Strengthening Consumer Protection in Social Commerce
By Melvin Yong
May 31, 2024
This article is contributed by Melvin Yong, CASE President. Any extracts must be attributed to the author.
We use social media to connect with friends, watch hours upon hours of short videos, and increasingly to shop!
The unstoppable trend of “shoppertainment”
”Shoppertainment” is a phenomenon where shopping and entertainment are combined, allowing consumers to purchase products and services in real-time through engaging and interactive livestream on social media platforms. The trend is experiencing a huge growth in Singapore, with the total value of goods sold on TikTok Shop Singapore Live growing four times in the second half of 2023 over the same period in 2022.
In fact, our local social commerce industry is also slated to grow significantly over the next five years from S$1.6 billion in 2023 to S$11.4 billion by 2029.
Risks when buying from a livestream seller
While the convenience and seamless integration of social commerce into lives offer benefits to consumers, it is important to note the inherent risks in this nascent industry. Here are some examples.
Poor dispute resolution processes
In 2023, CASE received 85 complaints relating to social commerce. The majority of the complaints pertain to the sellers not fulfilling the contracts and refunds, defective goods or goods that do not conform to contract, and delivery issues.
You may recall a notable incident in 2023 involving Mdada, a Singapore-based company that markets items such as skincare products and luxury bags via livestreams on their Facebook page.
Consumers complained that orders were not delivered on time, others faced delay in receiving refunds for non-deliveries, and some received defective goods or goods that do not conform to contract.
As these transactions were conducted outside of the social media platform, there was a lack of accountability, and consumers were left in the lurch. CASE then stepped in to assist consumers and sought a resolution with Mdada.
The prevalence of poor dispute resolution processes among livestream sellers leave consumers without proper avenues for resolution.
Low barriers to entry leading to scams
The ease of setting up shops on social media platforms has also led to increased scams, as sellers’ identities are often not authenticated.
From January 2024 to March 2024, at least 104 victims have fallen prey to scams involving social media advertisements, with losses amounting to more than $63,000.
These scams perpetuate through livestreams that feature promotions for heavily discounted goods on social media platforms. When victims clicked on the advertisements, they were redirected to fraudulent phishing websites that prompted them to enter their payment details and passwords.
Fake Reviews
When purchasing products online, consumers often rely on reviews to guide purchasing decisions as they provide insights into the quality and reliability of products from the perspectives of other buyers.
However, it can be difficult to know if these reviews are genuine. Reviews can be written by paid writers, or even bots! Such deceptive reviews should be considered an unfair practice as it can mislead consumers.
Beyond tackling the issue of fake reviews, I have three suggestions to strengthen consumer protection in social commerce.
- Sellers on social commerce platforms should be deemed as businesses
Firstly, the government should mandate business registration for sellers operating on social media platforms, so that any disputes would be covered under our consumer protection laws and consumers can seek redress via CASE.
This is already the case in China. Its e-commerce law, passed in 2019, places different obligations on e-commerce platform operators, merchants on these platforms, and other players in the e-commerce ecosystem, to safeguard consumers.
Alternatively, the Government could clarify provisions within the Consumer Protection (Fair Trading) Act (CPFTA) to automatically deem sellers on social commerce platforms as businesses.
This would also level the playing field for retail businesses and those operating on social commerce and ensure accountability of sellers regardless of its mode of sale.
- Mandate escrow accounts
Next, escrow accounts must be mandated on social commerce platforms to combat the scourge of scams.
In February 2024, several people were scammed when they bought Lululemon products from Carousell seller and the seller ghosted them. This can easily happen on any social commerce platforms. Therefore, it is important for platforms to have escrow accounts, as consumer’s monies are only released to the seller once the transaction has been verified.
The Codes of Practice under the Online Criminal Harms Act already provide for seller verification and payment protection for e-commerce platforms. We want this to be extended to social commerce platforms.
- Establish and mandate a clear dispute resolution framework
Lastly, all social media platforms should establish a clear dispute resolution framework to provide consumers with avenues to resolve their disputes.
During a recent visit to ByteDance, my CASE colleagues and I learned about the various measures put in place to enhance the safety of the shopping experience for consumers.
We learned that TikTok Shop has an after-sale dispute escalation handling framework, which specifies the timelines for submission and resolution of disputes, and what consumers should do to submit the disputes.
TikTok Shop also has specific platform governance and fraud prevention measures to ensure compliance with safety standards and laws.
I went on a learning journey to ByteDance together with colleagues from CASE and learnt about the various measures put in place to protect consumers who buy from TikTok Shop.
I call on all social media platforms to establish a clear dispute resolution framework to ensure efficient and equitable resolution of disputes for consumers who shop on their marketplaces.
A final word of consumer advice
Consumers engaging in social commerce should exercise caution and remember the three Rs before purchasing goods.
- Rating and reviews: Research seller ratings to make informed decisions and avoid buying from sellers with a history of complaints. When assessing online reviews, consider a variety of ratings, cross-check multiple platforms for consistency, and look for signs of fake reviews, such as overly positive feedback, generic content, and sudden spikes in reviews.
- Returns and refund policy: Check the social commerce platform’s returns and refund policy to understand the terms and conditions before making a purchase.
- Reliable platform practices: Choose to shop on social media platforms that put in place consumer protection measures such as authentication of sellers, escrow service to protect consumer monies until goods are received in satisfactory condition and having clear dispute resolution processes.
CASE will continue to champion safeguards in the social commerce industry so that consumers can enjoy entertaining sales pitches with a peace of mind.
