Online retailers ‘race to the bottom’ on privacy

Joseph Brookes
Senior Reporter

Online retailers offer no genuine competition on privacy to Australian consumers, allowing them to conduct “pervasive” and “unnecessary” data collection, a leading privacy expert has told the competition and consumer watchdog in its current investigation of ecommerce giants.

New analysis of eBay, Amazon, Catch and Kogan’s Australian privacy terms found they offer little variation in quality or competition, despite significant variance in form, including eBay’s 22,000-word privacy terms dwarfing Kogan’s 1,500-word policy.

Complex terms and conditions of online retailers are minimising privacy options and competition, new analysis has found.

The analysis, by UNSW senior lecturer Dr Katharine Kemp, found the “vague” and “complex” terms conceal the true data practices and intentions of online retailers, helping to minimise competition and consumer choice.

“No marketplace wishes to provide consumers with substantial privacy choices while their rivals may continue to undermine consumers’ privacy to their own advantage without detection, which makes the present situation a ‘race to the bottom’,” Dr Kemp said.

The privacy terms offered in Australia are also less protective than those typically offered in Europe, Dr Kemp found. In Europe, strict data processing regulations are legislated and include significant penalties for breaches.

The privacy agreements of the online retailers require Australian consumers to consent to “pervasive and unnecessary third-party data collection terms” to use the website or marketplace, Dr Kemp found. She said the agreement allows the companies to use this third-party data with few limits, even when the consumer has not knowingly provided the data being used.

“[M]arketplaces use this third-party data to create and build a more detailed profile of the consumer for purposes such as marketing, profiling, advertising and/or product development.

“It is reasonable to assume most consumers would not have discovered these terms, which are not highlighted in the privacy terms, but buried below numerous other terms about obvious, uncontentious data practices.”

Dr Kemp is using the analysis as a submission to the Australian Competition and Consumer Commission’s (ACCC) current inquiry into online retail marketplaces.

The watchdog is probing online marketplaces like Amazon, eBay and Kogan as part of a long-running digital platform services inquiry, following concerns about their conduct and risk to consumers as they grow in size and reach.

Online retailers’ terms and conditions and their use of third-party data have been identified by the ACCC as a particular area of concern.

Dr Kemp argues Australian consumers should not be forced to “consent” to third parties unnecessarily sharing data about them to use online retailers, but currently they have little genuine choice.

A better option, Dr Kemp said, is to allow consumers to opt-in to third-party data sharing if they like, and the third parties should be named.

“The general rule should be that online retailers and marketplaces must not collect data relating to an individual from another company, unless the individual has requested the online retailer or marketplace to do this by taking clear and unequivocal action,” the submission said.

Without better regulation, online retailers and others will continue to use the “implied” consent consumers give when accessing a website or in agreeing to vague privacy terms, she said.

“These implied consents are fictional and pervasive. They should be eliminated through improved privacy regulation, including deterrent financial penalties,” Dr Kemp’s submission said.

“In the meantime, it is possible to turn off the tap on some unfair data flows by creating a simple rule that online retailers and marketplaces must not collect data relating to a consumer from a third party, unless the consumer requests the retailer or marketplace to do this through the consumer’s own clear and unequivocal action.”

Dr Kemp also recommended requiring retailers to turn off tracking and cookies by default and that they must provide consumers with a warning on the collection of data for personalised advertising, including when it is still being collected after a user opts out of seeing the ads.

The Attorney General’s Department is currently conducting a review of the Australian Privacy Act, which is expected to address some of these issues. But the review has been delayed, with a discussion paper still yet to be released 18 months after the review was launched.

Do you know more? Contact James Riley via Email.

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