Strengthening Consumer Protection in the Digital Age
By Melvin Yong - 11 Nov 2021
This article is contributed by Melvin Yong, CASE President. Any extracts must be attributed to the author.
The biggest online sale event of the year is here again.
Held on 11 November every year, the perennial Singles’ Day sales event sees online marketplaces and retailers offer rock bottom prices and other attractive deals to entice consumers to spend.
Just how popular is this global sales phenomenon.
The sales volume on Singles Day in 2020 far surpassed that in 2019, despite the impact of COVID-19 and less ideal economic conditions. And this year’s 11.11 sales are expected to do even better.
There are many reasons why more consumers are choosing to shop online – greater variety of product choices, lower prices, convenience, and the ease of comparing prices across multiple retailers, just to name a few.
RISKS OF ONLINE SHOPPING
Yet, with all its convenience, e-commerce transactions come with certain risks and downsides which consumers need to be aware of.
For example, consumers need to be wary of scammers lurking on e-commerce platforms, as well as unfair practices such as false and misleading claims.
Engagement with the Singapore Police Anti-Scam Centre to better protect consumers, especially among the less tech-savvy, against e-commerce scams.
A survey published last year by Blackbox and Toluna shows that almost 40% of Singaporean consumers are not satisfied with their user experience on e-shopping sites, while a 2020 CCCS market study on e-commerce platforms found that two out of three online shoppers have encountered false claims relating to discounts or benefits, limited time deals and scarcity of goods or services.
As the volume of e-commerce transactions grows, what can be done to strengthen consumer safeguards in the e-commerce sphere?
I have 3 proposals.
1. Authenticate sellers
First, we need to authenticate the sellers on online marketplaces.
How do you know if the seller that you are buying from is a reputable one? How do you know if the online store will honour your purchase? Could that sleek online storefront have been created overnight?
The duty of ensuring the legitimacy of sellers should be placed on the online marketplace. By charging platform fees and commissions, online marketplaces are expected to ensure that the merchants listed on their platforms are genuine and legitimate.
Online marketplaces should vet, verify and authenticate the credentials of sellers carefully before allowing them to list and sell products on their platforms.
After a seller is listed, the online marketplace should ensure it has a process to monitor the seller. By regularly tracking information such as the number of complaints, customer reviews, product ratings and order fulfilment rate, online marketplaces can have an early sensing of which sellers are not meeting service standards and take proactive actions to protect their consumers’ interests.
It took a tragic incident to push Airbnb into committing to verify all 7 million of the worldwide listings on its platform!
2. Establish an escrow
Second, online marketplaces should ensure that there are mechanisms in place to protect consumers’ payments.
One way to do this is to incorporate escrow into the transaction process. This means that when a consumer makes a purchase, payment to the seller is temporarily held by the platform for a period, and only released to the seller when the consumer confirms that the item is delivered in good condition.
Consumer receiving cash-on-delivery goods purchased online.
In many e-commerce scams, the seller will tout low or discounted prices to attract unwitting consumers. Consumers are often directed to transfer money directly to the sellers’ bank accounts, instead of transacting through the platforms. Consumers subsequently realise they have been scammed when they do not receive the product or receive a counterfeit product. At this point, the sellers usually become not contactable.
Escrow accounts would give consumers greater peace of mind when shopping online.
3. Improve dispute resolution
Third, we need to improve the dispute resolution mechanisms in e-commerce transactions.
For the consumer, it can be time-consuming and frustrating dealing with disputes when purchases go awry. Hence, dispute resolution is an important aspect of improving consumers’ online shopping experience.
In the first half of 2021, CASE received 986 complaints relating to online purchases. This number is likely only the tip of the iceberg as many more consumers could have resolved their disputes directly with the sellers through the online marketplaces.
While we cannot eliminate disputes, we hope to help consumers resolve their disputes fast and equitably. We have observed that online marketplaces have varying scopes and different service levels in their dispute resolution processes. This can sometimes cause confusion to consumers, especially when they shop across different online marketplaces.
To align dispute resolution processes across online marketplaces and e-commerce businesses, CASE aims to put in place a standardised dispute resolution framework in the e-commerce sector covering the following key areas:
- Verification of merchants
- Communication to consumers
- Timeframe for resolution of disputes
- Exchange and refund policies
- Mechanisms and processes to resolve disputes
CASE had previously called out the use of exclusive arbitration clauses that oust the jurisdiction of the Small Claims Tribunal (SCT) by an online marketplace. Arbitration is costly and usually disproportionate to the quantum of the sum in dispute. When faced with such clauses, consumers are often discouraged to pursue their claims which they would otherwise have been able to through the SCT. Dispute resolution mechanisms and processes should not exclude the jurisdiction of SCT.
The Small Claims Tribunals aim to provide a quick and inexpensive forum for the resolution of small claims between consumers and suppliers.
CASE is currently engaging the major online marketplaces to develop a standardised dispute resolution framework for the industry and will share more in due course.
DIFFERENTIATING THE GOOD FROM THE BAD
Last year, CASE worked closely with Enterprise Singapore, the Singapore Standards Council, the Singapore Retailers’ Association and other industry stakeholders to develop and launch Singapore’s first national standard for e-commerce, Technical Reference 76 (TR76).
TR76 provides e-retailers and online marketplaces with clear guidelines on how to implement consumer-centric policies across the entire e-commerce transaction process – including browsing, purchasing, payment, delivery, product tracking, and returns – as well as customer support practices.
I urge all online marketplaces and e-commerce businesses to adopt the TR76 guidelines, which will help distinguish bona fide online marketplaces and merchants from dubious ones.
CASE is also in the process of coming up with a new CaseTrust accreditation scheme for e-commerce businesses. The accreditation, which will incorporate some of the guidelines listed in TR76, will enable online retailers to differentiate themselves as being consumer-friendly.
Businesses doing online sales are encouraged to obtain the CaseTrust accreditation mark when it is launched next year. The accreditation will increase consumers’ confidence to transact with these businesses and help them stand out in the crowded e-commerce marketplace.
Facebook live stream of a local fruit stall.
As we look ahead, online shopping is constantly evolving. New trends such as social commerce and live streaming are growing in popularity with Singaporeans. More consumers are buying products through social media and messaging platforms like Facebook, Instagram, WhatsApp and Telegram. In particular, the trend of shopping infotainment is catching on among Singaporeans, with live streaming companies such as Mdada raking in millions in sales.
CASE is watching these new trends closely.
In the meantime, enjoy the good deals this 11.11 and remember to shop safe.