Introduction
Consumer protection in online shopping
Scope of investigation
Background
Comment
In a 31 March 2022 press release, the Federal Cartel Office (FCO) announced that it had initiated a sector inquiry under consumer law into so-called "scoring" with regard to online shopping. Specifically, the investigation is concerned with procedures that are used by retailers to check the solvency of online shoppers.
Credit checks serve to reduce risks and are intended to provide contractual partners with information about a person's ability to pay. They are typically based on individual score values determined by credit agencies, taking personal data into account. The scorer values can be used to determine how likely a buyer is to pay the bill.
Consumer protection in online shopping
Assessing the consumer's solvency is subject to strict data protection requirements. In particular, the data subject's voluntary consent to data processing is required for this purpose.
In the FCO's opinion, it could be problematic if the practice of ordering goods via online retailers with regard to solvency checks is inconsistent and, in many cases, not easily understood by consumers. Ultimately, there is a risk that consumer rights will be violated because of transparency and consent deficits. Andreas Mundt, the president of the FCO explained: "Many consumers are not aware that their solvency is checked when shopping online with the help of so-called score values, especially with the popular "purchase on account".
The sector inquiry is now to examine whether, and in what form, online retailers provide information about solvency checks, how these are carried out and what criteria are used in the process. The investigation will include companies that could be relevant for scoring. These include credit agencies, which supply online retailers with score values – a key instigator for solvency checks.
Following preliminary discussions with experts and interest groups, the FCO will promptly conduct written surveys of approximately 50 selected online retailers and major credit reporting agencies. The results of the sector inquiry will be published in a report once the investigations have been completed.
Sector inquiries can be initiated in the area of consumer protection if there are reasonable grounds to suspect that there are significant, persistent or repeated violations affecting the interests of a large number of consumers. This is a general sector investigation, but explicitly not a procedure against specific companies.
With these powers, the FCO can identify problems and recommend courses of action. It can identify violations of consumer law but does not have the capacity to impose penalties resulting from a violation.
The current sector inquiry into scoring in online shopping is the sixth sector inquiry under consumer protection law conducted by the FCO. The previous investigations also focused on issues that affect consumers' everyday digital lives (eg, comparison portals, smart televisions and user ratings). The importance of online shopping has been growing continuously for years. This also increases the risk of transparency and consent deficits. In this respect, the review is another important step toward strengthening consumer rights in the digital economy.
For further information on this topic please contact Sascha Dethof or Paulina Stemmler at Fieldfisher (Germany) LLP by telephone (+49 211 950 749 0) or email ([email protected] or [email protected]). The Fieldfisher (Germany) LLP website can be accessed at www.fieldfisher.com.