain more external factors, which influence the consumer in his decision-making. One main difference between the offline and online commercial environment is the informedness of the consumer, which has changed dramatically because of the development of and increasing accessibility to the Internet.96 Before the online commercial world had developed the way it now has, advertisers depended on channels such as television, radio and newspapers, in order to report on the information on their products or services.97 This was the only way in which consumers would get their information and the only information they would receive. With the emergence and high accessibility of the Internet, consumers are offered more information: they can search for a product or service on the Internet, can easily compare products with each other and all the information needed, and even more, will appear, including information on user reviews, social media, search tools etc.98 Therefore, one would say, that the average online consumer is more well-informed. However, this may lead to an information overload, confusing the consumer on what to believe.99 This new situation asks for a new approach of the consumer to advertising, in which he or she plays an active role, trying to find the right information and protecting his own interests.100 This activity not only lies in the processing of information, but the online consumer is also a producer of information, through online tools such as user reviews and social media.101
95 Duivenvoorde 2014, p. 169.
96 Jarmila Lazíková and Lubica Rumanovská, ‘The Notion of Consumer in the EU
Law’ (2016), EU agrarian law, p. 2.
97 Lazíková and Rumanovská 2016, p. 2. 98 Ibid. p. 2.
99 Ibid. p. 2.
100 Kanchana Kariyawasam and Shaun Wigley, ‘Online shopping, misleading
advertising and consumer protection’ (2017), Information & Communications Technology Law, p. 73.
These user reviews, social media, search tools and other online tools, which have emerged over the last few decades, may influence the circumstances in which consumers make their decisions and therefore may influence their reaction to online advertising.102 First of all, the effect of online reviews on consumer behaviour has been studied. As proven in a study by Pranjal Gupta and Judy Harris,103 reviews on a product or service exert a big influence on the behaviour of a consumer on the Internet.104 They found out that if a product or service has more reviews or recommendations, it will attract more attention of the consumer.105 Furthermore, according to them, there are two types of consumers: the consumer who wants to find information, and the consumer who does not really attach value to the information found.106 The effect of reviews on both types of consumers is very different: on the one hand, the consumer willing to process the information found, needed more time to make a choice after reading the recommendation, but eventually did make the best choice.107 On the other hand the consumer, who was not really open for processing the information found, did not make an optimal choice, but reading reviews did improve his final purchasing decision.108 This side effect of reviews does not, to this extent, exist in the offline commercial environment, since consumer experiences can be passed along easier from consumer to consumer through the online channel.109 Of course, in times preceding the great accessibility of the Internet, a form of reviewing did exist through mouth-to-mouth information and the press, but the emergence of the Internet has expanded the influence of reviews immensely, because of their accessibility and, as is
102 SWD (2016) 163 final, p. 121.
103 Pranjal Gupta and Judy Harris, ‘How e-WOM recommendations influence
product consideration and quality of choice: A motivation to process information perspective’ (2009), Journal of Business Research, p.1041-1049.
104 Gupta and Harris 2009, p. 1046. 105 Ibid. p. 1046.
106 Ibid. p. 1041-1042. 107 Ibid. p. 1046-1047. 108 Ibid. p. 1046-1047.
109 Daniele Scarpi, Gabriele Pizzi and Marco Visentin, ‘Shopping for fun or
shopping to buy: Is it different online and offline?’ (2014), Journal of Retailing and Consumer Services, p. 260.
