swd (2017) 0209 - Bilag 1: Kopi af ERU alm. del - bilag 207. Regeringens non-paper vedr. Europa-Kommissionens fitness check af EU’s forbrugerrettede regulering, fra erhvervsministeren

Europaudvalget 2016-17
SWD (2017) 0209 Bilag 1
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USING BEHAVIOURAL INSIGHTS TO PROMOTE ACTIVE EURO-

PEAN CONSUMERS

The Fitness Check of the consumer area evaluates if EU consumer law is

fit for purpose on the basis of the criteria of effectiveness, efficiency, co-

herence, relevance and EU added value of the existing EU legislation.

The Fitness Check is an important exercise, because active consumers are

an important part of the Single Market, as active consumers make de-

mands on businesses which give them incentives to provide better service.

This can lead to an improvement in competition and create well-

functioning markets. The result of the Fitness Check will hopefully make

it easier for consumers and businesses to navigate within the area of the

directives that are subject to the Fitness Check.

Behavioral insights

refers to the range of behavioral science research into

how biases influence consumer decision making. The term has gained

prominence as a result of the wealth of research calling into question the

traditional assumption that consumers and citizens act like rational agents

in the marketplace. Behavioral insights are an obvious mean to ensuring

that regulation aligns with actual consumer behavior to the benefit of both

consumers and businesses.

The gap between the intended consumer protection of information disclo-

sure requirements and the observed consumer behaviour especially calls

for the consideration of insights from behavioural sciences.

This non-paper aims at emphasizing the importance of continuing the

implementation of behavioural insights in the refit and development of

EU consumer and marketing law.

From Full Disclosure to Targeted Disclosure

This non-paper argues that we should strive to shift from full information

disclosure to better targeted information disclosure based on evidence,

impact assessments and behavioural insights.

When regulation forces businesses to expose consumers to large quanti-

ties of information at once, there is a risk of consumers being uncritical

and inactive. Furthermore, an overload of information limits the compa-

rability of products across providers. This implies that the actual effect of

the regulation may be counterproductive

–

for the consumer as well as for

competition in markets.

swd (2017) 0209 - Bilag 1: Kopi af ERU alm. del - bilag 207. Regeringens non-paper vedr. Europa-Kommissionens fitness check af EU’s forbrugerrettede regulering, fra erhvervsministeren

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The purpose of disclosure requirements is to create greater transparency

in the market, so that consumers can consider conditions and costs relat-

ing to e.g. credit agreements. The rationale behind full disclosure of in-

formation is to provide for consumers to understand their choices and be

able to make an informed decision.

However, one important challenge is that such requirements determine

that the information must often all be disclosed at the same time, hinder-

ing the ability to create innovative solutions that could make it easier for

consumers to understand the conditions of the product or service being

sold to them

–

e.g. by presenting it in a more user-friendly way. It can be

challenging for consumers to comprehend the amount and complexity of

information in current disclosure formats. Moreover, this challenge is

particularly clear in an electronic format across digital platforms, due to

limited clarity on electronic handheld devices such as smartphones. In

other words, the current rules - which are in principle technologically

neutral - actually make it harder to develop solutions that would help in-

form and activate consumers, and improve competition in the market,

thus making the rules more effective.

Insights from behavioural sciences has led to the recognition of the fact

that consumers are not acting

rational

in every purchase situation, even

when adequate information is fully disclosed to the consumer. A recent

study by the Danish Competition & Consumer Authority identified signif-

icant limitations in consumers’ ability to understand and use disclosed

information when presented with mortgage loan offers from three differ-

ent providers.

We suggest that the Commission start a practice of field testing new dis-

closure requirements and/or reviewing existing requirements retrospec-

tively and revising them. In the process of applying or revising infor-

mation disclosure regulation to better target the consumers, considerations

ought to be given to five tests in policy design:

II.

III.

IV.

What are the desired behavioural outcomes aimed for?

Will the information provide sufficient incentive for consumers to

optimise their choice-behaviour?

To what extent does the information simplify choices for consum-

ers on a nice- /need to know basis?

Are burdens for businesses disproportional to expected benefits

for consumers?

Are existing regulated information requirements taken into ac-

count?

swd (2017) 0209 - Bilag 1: Kopi af ERU alm. del - bilag 207. Regeringens non-paper vedr. Europa-Kommissionens fitness check af EU’s forbrugerrettede regulering, fra erhvervsministeren

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Furthermore, policy-makers at the EU-level should consider:

a. To pilot the use of outcome-based approaches to information re-

quirements, enforced on the basis of consumers’ understanding of the

information rather than the sheer availability of the information.

b. Assigning research to develop concrete proposals on how infor-

mation requirements might be presented in a more compact electronic

format.

c. Establishing partnerships across member states and stakeholders to

develop innovative approaches to communicating with consumers.

d. To test significant future information requirements before implemen-

tation and evaluate according

to the Joint Research Centre’s taxono-

my of behavioural policy interventions.

e. To include information disclosure requirements in the scope of re-

views of relevant legislation so that requirements may be re-designed

or removed unless proven effective in improving outcomes.

Further suggestions for review

In terms of ensuring the effect of information disclosure requirements and

legislation fit for the digital age, we also suggest reviewing the following:



Directive on electronic commerce (2000/31/ED)

Directive on consumer credit (2008/48/EC)

Directive on credit agreements for consumers relating to residential

immovable property (2014/17/EU)

References

Better Regulation Executive and National Consumer Council (2007)

“Warning:

too

much

information

can

harm…”

http://www.eurofinas.org/uploads/documents/policies/NCB-BRE-

Report.pdf

Sousa Lourenço, J., Ciriolo, E., Almeida, S., & Troussard, X. (2016). Be-

havioural insights applied to policy.

JRC science for policy report: Euro-

pean Union.

OECD (2017),

Behavioural Insights and Public Policy: Lessons from

Around

the

World,

OECD

Publishing,

Paris.

DOI:

http://dx.doi.org/10.1787/9789264270480-en