Smart consumers for a smarter Europe

Public conference

Wednesday 17th October, Brussels

The new relationship between consumers

and companies

Internet usage

3

In the EU, 72% of individuals used Internet on a daily basis. Luxembourg and Denmark werethe best performing countries with 91%, while the lowest positions were held by Greece,Croatia, Bulgaria and Romania with 59%, 58%, 54% and 47%, respectively.

Source: Eurostat

91 91 90 90 87 8579 79 76 75 74 74 72 70 70 70 69 69 69 68 68 68 64 63 61 59 58 54

47

0102030405060708090

100

Den

mar

k

Luxe

mb

ou

rg

Net

her

lan

ds

Swed

en

Fin

lan

d

Un

ited

Kin

gdo

m

Ger

man

y

Esto

nia

Bel

giu

m

Mal

ta

Cyp

rus

Au

stri

a

Euro

pea

n U

nio

n

Irel

and

Fran

ce

Latv

ia

Spai

n

Hu

nga

ry

Slo

vaki

a

Cze

ch R

epu

blic

Ital

y

Slo

ven

ia

Lith

uan

ia

Po

rtu

gal

Po

lan

d

Gre

ece

Cro

atia

Bu

lgar

ia

Ro

man

ia

% of individuals using the Internet on a daily basis (2017)

Internet activities

4

At the EU level, sending/receiving e-mails and information searches for goods and serviceswere the most frequent activities in 2017, with 72% of online users sending/receiving emailsand 65% searching for information about goods and services.

Source: Eurostat

94 91 92 93 89 86 78 84 81 64 69 79 61 78 51 72 69 70 71 68 69 59 76 60 48 53 45 55 45

60 56 55 44 35 50 44 49 41 45 45 36 55 37 57 39 39 42 45 30 37 32 29 32 42 33 54 28 34

75 71 68 67 66 7160 51 72 70 65 48 54 51 63 54 59 60 59

57 45 56 43 48 47 50 5043 52

79 84 82 88 85 7575 83 74 70 65 73 62 63 61 65 70 57 58

63 69 60 67 58 59 57 3938 31

83 85 85 76 84 6879 67 56 67 65 77 72 63 65 61 53 68 63 66 61 59 53 60 61 61 47

39 44

30 23 23 34 19 2215 11 15 14 12 4 8 15 9 13 14 6 4 14 7 12 9 10 6 5

29 4

Internet use and activities (%, 2017)

sending/receiving e-mails telephoning or video calls

participating in social networks finding information about goods and services

reading online news sites participating in professional networks

E-commerce in Europe

5

✓ One of the most important activities that individuals perform online is the purchase of goods and services. According to Eurostatdata, 48% of European citizens made at least one online purchase in the last three months of 2017, with the UK leading (78%),followed by Denmark and Luxembourg (69%), while Bulgaria and Romania had the lowest percentages.

✓ E-commerce is growing in all EU countries, especially in those trying to catch up. Romania grew the most in the last year (40%),followed by Portugal (23%), Greece (22%) and Bulgaria (22%).

Source: Eurostat; European Ecommerce Report 2018, Ecommerce Foundation

7869 69 68 67 66

58 54 53 49 48 46 46 44 43 4035 34 33 33 29 26 26 25 24 23 21

11 11

0102030405060708090

%

Purchasing online in the last 3 months (% of individuals; 2017)

0%

10%

20%

30%

40%

50%E-Commerce Growth (2017/2016)

Consumers empowerment

Kinds of online platforms

7

The success of the Digital Single Market depends mostly on the confidence and trust ofconsumers. Millions of European consumers use online platforms that range from smallwebsites with a local reach to worldwide companies generating billions in revenues (e.g. searchengines, social media, e-commerce platforms, app stores, price comparison websites) and theseplatforms enable consumers to access goods and services and to find online information andbusinesses to exploit the advantages of e-commerce.

Source: Jacques Delors Institute – Berlin, ONLINE PLATFORMS AND HOW TO REGULATE THEM: AN EU OVERVIEW, JUNE2018

TYPE OF PLATFORM MAIN BUSINESS MODEL EXAMPLE

Online marketplaces Transaction fees Amazon, eBay, Booking.com

Collaborative or "sharing" economy platforms Transaction fees Uber, Airbnb, Bla-bla car

Communication platforms Advertisement, subscription Skype, WhatsApp

Social networks Advertisement, subscription Facebook, LinkedIn, Twitter

Search engines and specialized search tools Advertisement Google search, TripAdvisor, Skyscanner

News aggregators Advertisement Google news

Music/Video sharing platforms Advertisement, subscription

Deezer, Spotify, YouTube, Netflix, Apple TV,

Canal Play

App stores Transaction fees Google Play, Apple app store

Payment systems Transaction fees PayPal, Apple Pay

Digital comparison tools

8

➢ Faced with increasingly complex information and choices online, consumers areincreasingly using digital comparison tools that guide them in making a decision.

