Taking advantage of predictable consumer behavior online must stop

On September 6, Dutch financial newspaper het Financieele Dagblad published an opinion piece on choice architecture, written by Cateautje Hijmans van den Bergh, Member of the Board of the Netherlands Authority for Consumers and Markets (ACM). The topic of "the digital economy", which is one of the key priorities on the 2018-2019 ACM Agenda, falls under her portfolio.

Consumers are too often offered products that are inferior to their own choices

Companies know more and more about us as consumers. That knowledge can be used for positive ends, but it can also be used for nefarious purposes. This calls for a new standard, a duty of care that is tailored to this specific predicament. It requires a debate at a European level. Let the industry join in and take the lead in that debate. One potential outcome is self-regulation combined with a big stick, just in case.

Why are the risks for abuse becoming greater online than offline? That is connected to the ways in which companies are able to understand consumers better and better, including their soft spots. Hotel booking sites, telecom providers, online stores, search engines and app stores: by using smart algorithms, they decide on the selection of products and services that are brought to our attention. And by constantly testing their websites and apps (through so-called A/B testing), they are able to present these selections in ever smarter ways. These companies optimize the so-called "choice architecture," and determine to a large degree what consumers end up choosing.

This is possible because we, as consumers, are actually incredibly predictable. For instance, in 75% of all cases, we click on one of the first four search results, regardless of the quality or relevance of these results. Or take app stores, where, in 87% of all cases, we choose an app from the "top five" apps presented to us. When it comes to health insurance, we tend to choose the middle option out of three, or for the one labelled "most popular choice".

This saves us all a lot of time. Moreover, research also shows that, if we have invested less time and energy in the decision-making process, we also tend to experience much less dissatisfaction or doubt afterwards. Clearly, choice architecture is not such a bad idea. As long as the architect does not act against your interests, that is.

The fact is that consumer interests sometimes lose out to the desire to increase sales. How do we ensure that companies do not slyly let consumers fall into their biggest pitfalls?

We know that, as human beings, our rationality is bounded, and we often take decisions based on impulses rather than on intentions. In other words: whoever writes the menu, decides your order. And, if you are the consumer, you do not want the ‘chef’ to abuse that power, for example, by having us, consumers, consistently and unwittingly choose a product that generates a higher commission for the platform, or by keeping the default settings in a such way that large amounts of data will be accessed by the platform.

In a recent report, the Norwegian consumer association dubbed this phenomenon "deceived by design". ACM has found that these techniques are used more and more often, and we believe that they carry risks.

As a result of such undesirable guiding techniques, consumers often do not end up with the choice that is optimal for them. Research shows that, on average, we, consumers, are often offered products that are inferior to the products that we would have chosen ourselves.

For instance, only 3% of consumers are able to find the best loan for them if the search result is shown on the second page, compared with 27.5% if the results are shown in a random order. And 72% of Dutch consumers have a basic health insurance package that has a comparable but cheaper alternative, according to a recent study by the Netherlands Authority for Consumers and Markets and the Netherlands Healthcare Authority. 80% of consumers choose a privacy-friendly app if information regarding privacy is more clearly presented, compared with 30% if such information is difficult to find.

Consumer law is mainly aimed at the provision of information, intended to help "reasonably well-informed, careful, and observant consumers" make choices. However, online services that properly provide information to their customers could still design their websites in such a way that consumers are guided towards choices that are harmful to them.

The European Commission recently proposed that companies should be transparent to consumers about the parameters they use in the design of their choice architecture (the "New Deal"). So attention for this question is already there. Now we need to take the next step: from transparency to responsible behavior.

Cateautje Hijmans van den Bergh is a Member of the Board of the Netherlands Authority for Consumers and Markets (ACM). The topic of "the digital economy", which is one of the key priorities on the 2018-2019 ACM Agenda, falls under her portfolio.