The Algorithmic Exploitation of Consumers

Abstract

Scholars and regulators are increasingly aware of the practical implication of such phenomena as algorithmic bias, price discrimination, blackbox AI as well as the misuse of the personal information of consumers. The dangers of algorithmic exploitation in the context of mass market consumer transactions remain, however, somewhat underexplored. Think: extreme information asymmetry meets inequality of bargaining power on steroids. One party to the transaction (e.g., Amazon, Meta, Google or “BigTech”) has all the technology and all the information while the other (the consumer or… human) has none. IQ 10000 meets IQ 100. The key terms in the proceeding sentence are “technology” and “information.” In typical transactional contexts, such as those represented on ecommerce sites, one party provides and controls all the technology for the other party to use. In typical transactional contexts, one party has all the information about the products or services being offered - and about the other party. This situation is unprecedented and defies all the assumptions traditionally made about the contracting process. In online interactions, one party designs and control the entire transaction environment, often hiding the very fact that a transaction is taking place. At present, neither the principles of contract law, nor any of the instruments in the area of consumer protection or privacy are capable of addressing the problem of hapless humans being exploited by advanced algorithms. Existing legal frameworks tacitly tolerate the absolute dominance of one party over the other. There are piecemeal solutions that address selective aspects of this phenomenon but there is no attempt to address the problem in toto. To aggravate matters, progress in such areas as affective computing, neuromarketing and interface design create a seemingly friendly transacting environment that detects, harvests and exploits every possible human weakness. This chapter describes how technology-driven exploitative commercial practices have passed under the legal and regulatory radar. It examines the extent, if any, recent regulatory updates have managed to address or alleviate the impact of such practices. Given that regulators have a long history of technological incompetence, the chapter focuses on the combined effect of the technologies deployed in exploitative practices. While both regulators and the general public seem increasingly aware of the societal risks accompanying the pervasive use of ecommerce platforms and social media in the context of mental health and political manipulations, the more mundane commercial risks accompanying such use seem less appreciated. Consumers are not only overpaying for their purchases or purchasing products they would not have acquired were it not for the “manipulative online interface” but also entering into transactions without a clear commercial intent. The problem is not new. What is new, however, is its scale.