Big data in e-commerce: lack of consumer awareness and no competitive disadvantage

The Hungarian Competition Authority’s ("GVH") recently concluded market analysis into data assets revealed that most Hungarian online stores do not use the potential of data assets, thus its absence does not constitute a significant barrier to market entry or expansion. The market analysis also revealed that Hungarian consumers know little about the data collection and management practices of online stores, and a significant proportion of them are explicitly afraid that the data they provide when shopping online will be misused.

The role of e-commerce is growing in the lives of Hungarian consumers, and such growth was significantly boosted because of the COVID-19 pandemic and related restrictions. Acting upon this trend, the GVH launched a market analysis by the end of 2020 to explore how consumer datasets of e-commerce companies are created and what role such assets play in the competition between online stores.

This market analysis was novel as, for the first time, the GVH examined both consumer protection and competition policy aspects in the same market analysis. The analysis covered online retailers selling technical goods, clothing, daily consumer goods and food.

I. Consumer protection findings and recommendations:

The GVH focused mainly on three topics: (i) consumers’ awareness of the collection of their personal data, (ii) the role of cookies and newsletters and (iii) consumer expectations and behaviour.

1. Consumers' awareness of the collection and use of their personal data

GVH’s findings:

(i) Hungarian consumers have little knowledge of the data collection and processing practices of online stores: it is not always clear to users what types of data are collected by online stores and for what purposes;

(ii) Hungarian consumers are motivated to manage their data consciously, however, this is often overridden by time constraints and the need or urge to buy as quickly as possible;

(iii) Hungarian consumers typically do not complain about the legal accuracy of the information provided, but they often have a problem with its clarity, transparency and user-friendliness.

GVH's recommendations:

Companies should prepare their privacy notices in simpler language and make them clearer by using creative tools such as the presentation of the information in a multi-level manner and/or supported by visualisation tools. Two-layered information may include a shorter and clearer summary of the privacy notice, which would also refer (via a link) to the detailed and original document.

The GVH has also undertaken to liaise with the National Authority for Data Protection and Freedom of Information (“NAIH”) to produce a briefing note to explain the requirements for a modern consumer information document to online retailers, thereby indirectly helping consumers to be properly informed.

2. Cookies and newsletters

GVH’s findings:

(i) The concept of cookies is generally known to consumers, but they usually accept them without reading;

(ii) Consumers would prefer to receive useful, tailor-made information instead of newsletters;

(iii) Every second online shopper perceives the newsletters received from online stores as confusing.

GVH's recommendation:

The information on the management of cookies should explain the duration of the cookie and whether third parties have access to these cookies.

The GVH urges advertisers to consciously plan the frequency and content of their communications to consumers and refrain from seeking out consumers aggressively.

3. Consumers' expectations and consumer behaviour regarding the processing of their personal data

GVH’s findings:

(i) Hungarian consumers try to provide as few personal data as possible when registering or making a purchase;

(ii) The more data that is being collected when shopping online, the higher the risk that the consumer will not buy the product;

(iii) Usually, the companies’ primary purpose for using data is fulfilling orders, retaining customers, and reaching new customers;

(iv) In the case of online payments, there is a significant concern about data leakage of the bank card details, which acts as a disincentive factor to online shopping.

GVH’s recommendations:

To strengthen consumers’ trust, public and corporate awareness campaigns and information campaigns should educate consumers on how to ascertain the authenticity and reliability of a given online store.

II. Competition policy findings and recommendations:

The GVH focused on the existence and quality of companies' data assets and the extent to which they constitute a competitive advantage.

GVH's findings:

(i) At present, data assets or the lack thereof do not generally constitute a significant barrier to entry or expansion for online stores in Hungary, as most online stores do not currently take advantage of the data assets they have or could have, and only the largest industry players rely heavily on data assets;

(ii) Underutilisation of data assets is due to lack of knowledge, skills, resources, and motivation of companies (mainly SMEs);

(iii) Data is rapidly becoming obsolete, and so does not represent a lasting advantage, therefore existing short-term benefits can be caught up.

GVH's recommendations:

Development and support of the implementation of both public and corporate programmes to improve the digital and data analysis competencies of SMEs.

With regard to companies providing various marketing and IT services to online shops, the GVH recommends that companies with significant market power should take active preventive measures to enforce legal compliance, in particular, to avoid the potential abuse of their market power.

III. Summary

Most Hungarian online stores do not make use of the data at their disposal and use consumer data primarily to fulfil orders. For this reason, the lack of data assets is not in itself a significant barrier to entry into online resale or the expansion of already existing companies. The GVH welcomes the creation of databases by businesses processing their customers’ personal data, but companies must comply with data protection aspects and should improve the clarity and transparency of their privacy notices.

The GVH and NAIH’s joint briefing note on the requirements for a modern consumer information document for online retailers is expected to be published soon.

The GVH’s press release in English is available here and the GVH’s market analysis is available in Hungarian here.

For more information, please contact Dániel Arányi, Gábor Kutai or Rebeka Szopkó.

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