➢ According to the report, “Digital Comparison Tools Market Study” (2017) of theCompetition and Markets Authority in the United Kingdom, these tools offer two typesof benefits:

1. They save time and effort in searches and make comparing easier and moreappealing, above all for household services that are often complicated and not ofimmediate interest.

2. They make suppliers compete more to provide lower prices and better consumerchoices.

➢ In general, four types of comparison tool models can be found in Europe:

1) commercial websites run by the private sector;

2) commercial websites run by the private sector but certified by the National

Authority;

3) non-commercial websites run by consumer and/or industry associations;

4) non-commercial websites run by public authorities.

The use of comparison tools (1)

9

97%

85%

0%

20%

40%

60%

80%

100%

Aware of digital comparisontools

Have used digital comparisontools

Proportion of people that know of and have used digital comparison tools in the UK

% of all internet users

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Broadband Credit cards Home insurance Motor insurance

The significance of DCTs in terms of sales volumes in 2013-2015 in the UK

DCTs Direct Other

Source: CMA, Digital comparison tools market study, 2017 CMA, Paper A: Consumer views, behaviour and experiences, 2017Note: The research involved an online survey of over 4,000 consumers and 32 face-to-face interviews with an observational exercise

The use of comparison tools (2)

10

Source: CMA, Digital comparison tools market study, 2017 ; CMA, Paper A: Consumer views, behaviour and experiences, 2017Note: The research involved an online survey of over 4,000 consumers and 32 face-to-face interviews with an observational exercise

0% 20% 40% 60% 80% 100%

Credit cards

Broadband

Travel insurance

Energy

Home insurance

Flights

Hotels

Motor insurance

Any sector

Use of comparison sites in the last 12 months among all Internet users in the UK, by sector

All consumers

0% 20% 40% 60%

uSwitch

Trivago

Skyscanner

Expedia

Hotels.com

Lastminute.com

Autotrader

MoneySavingExpert

Confused.com

Moneysupermarket

Booking.com

GoCompare

Comparethemarket

TripAdvisor

Comparison sites most commonly used in the UK

% to visit eachcomparison site

Customer care 2.0: the role of social networks

11Source: Eurostat

0

10

20

30

40

50

60

70

80

%

Use of social networks (e.g. Facebook, LinkedIn, Xing, Viadeo, Yammer, etc.) (% of enterprises)

2014 2017

Customization, profiling and the potential role of artificial intelligence

12Source: PwC, Global Consumer Insights Survey 2018

10%

32%58%

Ownership of any artificial intelligence (AI) devices (robots, automated ‘personal assistants’)

Consumers own any AI devices

Consumers plan to buy AI devices

Consumers have no interest inowning an AI device

0% 10% 20% 30% 40% 50% 60% 70%

Poland

Italy

Brazil

France

UK

Thailand

US

Indonesia

Vietnam

China

Ownership of AI: Top 10 countries

Plan to Yes

0% 20% 40% 60% 80% 100%

Spootify

Pandora

Netflix

Facebook

Nest

Amazon

Siri

Awareness of AI technology

Aware of AI tech

Not aware of AI tech

The use of chat-bots in the relationship between consumers and companies (1)

13Source: Technavio, Global Chatbot Market 2017-2021

41%

15%

15%

10%

19%

Chat-bots market share (2016)

Banking, fiancialservices andinsurance

Government

Retail and E-commerce

Travel and Hospitality

Other

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Government Retail and E-commerce

Banking, fiancialservices and

insurance

Chat-bots market growth (CAGR 2017-2021)

The use of chat-bots in the relationship between consumers and companies (2)

14Source: State of Chat-bots, 2018

0% 5% 10% 15% 20% 25% 30% 35% 40%

Buying an expensive item

None of these things

Communicating with multiple brands using one…

Getting ideas and inspiration for purchases

Adding yourself to a mailing list or news service

Buying a basic item

Paying a bill

Making a reservation (e.g. restaurant or hotel)

