I think they should care about online consumers?

What's the problem?

There has been an emergence in recent years of what are called Dark Patterns when we are purchasing goods and services online, defined by advocacy group darkpatterns.org as follows:

A Dark Pattern is a type of user interface that appears to have been carefully crafted to trick users into doing things, such as buying insurance with their purchase or signing up for recurring bills.

I think its about time consumers were protected from this behaviour so I wrote to the ACCC about it. The problem and their response are outlined in this article.

Most people who've used the Internet to purchase goods and services have been victims of such trickery, and it takes a while to gain experience in getting through the process of making sure you don't sign up to newsletters, making sure you don't have extra items added to your bill, and making sure that your on-line payment is not a recurring one when making purchasing decisions.

In addition, many of these processes are "easy-in, hard-out" which makes it difficult to cancel a service that you have accidentally paid extra money for by being required to send cancellation requests trough standard mail or to call a number that is not answered and/or difficult to find, rather than use the same easy mechanism to "opt-in" (e.g. a hidden box in a form that is pre-ticked).

If every time you put a can of tomatoes in a supermarket trolley the retailer added a can of coke, with you having to go to the other side of the store to remove the can and place back in the soft drink section (otherwise being required to pay for the can), then consumers would force supermarkets to stop putting the coke in the trolley and potentially fine them for being misleading and deceptive conduct under the Competition and Consumer Act 2010 (formerly the Trade Practices Act). In the online world, this should be no different.

An Example

Tiger Airways are one of the biggest offenders. I went to their site on my mobile site (https://m.tigerair.com/) to book a return flight from Melbourne to Sydney. As with most airlines, I selected the outbound and inbound journeys by selecting the flights which had clearly displayed prices of 54.95 and 64.95 respectively, then clicked Next. On the next page I am then required to enter my details (first name, last name and DOB).

I assume this screen is inserted here likely to make me forget how much I've decided to pay on the previous screen. The next part is where it gets tricky. The screen below clearly shows no options checked, but in fact I have agreed to pay an extra $40 for Luggage without knowing it.



The way Tiger have done this is to separate some extras (baggage upsize) from other extras (tigerconnect, sports equipment etc) to give the impression that nothing extra has been selected. Its blatant trickery and is misleading. This should be assumed to be deliberate.

The next screen is more of this. The question of which seat I want, with different seats having different prices, intimates that if I want a seat (which I must have) I need to pay for it.



This is not in fact true. I scroll to the bottom of the page without selecting a seat and click next, and this is perfectly fine.

Once I enter my name and address, I then go to the final screen, which summarises my ticket but doesn't itemise the costs. It just provides a booking total of 171.90, a full $52 more than the expected $119.90 that was advertised as the cost of the flights.

Does the ACCC care?

I wrote to the Australian Competition and Consumer Commission (ACCC) citing the above as an issue and asking the following questions:

• Does the ACCC have power to act on websites that trick customers by "opt-in" being the default option for additional services when a primary purchase is made?

• If the ACCC does have this power, has there been any evidence of penalties being imposed on companies for deceptive and misleading conduct? What other actions (if any) has been taken?

• Has there been previous complaints against Tiger Airways for this particular concern (trickery on their website)?

Their response was as follows:

Thank you for the information you provided to us. The issue you have contacted us about may raise concerns under the Australian Consumer Law. Complaints like yours help us understand what issues cause the most harm to Australian consumers and where best to direct our resources.

We will only contact you again if we need more information. Please see our website for information about the ACCC and the types of matters we prioritise.
So it would appear that the ACCC don't prioritise questions that ask them what they do. I can only therefore assume they don't prioritise company's ripping off consumers online, which begs the question: Isn't that their job?

What are the costs?

1. Direct Consumer Cost

There is a cost to consumers that are being "ripped off" by the organisations that exhibit the immoral behaviour of workflows using dark patterns.

2. Anti-competitive

There is a difficulty in price matching between various airlines. If prices can't be easily placed side by side, then competition is reduced and normally that means prices end up being higher.

3. Reduction in Online Confidence and Efficiency

The reason this is such a critical problem is that the costs of "doing things" online for a consumer should enhance our lives by making purchases more efficient than other means. These engagements are also significantly cheaper to facilitate for retailers and other providers of services, as there is no requirement for a shop front, the office can technically be "anywhere" and the transaction can occur any time of the day without the need for a person to be there to facilitate it. Dark patterns reduce confidence, particularly by non-expert Internet users (e.g. older people), and therefore take-up of the more efficient retail behaviour is slower and the high costs of traditional forms of retailing remain. For this reason there needs to be intervention by the Government to improve this confidence.

4. Small Theft Undetected

Taking a small amount from a number of people is far less likely to be reported than taking a large amount from a small number of people. Anybody who does complain is likely to get their money back (consumers are generally encouraged to seek resolution of complaints with the company first). Those who don't bother then allow online retailers to get away with their dark patterns.

Why is the law not being upheld?

Many sites have been and continue to be found to be poorly "put together" by User Experience (UX) experts in terms of the way people interact with them. In the past this was largely the result of not having the expertise to know how people use the internet due to its relative recency. In recent years, however, this has changed, and large retailers employ UX experts to built and maintain their sites and applications to optimise the user experience as well as maximising profit.

Having a poor usability experience which involves a dark pattern should therefore be assumed to be deliberate and the responsibility of online retailers under the law should be to remove such elements from their site. As with other areas of the law, ignorance should be no excuse and fines should be issued to offenders as a multiple of the likely profits made from this behaviour.