clear from the formerly described study, they do have a big impact on consumer purchasing.110 This impact can partly be subscribed to the use and popularity of social media, where users pass their experiences with products and services on to their friends, which again can be seen by their friends etc.111 Moreover, socially connected consumers tend to buy the same products.112 In this way, online advertising, through the “network effect” has a bigger playingfield and therefore a bigger impact, which increases even further through social media.113
Thus, social media is a place, where consumers spread online advertisements.114 However, advertisers also use social media directly for their advertisements, which is of big influence on the behaviour of online consumers, especially since the use of social media has increased immensely.115 Social media, such as Facebook, is mainly used by people to socialize with other users, based on a profile created by them.116 Over the last few years however, advertisers have started to display their products and services on these platforms too,117 by which means advertising has entered this area of the online environment.118 Many problems are connected to this new phenomenon, but the biggest challenge in protecting consumers against unfair advertising on social media, and in general on the Internet, is the fact that advertisers have started to “profile” consumers, which enables them to offer OBA.119 This profiling means, that advertisers
110 Scarpi, Pizzi and Visentin 2014, p. 261.
111 Kin Meng Sam and Chris Chatwin, ‘Online consumer decision-making styles
for enhanced understanding of Macau online consumer behavior’ (2015), Asia Pacific Management Review, p. 101.
112 Farshad Kooti and others, ‘Portrait of an Online Shopper: Understanding and
Predicting Consumer Behavior’ (2015), <https://arxiv.org/pdf/1512.04912.pdf> accessed 25 May 2017, p. 6.
113 Commission (EC), ‘Online Platforms and the Digital Single Market
Opportunities and Challenges for Europe’ (Communication), COM (2016) 288 final, 25 May 2016, p. 2.
114 Meng Sam and Chatwin 2015, p. 101. 115 SWD (2016) 163 final, p. 121. 116 Ibid. p. 142.
117 Meng Sam and Chatwin 2015, p. 101. 118 SWD (2016) 163 final, p. 142-143. 119 Savin and Trzaskowski 2014, p. 383.
use personal data and search history of consumers available on the Internet and stored in databases, to adapt the advertisement specifically to the consumer, which makes the consumer more vulnerable.120 This is one of the main differences between offline and online advertising: targeted offline advertising used to be addressed to a general group of people, but with the help of big data advertising has become targeted at and tailored to a consumer specifically.121 Moreover, OBA pops up every time you visit the Internet, it may even vary in price per consumer and even the timing is targeted, which may push the consumer to purchase the good or service, in a way offline advertising could never do and which may be seen as unfair advertising, as it causes a “transactional decision that the consumer would not have taken otherwise”.122 Besides it is an infringement of the privacy of consumers.123 This kind of advertising mainly is available because of consumers purchasing services, by giving away their personal data instead of paying with money, which again is not possible in the offline commercial environment.124
As is clear from the former remarks, the characteristics of the offline commercial environment are different, than the ones of the online environment, both in general and because of the emergence of OBA. But as a result of these different commercial environments, the behaviour of offline and online consumers differs too: offline and online advertisements may be perceived differently.125 One example of the difference between offline and online consumer behaviour has already been given, namely, the fact that online reviews, next to the “network-effect”, can highly influence the decision-making of online consumers, in a way offline mouth-to-mouth
120 Savin and Trzaskowski 2014, p. 397.
121 Natali Helberger, ‘Profiling and targeting consumers in the Internet of Things –
A new challenge for consumer law’ (2016), Digital revolution: challenges for contract law in practice, p. 138.
122 Unfair Commercial Practices Directive 2005/29/EC, art. 6(1). 123 Savin and Trzaskowski 2014, p. 398.
124 Helberger 2016, p. 142.
125 Blanca Hernández, Julio Jiménez and M. José Martín, ‘Customer behavior in
electronic commerce: The moderating effect of e-purchasing experience’ (2009), Journal of Business Research, p. 964.
recommendations could never have that effect, as online recommendations can be spread very easily and therefore reach a bigger public.
