Online Platforms and Data Privacy - DAC Beachcroft

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Online Platforms and Data Privacy

Published 17 May 2016

The House of Lords Select Committee on the European Union published its report on 'Online Platforms and the Digital Single Market' on 20 April 2016. The report is intended as a response to the European Commission's consultation on how large online platforms use their power and whether the current regulatory environment is fit for purpose.

There is a general recognition in the report that data is fundamental to the success of any online platform. The report suggests that online platform providers' collection and use of data is often complex and not transparent leading to low levels of trust from consumers. In order for the digital economy to grow, online platforms need to be more effective in explaining how personal data is used.

There seems to be something of a paradox here. When asked, consumers say they do not trust online platform providers to do the right thing with personal data and yet consumers' online behaviour would suggest otherwise. Privacy policies are rarely read, privacy settings are often not explored and opt outs are often not used. As pointed out in the report, consumers will choose convenience over privacy. Given the lack of competition in the market, consumers cannot go elsewhere and online platforms have little incentive to become more transparent.

The report goes on to acknowledge that under the forthcoming General Data Protection Regulation (GDPR) privacy notices will need to be more transparent. The bigger question is, will consumers read them? The report, quite rightly, questions whether shorter, more transparent privacy policies will "… be sufficient to make consumers understand the value of their data when transacting with online platforms".

Kite marks have been recommended as a way of allowing consumers to quickly determine if an online platform is complying with data protection laws. The report recommends that the government works with the Information Commissioner's Office and the Commission to introduce a kite mark or privacy seal that includes a traffic light system (much like the food labelling system). However, again, a kite mark might show compliance with the GDPR but that won't in itself educate consumers on how their personal data is being used. The report suggests that such a system might encourage competition on privacy standards thereby encouraging consumers to switch to online platforms with green traffic lights.

There is a clear tension between consumers who expect services for free and commercial online platform providers which need to generate revenue in order to continue to provide these. Consumers need to understand that while the service might be provided for free in the sense that there is no exchange of money, there is a value exchange taking place. Consumers pay for services by handing over their personal data to online providers who then monetise that data. There is no doubt that large online platforms need to improve transparency but until competition in the online platform market is improved consumers are likely to continue to value convenience over privacy.

To see the report click here.

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