Finding a human customer service assistant

Resolving a complaint or problem

Getting detailed answer or explanations

Getting a quick answer in an emergency

Predicted Use Cases for Chat-bots according to U.S. consumers

0% 10% 20% 30% 40% 50% 60% 70%

none of these

Friendliness and approachability

Answers to complex questions

Detailed/expert answers

Complaints resolved quickly

A good customer experience

Easy communication

Getting an istant response

Answers to simple qestions

24 hour service

Benefits of chat-bots use according to U.S. consumers

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Other

Nothing would stop me from using a chat-bot

If it wasn't able to chat in a friendly manner

I'd prefer to use a normal website

If I could only access it through Facebook

I'd worry about it making a mistake

I'd prefer to deal with real-life assistant

U.S. Consumers’ doubts about chat-bots

Concerns over the power of online platforms

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According to the policy paper “Online platforms and how to regulate them: an EU overview”(2018), the concerns over the power of online platforms raised in the ongoing political debatecan be roughly grouped into two categories:

1. Competition and market power: Platforms generate regulatory concerns because of theirexpanding market power. Many platform markets tend towards domination by one or veryfew players, thanks to, among other things, strong network effects and economies of scaleadvantages. Another concern is the way in which platforms are able to leverage theirexclusive access to vast amounts of consumer, business and transactional data. These datatroves give them a constantly self-reinforcing knowledge edge concerning market dynamicsover competitors and regulators alike.

2. Algorithmic discrimination and information asymmetries: Most platforms heavily rely onautomated algorithm-based decision-making to process transactions and data. Automateddecision-making systems are efficient and often more impartial than human decision makersbut they can also perpetuate discrimination and deleteriously affect European citizens. Yet,proving such a discriminatory bias can be complicated. The inner logic of automateddecision-making systems remains unclear to businesses and individuals operating on aplatform. This so-called “algorithmic black box” also complicates regulatory scrutiny.

EU survey on online platforms

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46%

47%

43%

44%

37%

37%

40%

38%

0% 20% 40% 60% 80% 100%

Internet platforms should be required by law to includeinformation on who is actually selling the goods of services

presented in the platform.

All platforms should include information on who is actually sellingthe goods or services presented in the platform

All platforms should include information on the way they orderthe results of a search

Knowing how the platform ordered the results of the search mademe more confident and trusting in the platform

Strongly agree Agree Indifferent Disagree Strongly disagree

Note: Survey involved 4802 respondents in the four European countries (Germany, Poland, Spain and UK)

Consumer protection in the digital economy

European Commission's initiatives

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May 2016: Communication “Online Platforms

and the Digital Single Market -Opportunities and Challenges for

Europe”

March 2018: Recommendation on measures to effectively tackle illegal content

online

April 2018: EU Regulation on fairness and

transparency in online platform trading

April 2018: A New Deal for Consumers

The European Commission has drafted various proposals to

foster an environment in which online platforms thrive, where

consumers are protected whilst competition is enhanced.

Communication “Online Platforms and the Digital Single Market -Opportunities and Challenges for Europe”

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In the 2016 Communication “Online Platforms and the Digital

Single Market - Opportunities and Challenges for Europe” , it is

stated that the “future internet cannot succeed without the

trust of users in online platforms, and without online platforms

respecting all applicable legislation and the legitimate interests

of consumers and other users”. This Communication identifies

the following guiding policy principles:

A level playing field for comparable digital

services

Ensuring that online platforms behave responsibly

to protect core values

Fostering trust, transparency and ensuring fairness

Keeping markets open and non-discriminatory, tofoster a data-driven economy

Measures to tackle illegal content online

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In the mid-term review of the Digital Single Market

strategy, two principal follow-up actions specifically

concerned online platforms:

1. to ensure better platform dialogue coordination

within the Digital Single Market focusing on the

mechanisms and technical solutions for the

removal of illegal content, in order to enhance

their effectiveness in fully respecting

fundamental rights;

2. to prepare actions to address the issues of unfair

contractual clauses and trading practices

identified in platform-to-business relationships,

including exploring dispute resolution, fair

practice criteria and transparency.

To ensure transparency and consumer protection inonline platforms on 1 March 2018, the Commissionissued a Recommendation on measures toeffectively tackle illegal content online. ThisRecommendation builds on an earlierCommunication on "tackling illegal content online,towards enhanced responsibility of onlineplatforms", adopted on 28 September 2017.

EU Regulation on promoting fairness and transparency for business users of online intermediation services

21

On 26 April 2018, the Commission proposed an EU Regulation on promoting fairness and transparencyfor business users of online intermediation services trading together with the creation of anObservatory on the online platform economy.The Regulation aims to create a fair and predictable online environment for businesses by settingobligations for online platforms and search engines to provide business users with appropriatetransparency and to offer effective redress possibilities.