In a study of G.J Browne et al, the “Generation Y study”,126 along with other questions, it was examined whether people use the Internet to purchase goods and services, and if so, why they use it for this.127 Although this is a relatively old study, the results show some interesting points that, to some extent, are still relevant and at the same time show that a quick change has emerged. Namely, at the time of this study in 2007, the main reasons to purchase online were “the ability to shop from home”, “the ability to shop any time”, “that it saves time” and “that a person can locate hard-to-find items”.128 In other words, consumers preferring to purchase online had as their main reason the ease and rapidness it offers them in their purchasing needs,129 and after almost 10 years these are still the reasons consumers give for e-shopping.130 What has changed however, is that in 2007 the Internet was only preferably used to purchase, by around 21 percent of the Internet users questioned.131 Rather consumers used the Internet to find information about the product or service, to then buy it in the offline store.132 A recent study of the EC on e-commerce of 2016133 shows, that this percentage has increased immensely, with nowadays two thirds of the Internet users preferring to purchase online. Furthermore, as this percentage has grown
126 Glenn J. Browne, John R. Durrett and James C. Wetherbe, ‘Consumer
Reactions toward clicks and bricks: investigating buying behaviour on-line and at stores’ (2007), Behaviour & Information Technology, p. 237-245.
127 Browne, Durrett and Wetherbe 2007, p. 5. 128 Ibid. p. 7.
129 Ibid. p. 7.
130 Eurostat, ‘E-commerce statistics for individuals – About two thirds of internet
users in the EU shopped online in 2016’, <http://ec.europa.eu/eurostat/statistics-explained> accessed 7 July 2017.
131 Browne, Durrett and Wetherbe 2007, p. 6. 132 Ibid. p. 6.
133 Eurostat, ‘E-commerce statistics for individuals – About two thirds of internet
steadily over the last few years, it is expected to keep on growing in the future.134
On the other hand, this same study of G.J Browne et al. of 2007 shows, that characteristics of the online commercial environment such as “the inability to see items before purchasing”, “discomfort with the security of the transaction” and “difficulty in returning the items” were seen as disadvantages, and again, they still are nowadays.135 Namely, according to a more recent study by J. Park, W. Trey Hill and J. Bonds-Raacke, these disadvantages result from the fact that online consumers are not present at the offline store.136 Nevertheless they are made up for by the big variety on information on the Internet, which however again may lead to an information overload, making the decision even harder for the consumer.137 In order for the consumer to benefit from this information overload, he should invest some time to make sure he gets the best information possible. This “requires significant time and cognitive effort” which would go against the advantages of the Internet, namely the convenience and quickness of its use.138 Besides, former studies on consumer behaviour and decision-making show that consumers try to “minimize cognitive effort for a decision”.139 Because the Internet offers so much information, more cognitive effort is asked of the consumer and therefore he perceives purchasing online as more risky, which leads to more hesitation on making a decision.140 Nevertheless, although the Internet thus may require more cognitive effort than may be required in the offline commercial environment, the consumer still tries to minimize the efforts he has to make in order to make an accurate
134 Eurostat, ‘E-commerce statistics for individuals – About two thirds of internet
users in the EU shopped online in 2016’.
135 Browne, Durrett and Wetherbe 2007, p. 7.
136 Jisook Park, W. Trey Hill, Jennifer Bonds-Raacke, ‘Exploring the relationship
between cognitive effort exertion and regret in online vs. offline shopping’ (2015), Computers in Human Behavior, p. 444.
137 Park, Trey Hill and Bonds-Raacke 2015, p. 444. 138 Ibid. p. 445.
139 Ibid. p. 445. 140 Ibid. p. 445.
decision.141 This creates a less well-informed online consumer, rather than the expected more well-informed one, as, clearly, this is at the expense of his ability to make a fitted decision, which in the end culminates in more regret of his purchase, than he would have if he purchases offline.142 Moreover, even if the same amount of cognitive effort is invested in an online and offline purchase, the consumer will still regret his online purchase more, probably because he is not able to see and touch the product in advance.143 Consumers therefore are more satisfied with their acquirement if they purchase offline rather than online,144 and therefore it can be concluded, that online advertising may damage a consumer more than offline advertising and thus the average online consumer is more vulnerable.