Final Thoughts

The main thing we can do to ensure that consumers are protected online is the same thing that we should do in the physical world. Consumers, particularly those in Australia, may not be able to be protected from sites that are based overseas, but any site of an Australian company should be covered by the same rules that govern offline transactions, namely that Dark Patterns are a form of deceptive and misleading conduct.

This should be made clear to the ACCC as a priority with big fines to back them up, and to the Australian public who should feel confident to report this behaviour.

Collect GST on low value Imports

I think they should ensure GST is payable on ALL imported goods and services where there would be a tax on those goods and services if they were locally produced. This includes the current exemption for goods under $1000.

Proposal

• The exemption from GST of imported goods and services under $1000 should be abolished.
• All financial institutions that facilitate payments from Australian bank accounts for goods and services from international sources will be required to charge GST on that payment if the payment is to an international merchant NOT registered for GST in Australia and forward this GST to the Australian Taxation Office.

Background

In Australia, all goods and services except for a few exempt items (e.g. some food) that are sold are subject to a Goods and Services Tax (GST) of 10%. This includes all goods and services paid for by business or consumers. The tax collected is then required to be forwarded to the Australian Tax Office (ATO) on a regular basis.

There is currently an exemption from the GST for imported goods under the value of $1000 prescribed under item 26 of schedule 4 of the Customs Tariff Act 1995.  As a result of this law, local producers of goods and services are disadvantaged as they are paying tax when international competitors are not. This reduces competitiveness of local businesses by at least 10% and results in the following problems:

• A significant reduction in the GST collected by the Government. No numbers have been sourced, but it would be expected that this would be tens of millions of dollars and growing.
• Closure of local businesses. This issue is one of several factors that has resulted in retailers closing down in recent years, in particular for consumer goods such as clothing and electrical. 
• Lack of investment in local businesses.

These problems reduce economic activity, negatively impacting national income via reductions in employment and profitability of operators.

How has this happened?

The significant increase in the ability to purchase goods via the internet and the number of people connected has significantly increased the quantity of low value imports in just a small period of time. The use of financial instruments to easily pay for consumer goods underpins this trend.

The associated low cost of transporting goods and virtually zero cost of transporting services has also made the international importers of low value goods competitive when previously they may not have been.

It has also been argued in 2011 when the issue was hotly contested by large retailers that the high cost of administration of a scheme to tax low value imports would be greater than the revenue collected, however this discussion outlines how it could in fact be a low cost option.

How would it work?

It is assumed that the vast majority international payments for goods and services are either made through Visa, Mastercard, or increasingly through wallets such as Paypal.

The payment request would have to include either an ABN or identifying information that made it easy to match to an ABN, which could then be searched in the Australian Government's ABN lookup system.

Either the acquiring bank (bank of the card holder) OR the card network (e.g. Visa or MasterCard) would be required to add a check against the merchant for whether they are registered for GST. The easiest way of doing this is for Visa and MasterCard to perform the checks and provide the information as to whether the merchant is GST registered in the message sent to the bank for processing.

Wallets such as Paypal would also be required to be facilitate this rule. Movement of funds from banks to wallets where the GST checking mechanism was not in place would incur the 10% fee on any transfer to that wallet. This would ensure that wallets would be incentivised to participate.

The GST would then be forwarded by the institution to the Government.

How does this affect the Customer?

If the merchant was not GST registered then the institution would be required to charge an additional fee against the transaction of 10% of its value. This could appear as a separate item in the bank statement of the consumer, in a similar way to how banks charge a currency conversion fee for international transactions, or the amount of the transaction would be increased. Initially this may in fact be the easiest method of implementation.

How is the payment system affected?

The current way that a credit card is processed via the MasterCard or Visa network is outlined below. Each entity replies with a request of either success or failed. If success, a request is made to the next entity in the flow.

There are two key changes to this process:

• The Payment network will be required (for Australian Card Issuers and international Merchants Only) to check the merchant is GST registered. They could potentially do this using something similar to the Government's ABN lookup capabilities, or other means to be determined (see section below).
• Requests from international non-GST registered merchants will have an additional charge added by the MasterCard or Visa network when sent to the Card Issuer for processing. Ideally the card issuer would be able to identify (using information sent by the Payment Network) whether a payment had the 10% charge added and could inform customers of this.

International GST Registered Register

An online Australian Government Register of GST registered international companies that is highly scalable and available is required. This is expected to be low in cost to administer, which will be done by the ATO.

The Payment Network would request from this register to determine whether an international merchant is GST registered. If there is no response within a reasonable period (e.g. 2 seconds) then the merchant should be assumed to be registered and no additional charge should be requested. In this way the incentive should be on the Australian Government to ensure the register works effectively.

What will it cost?

The introduction of an open register of merchants registered for GST should be very straightforward for the ATO to create and administer. Without knowing all of the details, given limited security is required because the information is public, this is unlikely to cost much at all in terms of the time taken to develop the software and process the requests.

With respect to the cost to Payment Networks such as Visa and MasterCard, it is not known the complexity of the system, however these networks do have a series of rule based mechanisms used as part of card validation. In this way they should be able to already identify where an Australian card is being used for an international merchant, so the associated checking mechanisms via request to the new register and appropriate action should be relatively straightforward. It is expected the cost would be a tiny fraction of the total value of these types of transactions and therefore easily absorbed by the organisation and/or its partners (Australian financial institutions).

Ongoing Review

A continual review of new payment systems that facilitate international payments should be performed annually by the ATO.  Rather than providing a complex blanket rule for all operators, it is considered more appropriate to make a low-cost relatively straightforward change to the system that impacts 99% of transactions and deal with the exceptions as appropriate.