The impact of free digital offers on individual behavior and its implications for consumer and data protection laws

Two days ago, I received great news! I was awarded a Marie Skłodowska-Curie Fellowship to conduct research on how offers for free digital goods and services influence people’s decision about their personal data and consumer rights. This three-year project will be supervised by Jan Smits. It will include collaboration with researchers from the UM School of Business and Economics and a research stay at ETH Zurich with the Law, Economics, and Business Group led by Alexander Stremitzer.

The idea for this research started with a simple observation that there is an abundance of digital goods and services offered for free. We can communicate with our friends through social networks, store our files in clouds, navigate the city, manage our finances or even find a life partner using mobile applications or online services without paying a single penny.

When looking closer at these offers, it can be, however, noticed that free does not yet mean that we give nothing in exchange. We do provide our private information and attention that might be profitably used by suppliers of free digital content. Since these transactions affect consumers and their personal data, they fall within the scope of two fields of the EU law – data protection and consumer law. The overall objectives of these two areas of law are to protect the privacy of consumers and to balance their position against more powerful transaction partners, i.e., businesses. The question which interests me most is whether these objectives are indeed achieved with the current design of the rules, given people’s heuristics and biases in decision making about free products. Behavioral research has demonstrated that consumers tend to overestimate the benefits and underestimate nonmonetary costs of free digital content in the form of exposure to advertisements. Yet, it is still unknown how free offers influence consumer decisions that are relevant from a legal perspective, i.e., decisions that involve consumer rights and privacy. During my MSCA Fellowship, I will conduct online experiments to address this knowledge gap.

Specifically, I will aim to answer the following research questions:

  1. How does offering digital content at a zero price but in exchange for personal data influence consumers’ decisions about:
    • use of digital content,
    • sharing of personal data,
    • use of contractual and data protection rights, e.g., request to repair the defective content or to delete personal data.
  2. Will these decisions change if consumers are provided with information that:
    • consumer personal data are supplied as counter-performance for free digital content?
    • consumer personal data are valuable?

With the proposed experimental studies, I will provide further insights on consumer behavior by identifying how consumers make decisions regarding free digital content supplied in exchange for personal information. These transactions have been recognized as in need for a policy intervention and have been subject to recent legal initiatives in the EU such as the General Data Protection Regulation or the Digital Content Directive. The stakes are non-trivial. Although consumers do not pay money for free digital products, they do suffer detriment when a product fails to function properly (e.g., costs of time spent on repairment) or due to abuse of personal data they shared in exchange. Crucially, free offers might affect one of the most vulnerable groups of consumers that is low-income consumers who cannot afford paying for digital products. Thus, the overarching goal of this research is to learn whether there is room for improving welfare of consumers of free digital content and what further measures could be implemented to achieve such an improvement.

Since this is my very first post on the MEPLI blog, I would like to take this opportunity to briefly introduce myself to its readers. I am an Assistant Professor of Empirical Legal Research at the UM Faculty of Law. Before coming to Maastricht, I was a post-doctoral fellow and an LLM student at the NYU School of Law. I got into experimental research during my doctoral studies at the Max Planck Institute for Research on Collective Goods in Bonn. There I worked together with economists and psychologists investigating the impact of law on human behavior. For instance, I ran a series of experiments aimed to understand the influence of gender- and performance-based selection procedures on group cooperation (more details here). Based on my own and other empirical research I developed legal arguments contributing to the discussion on introducing gender quotas in corporate boards. I also investigated experimentally how payoff-irrelevant terms (i.e., a fixed-term vs. open-end contract duration) can impact contractual behavior (more details here). When at NYU I expanded my empirical toolkit and  started analyzing the content of contracts governing transactions for free and paid digital content. This helped me generate further research questions that I am going to address as a Marie Skłodowska-Curie Fellow. I will keep you posted about the results of this research project, so stay tuned!

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Brexit and the Economics of Federalism

By Prof. Dr. Niels Philipsen

 

With Brexit, Yellow Jackets and EU-scepticism dominating the news and everyday discussions, I would like to direct MEPLI blog readers’ attention to some of the lessons that law and economics can offer to the (polarizing) debate on the future of the EU. My impression is that many academics, perhaps also some colleagues, too quickly label certain voters (those who supported Brexit and those who vote for EU-sceptic political parties) as ‘stupid’ and lacking the intelligence to understand and vote on topics like immigration, monetary policy, and environmental law. In my view this is not the right way to contribute to the debate. We need a much more balanced view. Perhaps, law and economics can help.

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Vincenzo Cento and “The United States of Europe”

By Dr. William Bull

 

On 16 December 2018, I had the pleasure of visiting the home town of my late Italian grandfather, a small hilltop community called Pollenza, in the lesser known region of Le Marche. The Italian side of my family, the famiglia Cento, has produced a number of academics, including both my mother, Anna Cento Bull, Professor of Italian History and Politics at the University of Bath, and my grandfather, Alberto Cento, Professor of French language and literature at the University of Naples. What I had not realised, however, is that my great-grandfather was also a renowned scholar, and apparently quite an important name in the town of Pollenza.

