Consumer rights and unwrapping the latest gadget

The murky side of digital technology has never been far from the headlines this year.

The tone was set at the start of the year with the Facebook Cambridge Analytica scandal, and it was quickly followed with headlines about data breaches, data harvesting, and the misuse of data to manipulate people’s preferences in everything from shopping to voting.

Yet, with Christmas approaching, internet connected smart devices, which bring the so-called ‘Internet of Things’ (IoT) into our homes, are at the top of many people’s wish lists.

Despite the ongoing scandals around data and privacy, gadgets like Google Home or Amazon’s Echo, are growing in popularity. And while their list of benefits are obvious (who doesn’t enjoy turning the lights on from the sofa?), how these devices use the vast amounts of data they collect through easy access to our personal lives remains unclear.

Tech change and the law

These technological advances have been accompanied by greater scrutiny of the ‘fitness for purpose’ of our existing laws, and also the values and policies that underly these laws.

So what is the state of play, and what are your rights now when you unwrap the latest device?

This year in Australia, we’ve seen the Review into Open Banking and the development of a Consumer Data Right, the Human Rights Commission inquiry into Artificial Intelligence, and, most recently, the Australian Competition and Consumer Commission (ACCC) inquiry into Digital Platforms.

While we wait to see which of these recommendations make it into law, it is important to know that we are still covered by existing consumer protection law applying to new technologies.

Many of the protections in the Australian Consumer Law have been designed as ‘open textured principles’ precisely in order to allow them to respond to changes in business practices, markets and community values.

In its recently released report, the AI Now Institute at New York University noted the ‘widening gap between marketing promises and actual product performance’ for AI and internet enabled devices. It called for ‘truth in advertising laws’ to be rigorously applied to such products and services to address the gap between marketing promises and actual product performance, especially in the light of their largely unknown long-term risks.

Unlike the US, Australia already has a broad and categorical prohibition on conduct that is ‘misleading or likely to mislead’ occurring in trade or commerce.

Consumer guarantees

This means marketing claims that don’t match the reality of the service or product can be met with a demand for compensation for injured consumers and significant pecuniary penalties. So, statements like ‘we respect your privacy’ by digital platforms cannot be treated as mere ‘puffery’ that can be ignored by the company once a consumer has signed up.

This prohibition on misleading conduct is supported by a regime of consumer guarantees in the Australian Consumer Law. These are non-excludable statutory guarantees that apply to the supply of goods and services to consumers. The core guarantees require goods to be of ‘acceptable quality’ and services to be provided with ‘due care and skill’.

There is still some work to be done in understanding how the consumer guarantees apply to digital technology and IoT devices, which may come packaged as a complex bundle of goods and services. However, the legal standards will develop as the devices become more common and consumers’ expectations more discerning, and demanding.

For example, the consumer guarantee of acceptable quality in goods includes a requirement that the goods be reasonably ‘safe’. We predict this standard will develop to require goods equipped with IoT technology to include reasonable protections against hacking and spyware, even if such risks cannot be removed entirely.

The already existing law also contains prohibitions on unfair terms in standard form consumer and small business contracts. This regime will protect consumers against attempts by companies to limit their liability for IoT gadgets that don’t work as expected, and may even strike down overreaching terms that intrude into consumers’ privacy and other fundamental rights.

But of course, there is still more to do. Our new year wish list of consumer protection law reform finds a good start in the ACCC’s report. The Report is focused on media platforms but also includes some important recommendations for securing consumer protection in the digital environment.

Privacy protections

One important recommendation from this report is enhanced requirements for consent and transparency from digital platforms and tech companies in collecting, using and on-selling data about their consumer customers. This will quite simply let consumers know more about what is happening with the personal information harvested by our devices.

A second recommendation is increased privacy protections for consumers, along with enhanced rights for individuals to seek redress if these protections are breached. This might apply, for example, if a bluetooth connected device sends private health data to the consumer’s insurer without first seeking permission.

Thirdly, the ACCC report recommends attaching civil pecuniary penalties (fines enforced by courts) to the use of unfair contract terms. This response may really make big tech think twice before including in their contracts overreaching terms that strip consumers’ rights.

Fourthly, the report raises the possibility of a new prohibition on unfair trading practices. This prohibition might be used in response to companies that use the vast amounts of data they have collected and their easy access to our personal lives through IoT and social media to manipulate consumer choice in ways that aren’t transparent or fair.

For example, it might be an unfair trading practice for a company this advantage to trick or manipulate consumers into buying products they can’t use or afford.

With Treasurer Josh Frydenberg recently announcing more money for competition enforcement, 2019 may be an interesting year, especially for tech companies.

So, if you get a IoT gadget this Christmas, don’t forget to read the small print, know your rights and wish for a bit more law reform.

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