The future of consumer reputation

July 24th, 2019
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Download a copy of the report at www.lexisnexis.co.za

By Kgomotso Ramotsho

LexisNexis legal content editors and legal practitioner Michael Laws teamed up to compile an experimental report in law and policy forecasting, to look at the future of  reputation of consumers. In the report, Mr Laws stated that trend forecasting has become big business. In an age where major industry incumbents are being disrupted by emerging technologies and trends to the point of crisis, there is a heightened demand­ – both in the private and public sector – for expert insight as to where the future may take us. He said if one looks at the field of forecasting, while one notices an abundance of economists, technologists and scientists, however, there is almost a complete absence of legal practitioners and policy experts.

Mr Laws added that as social values and technology have evolved, so has the understanding and experience of ‘reputation’. From the recent introduction of ‘social credit systems’ in China through to the rise of professional social media influencers who rely on their ‘clout’ to make money, and an understanding of what ‘reputation’ is becoming and the role it may play in our lives is radically changing. He said this raised interesting questions, namely:

  • How will the law respond?
  • What future regulatory or legislative policy choices may be adopted?
  • How will this affect individuals and businesses?

In the report the team focused on four future scenarios discussing the law and policy framework aspects and implications, namely –

  • private law remedy – contractual consumer rights around reputation;
  • caveat subscriptor in a brave new world;
  • criminalisation of reputation fraud; and
  • state regulatory intervention through institutional oversight.

Consumer rights and reputation

Legal content editor at LexisNexis, Asanda Nonzwakazi Namba, compiled the paper on ‘Contractual Consumer Rights around Reputation’, in the summary of her paper it states that in the current future, a person’s reputation has become a commodity and their reputational scores determine their value in society and what access to employment and services they could have. This leaves them vulnerable to having their rights infringed when their reputations are compromised by companies consolidating their personal data, unfairly penalising them, or by consumer profiling them without their consent.

Ms Namba’s paper adds that the legislation has declined to become involved in regulating the market, but consumers are able to find a high degree of protection for their reputations under s 10 of the Constitution, which recognises a wider concept of a right to dignity, and through the courts as in the case of Barkhuizen v Napier 2007 (5) SA 323 (CC) in striking down contracts, which are regarded as contrary to public policy because they conflict with the Bill of Rights.

Ms Namba’s paper states that this means that the principle of freedom and sanctity of contract will be restricted by the courts if they deem the provisions to be unreasonable, oppressive or unconscionable. In the illustrative scenario, excessively one-sided standard form contracts, which none of the consumer parties could opt out of – or which failed to take reasonable account of their interests or circumstances – are discussed in context of loyalty point systems and their potentially negative effect on consumers’ reputations. Against this background, the inherent power of the courts to refashion and develop the common law in order to reflect the changing social, moral and economic make-up of society, in protecting the right to reputation of consumers derive, based on their rankings.

Caveat subscriptor 

Legal content editor at LexisNexis, Lungelo Gwala, compiled a paper on ‘Caveat Subscriptor in a Brave New World’. In his paper, he gave a scenario in a future where the state has decided not to intervene legislatively in protecting the rights of individuals when contracting with business, allowing business to dictate and to enforce largely one-sided standard form contracts. The paper states that this evolution is a direct result of the huge commercial and societal value massed, shared reputational scores given to service providers and companies; parallel to the accompanying social, health, employment, and other benefits consumers derive, based on their rankings.

Mr Gwala’s paper explained that companies enforce a strict non-tolerance policy when consumers misrepresent their facts either intentionally or negligently, resulting in them suffering a substantial loss of reputation and liability for pure economic loss. As a result, legal practitioners have turned to the law of delict to find a solution. The paper states that legal practitioners base their arguments on the right to equality as entrenched in s 8 of the Consumer Protection Act 68 of 2008 (CPA), and discriminatory differential treatment flowing from not giving consumers an opportunity to rehabilitate their scores/reputations. A further point of argument centres around the contravention by service providers of the Protection of Personal Information Act 4 of 2013 regarding issues of privacy, freedom of choice and the nature of personal information which they hold and how they process it.

The paper points out that in this scenario, consumers have to be careful about whom they contract with, what they disclose, on what terms, and how they behave thereafter, under threat of losing their reputations and the benefits they derive therefrom.

Criminalisation of reputation fraud 

Legal content editor at LexisNexis, Ivana Surian, gave a scenario in her paper ‘Criminalisation of Reputation Fraud’– where the state had decided that because reputation fraud presents such grim harm to society, it will intervene on behalf of companies by criminalising reputation and dedicating resources to investigating and prosecuting the problem. She explains that reputation fraud is defined as: ‘The intentional use, insertion, provision, communication and/or generation of materially false data, information and/or misrepresentations to manipulate one’s reputation status with third party services providers, which they rely on, causing them loss.’

In Ms Surian’s report it states that the main driver for criminalising reputation fraud is the need for market integrity to be maintained. It is an idea that the market needs to have certain conditions in place such as a good regulatory policy, commercial laws enforcing agreements, and the prevention of misuse of services to reduce the cost/risk of conducting business to companies. It has found expression in the National Credit Act 34 of 2005, Kubyana v Standard Bank of South Africa Ltd  2014 (3) SA 56 (CC) and the protection of intellectual property rights in some jurisdictions.

Ms Surian outlined a scenario, suggesting that those found guilty of reputation fraud could have their names and crimes placed on registers – naming and shaming; and even face penalties ranging from fines to imprisonment or both. A mechanism for correcting false information is also considered, and the question of people actually forfeiting their reputations was raised.

State intervention through oversight

Legal content editor at LexisNexis, Preneshan Pillay, compiled his paper on ‘State Regulatory Intervention through Institutional Oversight.’ He used a scenario in a future where reputation is commodified. One which regulatory bodies have a big role and influence in allowing consumers access to goods and services because of direct and extensive state regulation in the market to protect consumers. Here the state acts as a statutory watchdog, overseeing the use of reputation systems, and he speculates about the nature and powers such institutions would have.

He added that examples of the necessity of using state intervention institutions to regulate the balance between consumers and service providers in the interests of sustainable economic growth, peace and stability are taken from developing states like Brazil and India. In South Africa, the potentially unequal relationship between credit providers and consumers and the adverse effect this could have on the reputation of consumers is discussed, and an argument made for amending the CPA by imposing stricter liability on suppliers of goods and an ability for easier redress, thereby protecting reputational damage to consumers. The idea of having an ombudsman to protect consumer reputations is also looked at, however, the effectiveness and the current ability of existing institutions to enforce compliance is questioned when it comes to reputational damage.

Kgomotso Ramotsho Cert Journ (Boston) Cert Photography (Vega) is the news reporter at De Rebus.