Furthermore, for the facilitative function of the mechanisms and the business values of corporation reputation formed by the online reviews and ratings, online rev[r]
(1)Regulatory Governance of Online Review and Rating Mechanisms CHEN Yingwei
Introduction
With the development of e-commerce, online review and rating mechanisms which are commonly included components on platforms and review sites, have played an increasingly important role in facilitating consumers to make shopping decisions.1 Through the shared experience and information from other consumers, online reviews and ratings can help consumers to make faster and more confident decisions by indicating the reliable vendors and decreasing the opportunities of the poor-behavioural ones.2 The process whose nature is the establishment of trust in trade is also the accumulation of trust in the overall online market Furthermore, for the facilitative function of the mechanisms and the business values of corporation reputation formed by the online reviews and ratings, online review and rating mechanisms could enable boosting competition between businesses on their product reliability or the quality of service offered.3 In the long term, such mechanisms could create a fairer market environment with transparent, fair and clear reputational information
By seeing the advantages of the mechanism in a wide range of application in fields, discussions about replacing the traditional market regulation with the reputation mechanisms have been arisen by scholars from nations with well-developed consumer protection frameworks, which are also facing rapid developing e-commerce They doubt that ‘could the online review and rating mechanisms be a substitute form of regulation’?4
The legal role of online review and rating mechanisms under discussions is not independently established, but closely linked to the
1 Competition & Markets Authority (CMA), Online reviews and endorsements: Report on the CMA’s call for
information (19 June 2015)
<https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/436238/Online_reviews_ and_endorsements.pdf> accessed 12 November 2018
2 Eric Goldman, ‘An Assessment of the Consumer Review Freedom Act of 2015’ (Santa Clara Univ Legal Studies
Research Papers Series, Working Paper No 2-15, 2015), http://
papers.ssrn.com/sol3/papers.cfm?abstract_id=2686021
3
Competition & Markets Authority (CMA), Online reviews and endorsements: Report on the CMA’s call for
information (19 June 2015)
<https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/436238/Online_reviews_ and_endorsements.pdf> accessed 12 November 2018
4 Christoph Busch, ‘Crowdsourcing Consumer Confidence: How to Regulate Online Rating and Review Systems in
(2)facilitative role played in the market Well, the regulatory theories related to e-commerce are therefore enriched with the lately hypothetical construct But the answer of it should be seen in the classic dilemma of regulating e-commerce: Should the e-commerce be regulated? If yes, then in what extent it should be regulated? Technically, could the e-commerce be regulated by what kinds of regulatory tools?5 The discussion will be seen later in this study
As a vital component in the modern electronic economy, online review and rating mechanisms on one side bring extensive potential benefits, and on the other side problems related to such mechanisms have been reported The concerns are mainly about misleading consumers and distorting their decisions intentionally or unintentionally, which can lead to a degradation of trust6 and in turn detriment for both consumers and businesses.7
Because of the increasing influences of online reviews and ratings to consumers’ purchasing decision, it is imperative to both consumers and vendors that the mechanisms are managed effectively to ‘build confidence in the quality, integrity, accuracy and transparency of reviews and ratings.’8
This paper firstly provides a background study of online review and rating mechanisms in the definition and the scope in the research, and secondly, it examines the importance and the problems of online review and rating mechanisms respectively
It argues that the problem of misleading or fake reviews and ratings are the main concerns in the review and rating sector and that can undermine consumer confidence in the integrity of the mechanism and the online market Consequently, the defective sides can seriously mitigate the functional effects of the mechanisms as powerful trust-building tools in trade, and further bring harms to the online market In the worst cases, online users may consider these trust-building mechanisms untrustworthy, gradually losing confidence in the online market Having considered trust as a state in which ‘one party has confidence in an exchange partner’s reliability and
5 Lawrence Lessig, Code: Version 2.0 (Basic Book 2006),
6 ISO 20488:2018 Online consumer reviews – Principles and requirements for their collection, moderation and
publication, vi
7 Competition & Markets Authority (CMA), Online reviews and endorsements: Report on the CMA’s call for
information (19 June 2015)
<https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/436238/Online_reviews_ and_endorsements.pdf> accessed 12 November 2018
8 ISO 20488:2018 Online consumer reviews – Principles and requirements for their collection, moderation and
(3)integrity’9
, the absence or a lower level of trust in the online market exchange may decrease users’ confidence in vendors’ qualities, such as competence in contract performance, consistency, honesty, responsibilities, reliabilities and fairness10 As a result of distrust caused by loss of confidence, eventually, the negative evaluation that commonly exists among online users discourages market cooperation.11
Further, the part demonstrates that the potential risks and the problems of misleading or fake reviews and ratings could lead to a substantial disconnection between the objective quality information conveyed by the user reviews and ratings and the extent to which consumers trust them as quality and reliable information to indicate trustworthy traders Such disconnections undermine the usefulness of the online review and rating mechanisms
Moreover, through observations of the legal status of false and misleading feedback, gaps are found between the relevant regulation and the law enforcement, leading to regulatory disconnections It is proved that the potential risks and the problems of online review and rating mechanisms are one of the main reasons for the exacerbation of the legal disconnections The finding will necessarily lead the work to examine the legal role of the mechanisms in the next chapter
9 Robert Morgan & Shelby Hunt, ‘The Commitment-Trust Theory of Relationship Marketing’ (1994) 58 Journal of
Marketing 20, 23
10 Niklas Luhmann, Trust and Power (John Wiley & Sons 1979) 20
11 Sulin Ba & Paul A Pavlou, ‘Evidence of the Effect of Trust Building Technology in Electronic Markets: Price
<https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/436238/Online_reviews_