The UK Government has published a report, warning about the harm that can be caused when consumers buy products and services online. Whilst digital markets can bring innumerable benefits, they also bring a range of new and amplified risks. The report commissioned by the Department for Digital, Culture, Media and Sport has identified seven processes and features which can cause harm, increase prices and lower quality.

The seven features are:

  1. Using data, algorithms and analytics to amplify the information advantage firms have over their consumers (power imbalance due to data).
  2. Monolithic networks reduce competition between rival platforms and make it hard for new providers to enter the market (market dominance).
  3. High start-up costs and low operational/maintenance costs mean that incumbent firms can benefit from economies of scale to the detriment of their competitors (more market dominance).
  4. Vertically integrated ecosystems mean that several parts of the supply chain can be tied-into and dependent upon one provider (interoperability issues).
  5. Choice environment and the online architecture can push consumers into making wrong, and often more costly choices (user design and user experience).
  6. Illegitimate ratings and reviews lead to consumers making the wrong decision (misleading information).
  7. Rapid change in the market conflicts with user bias towards the status quo (users take comfort in what they know and are unlikely to switch).

Whilst it is easy to view these as the seven deadly sins of digital goods and services, the report acknowledges that these features also create benefits, such as the ability of large-scale networks to amplify the voice of consumer demand. Overall, there is a lack of data to properly understand the extent and severity of harm caused.

Whilst further work is being done to help estimate the cost of some specific digital harms to consumers, organisations can expect the above behaviours to come under scrutiny as the Government looks to make sure that digital markets work efficiently and fairly for consumers.