The proposed Regulation covers the following areas:• Terms and conditions;• Ranking methodologies;• Grounds for suspension or termination of services;• Access to data;• Differentiated treatment — vertically integrated online platforms;• Redress procedures

A recent paper by Michael Mandel and Desirée van Welsum, “Perceptions versus Reality RegulatingDigital Platforms” (June, 2018) , analyzed the proposed regulation. This essay examines six perceptionsof platform unfairness in light of the reality of transactions-based costs and user trust. It shows howthese perceptions, in some cases, correctly identify platform behavior, but misunderstand thereasoning behind the behavior. Other perceptions misunderstand the economic incentives ofplatforms. In particular, the perceptions of business users often don’t account for the competitiveand reputation reality faced by platforms. For each perception, the authors consider the associatedremedy outlined in the proposed regulation and discusses the different aspects of the proposedregulation.

A new Deal for Consumers

22

11 April 2018 the European Commission launched a New Deal for Consumers to ensure that all European

consumers fully benefit from their rights under Union law.

AIMS:

1) modernise existing rules and fill the gaps in the current consumer acquis;

2) provide better redress opportunities for consumers, support effective enforcement and greater

cooperation of public authorities;

3) increase cooperation with partner countries outside the EU;

4) ensure equal treatment of consumers in the Single market and guarantee that national competent

authorities are empowered to tackle any problems with 'dual quality' of consumer products;

5) strengthen the awareness and the capacity-building of consumers and traders;

6) look at future challenges for consumer policy in a fast evolving economic and technological

environment.

PROPOSALS

✓ to amend the Council Directive on unfair terms in consumer contracts, the Directive on consumer

protection in the indication of the prices of products offered to consumers, the Directive concerning

unfair business-to-consumer commercial practices and the Directive on consumer rights, to ensure

better enforcement and to modernize EU consumer protection rules, in particular in light of digital

developments;

✓ To introduce representative actions for the protection of the collective interests of consumers

New Deal for Consumers

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• More transparency in online market places. Consumers will have to be clearly informed if they arebuying products or services from a trader or from a private person, in order to know if they have rightsthat protect them if something goes wrong. The Commission also proposes to clarify that all onlineplatforms must clearly distinguish search results based on payments received from other traders from'natural' search results, and online marketplaces should provide the main parameters determiningoffer ranking.

New Deal for Consumers aims atstrengthening consumer rights online

• More transparency on search results on online platforms. When searching online, consumers will beclearly informed when a search result is being paid for by a trader. As well, online marketplaces willhave to inform consumers about the main parameters determining the ranking of the results.

The New Deal for Consumers also seeks to modify consumer protection in free digital services (cloudstorage, social media and email accounts), as consumers provide their personal data, instead of money,for these free services. Parallel to the GDPR, consumers will also benefit from certain information rightsand will have the right to “terminate the contract for digital services within the 14-day right-of-withdrawalperiod”. This will “remove the contractual basis for the processing of personal data…” and “…trigger theapplication of the rights provided by the GDPR, e.g. the right to be forgotten and the right to dataportability.”

Conclusions

Conclusions

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DIGITAL SKILLS

Institutions should work for thedigital literacy of citizens in orderto equip and empower individualswith the competence required tocapitalize on the opportunities.

E-COMMERCE

To safeguard digital consumers,institutions must improve pricetransparency and strengthen theenforcement of consumer rightsand guidance to clarify whatqualifies as an unfair commercialpractice in digital world.

The role of digitalization

Consumer empowerment

Consumer rights

DIGITAL COMPARISON TOOLS

Sectoral regulators must worktogether to make the use of DCTseasier and safer consumers, inorder to support more consumerinvolvement and a better informedchoice

ARTIFICIAL INTELLIGENCE

• Consumer privacy and dataprotection rights must beprotected;

• European safety legislationneeds to be reviewed to reflecttechnological developments;

• Companies should adoptsecurity by design and bydefault.

PRIVACY Ensuring a harmonized application ofthe Regulation and an accuratemonitoring of the new rule applicationis highly important, as well asaccelerating the conclusion of the otherlegislative procedures ongoing toencourage digital service usage.

ONLINE DISPUTE RESOLUTION

The availability of a reliable andefficient online dispute resolutionsystem could greatly help achievebetter empower consumer, defendingtheir own rights.

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tel. + 32 (0) 22347882

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