Law Commission of Ontario report calls for modernizing consumer protection for digital marketplace

“Our project contends with the reality that most consumer transactions now happen in the digital marketplace,” says Ryan Fritsch, counsel at the LCO. When most transactions occurred face-to-face with local businesses and suppliers, those relationships allowed consumers greater transparency, he says.

“What our project does is it asks if Ontario's Consumer Protection Act… provides the equivalent protection – like it did in the old economy – in the new economy, in the digital economy.”

The report highlights how citizens tend not to read or understand online terms of service and other consumer contracts to which they consent with the click of a mouse. In its current form, the legislation does not effectively protect Ontarians from online consumer risks and should be updated to address those risks and better protect young people and seniors, the report said.

According to Fritsch, new digital marketplace transactions introduce a new set of consumer risks. The major problem, he says, is that “boilerplate or standard-form” contracts have grown from just a few lines to thousands, and consumers do not know what they are accepting because the contracts are too long, complicated, unclear on the risks and consequences, and often misleading or disingenuous.

The contracts may state that the digital service will share the user’s information to “improve our product,” says Fritsch, when in reality, they are harvesting detailed information about the consumer and potentially reselling that data and building consumer profiles with it. He says this leads to another of the modern digital marketplace’s challenges, which is that “invisible algorithms” govern so many consumer transactions. Consumers may be totally unaware of how they operate.

“These can be quite powerful. They can shape prices. They can shape the kinds of content consumers see and influence the choices that consumers make.”

Fritsch also notes that many online transactions occur on platforms using dark patterns, which are manipulative functions on a webpage that push users into choices and behaviours they would not otherwise make. These include pre-checked consent boxes, which are checked as a “yes,” so users must take the extra step to click “no.” Another example is the conduct of Epic Games, the maker of the popular videogame Fortnite, which settled with the US Federal Trade Commission for USD$520 million. The FTC alleged that Fortnite’s dark patterns coaxed players – mostly children – into making in-game purchases.

Among the LCO’s primary recommendations is that the Consumer Protection Act explicitly prohibit “deceptive and unfair online practices” and ensure that consumer protections apply to online contracts.

Ontario’s reforms in Bill 142 made several positive changes, including raising fines for violations of the Act, says Fritsch. However, the legislation fails to deal with “new forms of digital unfairness and deception,” such as dark patterns.

The LCO also recommended that the Consumer Protection Act better protect youth and older consumers by mandating a “plain-language standard,” a duty to accommodate, and establishing an “age-appropriate design code.”

Fritsch says the new legislation also falls short on access to justice. The LCO report recommends a boost in using investigations, consent agreements, and interpretive guidance. It calls for establishing minimum standards for investigations of consumer complaints, establishing “adaptable sliding-scale fines and penalties commensurate with the size of the business in breach of the [Act],” and establishing damages for disgorgement. The LCO also suggests that the province consider creating a consumer assistance organization.