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The Regulation of Social Media Influencers, 11 January, Maastricht

BOOK WORKSHOP

11 January 2019
Maastricht University, Faculty of Law 

As people turn away from classical advertising channels such as television, print or radio, social media platforms such as Instagram, Youtube, and more recently Tik Tok, are establishing themselves as marketing outlets in the search of consumer engagement. Powered by the generation of online content by their users, consumers who produce content – or in other words prosumers, these platforms now feature hundreds if not thousands of popular individuals who amass impressive amounts of followers. Active in any possible industries that appeal to their followers, ranging from gaming to pets, lifestyle, beauty or health and fitness, social media influencers continuously create content for their fans to keep them updated on different products and services, in the form of reviews.


On the one hand, empowering users to start their own channels or accounts and be able to gather revenue as an alternative to a classical job sounds promising: there are no market entry requirements, it provides the much-coveted millennial work flexibility, and can be a great alternative if job prospects are dire. On the other hand, influencer marketing raises fundamental legal and moral questions. As a lot of the content posted by influencers on social media is sponsored by the companies behind the products or services they review, without any notification: how should the audience draw the line between honest opinions and paid endorsement? What is more, the business models used by influencers are obscure at best. Most influencers start small, very likely as an individual and not as a freelancer or a business, so it is very difficult to tell who owns a specific account and what their obligations are to their audiences: is it a company that must comply with advertising laws and consumer protection, or is it peers, not bound by the same high standard? What happens with content which entails health risks, such as the promotion of cosmetic surgery or medical products? In addition, given that impressionable children between 7 and 15 are constantly present on social media, should they benefit from any additional protections?

This workshop brings together interdisciplinary approaches to some of the less visible issues posed by advertising on social media, and is supported by the Independent Social Research Foundation, the Maastricht European Private Law Institute and the University of Groningen. Each speaker in the event is currently authoring a chapter in the book The Regulation of Social Media Influencers (Elgar, forthcoming 2019), edited by Sofia Ranchordás and Catalina Goanta. The event will also feature a keynote speech by Madeleine de Cock Buning, Professor (Utrecht University /EUI), Chairman of the Dutch Media Authority (CvdM) and Chair of the European Commission’s High-Level Expert Group (HLEG) on fake news and disinformation.

The full programme and registration are available here. The workshop is free of charge, but places are limited. Registrations will be open until 5 January. For any additional inquiries, you can send an email to catalina.goanta@maastrichtuniversity.nl.

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Robo-liability: the European Union in search of the best way to deal with liability for damage caused by artificial intelligence

Antonia Waltermann and I will be organising a debate on legal personhood for robots at the SSH Synergy conference 2019 (7 February). For a brief overview of some of the issues the event will touch upon, see the following editorial I wrote for the Maastricht Journal of European and Comparative Law:

Robotics is no longer a theme reserved for science fiction movies and technological research institutes. Although most of us do not yet possess a human-looking machine that takes care of our household, robots already play an important part in our daily lives, as search robots, virtual assistants such as Siri or Alexa, programmes that suggest products or services based on our previous purchases or searches etc.

It is difficult to define exactly what a robot is. The concept may refer to machines that carry out identical and repetitive actions. These types of robots have been widely used since the industrial revolution and our current law is fit for dealing with them. More problematic, however, are the robots that possess artificial intelligence (AI), enabling them to ‘learn’ from the information they are programmed with and the actions they perform, and to use this ‘knowledge’ to make decisions in subsequent cases. It is these types of robots that challenge the present legal framework, inter alia in the field of liability law.

Search engines and virtual shopping assistants may cause economic damage to certain traders, by steering potential customers to their competitors; they may affect consumers whenever their suggestions are not accurate or do not meet their needs or preferences. However, the risks and damage caused by self-driving cars or healthcare AI applications may be significantly larger.

The full editorial can be found here.

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The Supposed Rise of Empirical Research in European Legal Journals

Over the years, I have heard various colleagues say they thought empirical legal research (ELR) has been on the rise. Some see this as a positive development, making law and legal research more evidence-based and diverse. Others are critical, for example because ELR projects are more successful when it comes to obtaining grants than doctrinally-oriented projects.

For sure, I have seen many ELR workshops, conferences, symposiums and other events been organized over the years. Nevertheless, I have wondered why there would be an increase of ELR. I have not seen more colleagues who have been enthusiastic about ELR actually start doing more ELR. This year, together with two co-authors, I took the time to go analyze the proportion of empirical articles in the 2008 – 2017 period for a large number of European-based legal journals.

The result? The evidence for an increase is weak at best. The results do not provide convincing evidence (if any) for an increase of the proportion of empirical articles. We did find some other interesting effects, such as more prestigious journals being more likely to publish empirical articles than less-prestigious journals, and older journals being more likely to publish empirical work than younger journals, but not at an increasing rate.

The study obviously comes with some limitations, since the time period that was examined is limited, because an analysis of the submitted articles may paint a different picture, or because ELR scholars may tend to publish in US-based journals rather than European-based journals. Nonetheless, the findings do raise the question why ELR has not become more popular.

Various reasons can be identified that form obstacles for ELR to grow. The availability of data that can be analyzed is undeniably important. But perhaps more important is training. To my knowledge, legal academia has not been considerably changed in that it implemented a more empirical focus in the programs offered to law students. As a result, academic staff is not incentivized to obtain empirical skills, and because graduates are not trained empirically, they are unlikely to see the importance nor will they see the necessity to recruit empirically trained law school graduates. It therefore seems that if we want to increase the use of empirical legal research, it starts in legal education. And by simply start doing it.

The article can be found here or here.

 

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