From another study described by G.J. Browne et al.,145 it became clear that online advertising has a big influence on offline purchasing: it seems that if a consumer has already done some research online, he will spend more money in the offline shop.146 Therefore it can be said, that there exists a relation between the offline and online commercial environment and that the consumer is influenced by online advertisements, even if he purchases the good offline.147 However, this also works the other way around. Therefore, with the emergence of the online commercial environment, advertising, in general, has gotten a bigger impact on consumer behavioural.
Finally, in a study of Degeratu et al.148 on differences between online and offline price sensitivity, it was concluded that online consumers tend to
141 Park, Trey Hill and Bonds-Raacke 2015, p. 445. 142 Ibid. p. 445.
143 Ibid. p. 447.
144 Scarpi, Pizzi and Visentin 2014, p. 258. 145 Browne, Durrett and Wetherbe 2007, p. 7. 146 Ibid. p. 8.
147 Ibid. p. 9.
148 Alexandru M. Degeratu, Arvind Rangaswamy and Jianan Wu, ‘Consumer
choice behavior in online and traditional supermarkets: The effect of brand name, price, and other search attributes’ (2000), International Journal of Research and Marketing, p. 55-78.
spend more money than offline consumers on the same product, because they are shopping online to save time and therefore they do not spend much time comparing the different offers, but rather purchase quickly.149 However, they are less price-sensitive because they tend to have a higher income.150 This study may be old, but the findings are still relevant at this moment, as a study published by the EC end 2016 shows that “the level of formal education” is of influence on the use of the Internet and therefore online shopping.151 Namely, under higher educated people 96 percent use the Internet regularly, whereas it is only commonly used by 60 percent of the lower educated individuals.152 As higher educated individuals tend to have a higher income, nowadays the online average consumer is still less price-sensitive than the offline one and thus overall less vulnerable, which at the same time makes him more careless and in combination with the time limitation less well-informed, observant and circumspect.
Thus, what can be concluded is that the offline commercial environment differs from the online commercial environment: it seems that the development of the online environment has created a different approach of advertisers to advertising than in the offline commercial environment, which leads to different consumer behaviour, in particular different decision-making and therefore a situation exists, in which the real online consumer has moved further away from the expectations created by the normative average consumer image.153 Therefore in order to offer the right protection to consumers against online advertising and OBA’s, the approach to these advertisements under the UCPD, should maybe be adapted to the new circumstances.154
149 Degeratu, Rangaswamy and Wu 2000, p. 64. 150 Kooti 2015, p. 1.
151 Eurostat, ‘Internet access and use statistics – households and individuals’. 152 Ibid.
153 Savin and Trzaskowski 2014, p. 409. 154 Ibid. p. 409.
4. The need for a new approach to online
advertising and OBA
From the former chapter it is clear, that there are many differences between the offline and online advertising, which create a need for a new approach to online advertising and OBA. A brief enumeration of the former chapter shows, that the average consumer benchmark is highly inappropriate as a test for these kinds of commercial practices. First of all, in general, there is a difference concerning the level of informedness of the consumers: the online consumer is confronted with an information overload in comparison to the offline consumer, leading to a more active role to be played by the consumer, which lies, not only in the searching for, but also in the production of information, by contributing to user reviews and telling his “network” about his experiences with a purchase.155 Thus, the consumer has developed from being mainly a receiver of information to being both a receiver and a creator.156 Furthermore, online reviews and social media have increased the impact of advertising through the network effect, as this is a manner of free advertising.157 Moreover, advertisers use social media in a direct way too, by displaying their advertisements on platforms such as Facebook. The biggest challenge however, is the emergence of OBA, which is made available through big data: advertisers are now able to tailor their advertisements to a single consumer receiving them, based on the information they have on this consumer, whereas in the offline environment this was not possible as persuasively and therefore advertisements were mostly targeted at a general group of consumers.158
This online commercial environment, which clearly is a different one than the offline environment, affects consumer behaviour and therefore it could be even more needed to have a specific approach to online advertising and
155 Lazíková and Rumanovská 2016, p. 2. 156 Daly 2016, p. 4.
157 COM (2016) 288 final, p. 2. 158 Helberger 2016, p. 138.
