Friends of the Behavioral Economics Club, this week we present the paper “The role of behavioural economics in shaping remedies for Facebook’s excessive data gathering”, by Mäihäniemi, B. (2022), in which the author talks about the usefulness of behavioral economics applied to data protection in social networks’ context.
Social networks can exploit users’ online behavior using data collection techniques, it is a reality.
Rather than competing for better consumer protection, these companies often seek to attract and exploit consumers by exploiting their weaknesses, such as overconfidence and optimism.
Naturally, this is not the case for all companies, and some do, in fact, offer greater privacy options as a differentiating factor. However, the vast majority do not work this way.
Data is collected through the provision of free services that allow large companies to gather information about users’ online behavior.
This concept we have, as users, that companies offer us their services for free, is misleading, as consumers pay for these services in other ways. One of them is by providing this information.
Although extensive data collection has become the accepted business model for most, it does not seem to be the best for the welfare of users; in fact, in specific situations, it is a problem, for example, an abuse of exploitation of market power that does not respect data protection.
The main issue is voluntary consent to data collection in the context of a dominant company, and the problem of lack of user self-determination, which may diminish consumer choice and, consequently, consumer welfare.
Excessive data collection is evident, for example, when a fully personalized experience on social networks or mobile apps depends on users’ consent to the collection of their data on third-party websites. Such collection is problematic for several reasons: for example, it could be seen as exploitative abuse under competition law, as dominant companies take advantage of consumers’ vulnerability to collect valuable data.
Currently, users ignore the low level of privacy protection and allow excessive data collection by major online platforms. In return, they receive personalized services from them. But the fault does not lie entirely with consumers, as companies exploit a number of cognitive heuristics and biases that are specific to consumers.
The article aims to identify the circumstances that support excessive data collection and argues that those who possess the information exploit heuristics that lead to cognitive biases and take advantage of the power and information asymmetries that consumers face.
Behavioral economics forms the theoretical basis of the article, as both heuristics and information biases and asymmetries have been extensively researched by behavioral experts. You can refer to the original article for more information on this.
When users face dominant intermediaries, users deliver their specific and personalized data, however, such data collection often occurs in a questionable way. What’s more, the harm caused by data collection is difficult to understand; some users may not even know that their data is collected outside of the platform.
How can behavioral economics help the law design remedies that increase the transparency of online platform operations in relation to excessive data collection?
Several proposals are offered. For example, the possibility of data portability. This would reduce switching costs and could lead to greater competition between platforms. The right to portability would guarantee users effective and immediate access to their data generated while using the dominant platform. However, this does not seem to be the most appropriate according to experts.
On the other hand, the most important means to address the power and information asymmetries between these platforms and their users would be to use consent as a way to increase the transparency of data collection. For example, separate consent may be required to collect different data if this collection is unnecessary for the core services that the user accepts when using the platform.
Finally, the idea of an “opt-out regime”, in which users do not automatically agree to surrender their data, has also been proposed. However, this solution fails to eliminate the power asymmetry.
The author recommends further research on how behavioral economics can be applied in this context, as research on the effects of social networks on human behavior, society and justice is still very limited.
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