The 2017 Amendment of the ARC granted the FCO the competence to conduct sector inquiries into consumer protection issues.  The FCO recently published the results of two sector inquiries—into smart TVs and fake user reviews—and announced another sector inquiry into messenger services.

1. Smart TVs

On July 7, 2020, the FCO published the final report on its sector inquiry into smart TVs, i.e., television sets with integrated Internet and interactive Web 2.0 features, which allow users to stream music and videos, browse the internet, and view photos.[1]

The sector inquiry shows that while smart TVs offer convenient benefits for consumers by allowing the use of online services like video streaming alongside traditional Free-to-air and pay TV services, they can also be used to collect large amounts of user data, which can be used, inter alia, for advertising purposes.  The FCO has identified transparency deficiencies and violations of the German Data Protection Regulation (“GDPR”) by almost all smart TV manufacturers as well as unsatisfactory law enforcement in this sphere by individual consumers or consumer associations.

The FCO provides a number of recommendations for actions.  Inter alia, the FCO demands that smart TV manufacturers provide consumers with better and easily understandable information about how smart TVs, and Internet of Things (“IoT”) devices in general, can collect and process data—for example by using easily recognizable icons that stand for certain data protection features and/or QR codes allowing consumers to access all data protection-related information online, even before purchase.  Further, the FCO also sees a need for consumers to have a legal right to software updates, including from the manufacturer.

2. Online User Reviews

On October 6, 2020, the FCO presented the results of its sector inquiry into online user reviews.  The resulting report provides background on fake reviews and suggests solutions to the problem.[2]

Product and service reviews make a substantial impact on consumers’ online shopping choices.  Manufacturers, sellers, and service providers therefore have strong incentives to promote positive reviews.  This has led to fake review tactics, such as employing service providers that specialize in selling positive reviews.  Users might receive free products in return for positive reviews.  Also manufacturers, sellers, and service providers use software or bots to artificially generate reviews.

The FCO provides tips for consumers to be wary of fake reviews: exaggerated language, recurring language, and sometimes information about the authors can indicate when a review is fake.  The FCO also posits that platforms themselves must take more responsibility to ensure posted reviews are authentic.  Platforms currently might use word filters or respond to reports of suspicious reviews post-publication.  But platforms should more frequently also apply machine-learning methods, review metadata of authors, and check the authenticity of reviews prior to allowing posting.

In sectors where only few customers write reviews, the FCO suggests that platforms better motivate their customers to leave reviews, such as through raffles, vouchers, small amounts of money, or free product testing.  To conform with consumer law, the platform would have to clearly and explicitly mark the reviews generated through such incentives and product tests.  The platforms also would be required to publish these reviews on their websites.

The FCO does not enjoy enforcement powers in consumer protection, so it would not be able to initiate proceedings against individual companies suspected of breaching consumer law.  However, its inquiry may prove useful to consumers navigating online shopping and platforms seeking to provide better services to their customers.

3. Messenger Services

On November 12, 2020, the FCO announced an investigation of the messenger services sector, which encompasses applications that allow users to send and receive text, images, and video.[3]  The FCO signaled that the investigation would include an examination into whether the services adequately protect consumer data privacy and what the effect of increased interoperability of messenger services would be on consumer choice for data protection.  The investigation, which is expected to last several months, will involve discussions with key sectoral players and experts and will result in a public report.

[1]              The full report is only available in German here; the press release is available in German here and in English here, and the conclusions and recommendations for action are available in English here.

[2]              FCO press release of October 6, 2020, available in German here and in English here.  A full report is only available in German here.

[3]               FCO’s Press Release of November 12, 2020, available in English here.