Law Commission project looks at how traditional legal principles apply to new marketplace
The growing frustration that the contractual fine print no longer sufficiently regulates the digital marketplace is at the root of a new project from the Law Commission of Ontario (LCO).
The LCO’s new consultation paper on consumer protection in the digital age includes, as an example, the $520 million fine that Epic Games, the developer of the video game Fortnite, recently paid the US Federal Trade Commission. The video game is alleged to have collected the personal information of children and used “dark patterns” – deceptive user interfaces that trick users into taking specific actions – to generate in-game purchases. Fortnite is also the subject of class-action lawsuits in BC and Quebec, where plaintiffs allege the game’s design engenders addiction and unjustly enriches the company.
“Those are the kinds of activities in the digital marketplace where the terms of service plays the key role of disclosing what exactly the deal is that you're getting into,” says LCO legal counsel Ryan Fritsch.
“One set of issues that we raise in the paper is that the Consumer Protection Act doesn't specifically have protections for youth right now.”
Now that nearly every transaction is done digitally or online, Canadians have become “digital citizens and digital consumers,” which raises the question of what kind of digital rights should follow, he says. The main legislation protecting consumer rights in Ontario is the Consumer Protection Act. The last time it was significantly updated was in 2002.
“That's a while ago,” says Fritsch. “2002 was before Facebook was invented, which was 2004. YouTube was launched in 2005. And the iPhone wasn't released until 2007.”
“The Consumer Protection Act was last updated, essentially, for a time when we were just starting to do e-commerce via email and to account for things like fax machines,” he says. “So, consumer protection law has really struggled to keep up with the last two decades as we've all marched into the digital marketplace.”
The LCO expects legislation amending the CPA to be introduced this fall.
The LCO’s Consumer Protection in the Digital Marketplace project examines how to enhance consumer protection in terms of service (ToS) contracts for digital products and services.
Fritsch says the LCO is looking at two sets of questions. The first is how classic or traditional legal principles apply in the digital marketplace. These include a right to notice of ToS use, a right to the contract’s disclosure, and protection from unconscionable or unfair terms. The LCO will consider where these principles need updating to protect both consumers and businesses.
The second set of issues are new and specific to the digital marketplace, such as dark patterns, including pre-checked consent boxes, buried user settings, and when website designers make it nearly impossible to find where to cancel the contract.
The LCO’s project will also analyze “forward-looking issues,” such as the coercion consumer face from the difficulty of opting out of the software ecosystem, and the costs attached to using free services, says Fritsch.
“A lot of online services are presented as being free to use, but then often monetize the consumer in ways that they're unfamiliar with,” he says. “This means that consumers don't really understand the market context of what they're agreeing to by signing on to something. And they're not provided that key information at the signup process.”
The LCO has found that ToS contracts are long and complex, and studies show that almost no one reads them. In one major online platform’s collection of contracts that the LCO looked at, the policies and terms of service were longer than the first “Harry Potter” book.
A 2017 Deloitte survey of 2,000 US consumers found that 91 percent click “agree” to online ToS without reading them. That number rose to 97 percent for the respondents between 18 and 24. A study by researchers from York University and the University of Connecticut created a fake social networking site and a ToS that included the requirement that users hand over their firstborn child as payment, and 98 percent of the study’s participants agreed. According to the Guardian, to read the ToS for every digital service a person uses would take the average American 250 hours per year.
Because consumers do not have a physical copy of these agreements, they can also be subject to frequent unilateral changes, says Fritsch. These range from routine tweaks to modifications that can have “serious material consequences for consumers.”
“One of the things we're asking in the project is should consumers have a right to get notice of these kinds of unilateral changes. How would that be done? What's the best way to do that?”
Fritsch leads law reform projects at the LCO examining the impact of AI on Ontario’s criminal justice institutions, the modernization of consumer protection law for terms of service contracts in the digital marketplace, and the decolonization of health law for Indigenous communities in the province. He was formerly legal counsel at Ontario’s Psychiatric Patient Advocate Office and led the development of Legal Aid Ontario’s mental health strategy.
The LCO is running a consultation for the project that will be open until Sept. 1.