This article was first published on Lexis®PSL Commercial on 14 November 2016. Click for a free trial of Lexis®PSL.
Commercial analysis: A recent report highlighted some of the issues surrounding vulnerable consumers who are encouraged to buy online at night—a phenomenon dubbed the ‘vampire economy’. Hannah Batten, solicitor at Ashfords, and Louise Workman, partner at the firm, consider some of the legal angles of this trend.
What were the main findings of the Money and Mental Health Institute report into night-time shopping by vulnerable consumers and the so-called ‘vampire economy’?
The Money and Mental Health Institute report looked at the increasing issue of the ‘shops that never close’ in the online retail environment and the effect that this is having on vulnerable consumers. Being able to shop at any time, particularly at night when people with mental health issues can be at their most vulnerable, has led to more and more vulnerable consumers causing themselves significant financial self-harm.
The report surveyed 5,500 people with mental health problems and analysed their spending at times of poor mental health. When this spending is also motivated by emotional or psychological needs rather than material needs, this is known as ‘crisis spending’. The report found that:
- 93% spend more when they are unwell, and
- Four in ten respondents spend more at night while unwell
Some reasons for this might be:
- Late night shopping was a way of hiding their spending from family members
- It was a source of comfort when they couldn’t sleep, and
- Email marketing and personalised advertising made it more difficult to escape temptation
Due to finding it difficult to leave the house or feeling ashamed or guilty about their behaviour, people often failed to return online purchases.
Academic research gives reasons as to why consumers struggle to control their behaviour at night:
- Impulsivity is a clinical feature of a number of mental health disorders (eg bipolar)
- General psychological distress associated with more common mental health problems (eg depression) is linked to increased impulsivity, and
- Everyone, with a mental health condition or otherwise, is more impulsive when sleep deprived
What are the primary mechanisms by which online retailers are said to target vulnerable individuals?
Vulnerable consumers are said to be most at risk between midnight and 5am. The report suggests that vulnerable consumers are being targeted through email marketing (and targeted advertising) and television shopping. A number of companies frequently send emails between midnight and 5am and these night time emails are often:
- Tailored to previous purchases, and
- Remind consumers about items left in baskets, encouraging them to complete those purchases and include short lived discounts and promotions
Television shopping is also readily available at night. Freeview alone offers 14 dedicated channels.
With the inherent flexibility and convenience that online shopping brings, what protections are currently built into the online environment for consumers?
There are different ways of obtaining consent to marketing emails. Consumers can:
- Opt-in by stating that they wish to receive communications usually by ticking a box
- Opt-out by indicating that they do not wish to receive communications usually by not ticking a box, or
- Soft opt-in where an email address was obtained in the course of a sale to a consumer, the direct marketing was for similar goods or services and the recipient had the option to opt-out with subsequent communication
This offers a level of protection to consumers as it gives them the option to opt-in to marketing communications if they wish to do so. Certain information must be provided before consent can be given to opt-in or opt-out including the identity of the data controller, the purpose for which the data will be processed and any other necessary information so that the consumer knows what is happening to their information and can make an informed choice as to whether they sign up.
Certain information must also be provided in all marketing emails. The identity of the discloser of the information must not be disguised or concealed, an address must be included for consumers to be able to opt-out, it must be clearly identifiable as a commercial communication and clearly identify any promotional offer and ensure any linked conditions are easily accessible. All business emails must also include:
- Company name
- Company registration number
- Place of registration, and
- Registered office address
All of this information is provided to protect the consumer from spamming and unsolicited emails. It gives the consumer a degree of flexibility about the direct communications that they might receive.
Other protections state that all advertising must be:
- Accurately described
- Legal, and
- Socially responsible
There are regulations restricting what advertisers can and cannot do and two advertising codes of practice for advertisers to follow. Data protection law defines how a consumer’s data must be protected.
- Mislead or harass consumers
- Give false or deceptive messages
- Leave out important information, or
- Use aggressive sales techniques
Is there a need for greater protections to be made available for those consumers who are deemed vulnerable to excess/spurious spending?
The report warns against damaging the online shopping industry as it makes a valuable contribution to our economy and many consumers enjoy the flexibility and convenience of online shopping and teleshopping. The methods of protection that are suggested by the report are flexible enough that they would not affect the wider online retail space or consumers that wanted to carry on enjoying late night online or teleshopping but could specifically target and protect vulnerable consumers.
The report makes some suggestions as to how creating flexible settings could allow consumers to restrict their access in ways that works for them. Participants in the research suggested that the following would be helpful:
- Introducing regulation so that Freeview equipment can be set to block teleshopping
- Being able to opt out of email marketing at night (either with retailers or with email providers)
- Being able to change preferences in online accounts so purchases made at night have to be re-confirmed before despatch in the morning, and
- Being able to set opening times of online shops in their account so people can restrict their own access
Does the Advertising Standards Authority (ASA) have a role to play in regulating marketing communications and striking an effective balance between affording consumers flexibility and bolstering the UK retail economy while also protecting more vulnerable users?
The ASA is the UK’s independent regulator of advertising across all media. The ASA’s purpose and ambition is to make all UK advertisements responsible. They act as an authority on advertising issues and issues that cause societal concern.
They state that they will spend more time on matters that will make the biggest difference and will spend less time tackling ads that cause little detriment to consumers or the vulnerable.
Together with the Committees for Advertising Practice (CAP and Broadcast Committee of Advertising Practice) who write and maintain the advertising codes, they are committed to ensuring that the right levels of protection are in place for consumers and vulnerable groups, so that advertisements are appropriate and don’t cause harm.
Interviewed by Alex Heshmaty.
The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.