Analysis: Brussels – we have a P2P problem

Analysis: Brussels – we have a P2P problem

EC study highlights serious issues with platforms such as Airbnb. Ian Taylor reports

A European Commission study of peer-to-peer platforms has highlighted serious consumer issues and singled out Airbnb and Uber for criticism.

The Exploratory Study of Peer-to-Peer (P2P) Platform Markets found consumers “report frequent problems with transactions”, with more than half (55%) of active users experiencing at least one problem in the past year.

It found issues with the quality of products or services “to be almost twice as frequent” as with online purchases in general, and problems on accommodation platforms such as Airbnb “less likely to be resolved” than on other platforms.

The Commission reported that on platforms such as Airbnb and Uber: “Consumers are likely to be confused or mislead about who is responsible when something goes wrong” because the companies “give the impression they take at least partial responsibility in case of problems, but their terms and conditions exclude any liability.”

It found Airbnb and Uber operate a “platform-governed peer transaction” model characterised by “setting one or more of the contractual terms of the transaction and exercising control over its performance”. Yet the lack of clarity “about whether peer providers act as a private person or as a business creates confusion about whether consumer rights apply”.

The study points out: “Consumer rights apply to the service the platform offers, but civil law rules apply to rentals. These are not tailored to peer-to-peer transactions and do not facilitate easy access to redress.”

The EC expressed concern about the use of the platforms by commercial providers and “a lack of transparency” by platforms which “do not require providers give any information” as to whether they are commercial businesses.

It also called for more transparency on pricing, reporting: “Search results on many platforms do not give the total price; platform fees which range from 10%-25% are often added only at the booking stage.”

The study found 66% of consumers do not know or are unsure about their rights. When problems arose “almost half (46%) did not take any action, mostly because they felt it was not worth their time or effort”.

Half (49%) of users said they felt “safer and more protected” dealing with conventional businesses.

The EC study involved consumer surveys in 10 countries, including the UK, and the screening of 485 platforms with detailed studies of 10 including Airbnb and Uber. The findings will feed into a review of EU consumer laws.

Reviews and ratings ‘may be biased’

The study found the user review and rating systems on peer-to-peer platforms like Airbnb and the identity verification systems these use “are neither reliable nor transparent”.

It concluded reviews and ratings are not monitored, are produced by a minority of users and “may be biased”.

EC researchers reported: “A minority of consumers [who use the platforms] use reviews and an even smaller minority provide them.

“This is true even of those have a bad experience – just one in five of those who take action following a problem leave a bad rating or review.”

The study found 55% of users had a problem in the past year, of which half did nothing.

It also found: “Most platforms don’t appear to monitor whether review ratings are generated by genuine users . . . There are indications rating and review systems may be biased.”

The EC reported: “Only about 40% of consumers and providers using the platforms use reviews regularly.” Those who do “are more likely to consult reviews before a transaction than to write reviews afterwards” and reviews are likely to reflect the experience of “a smaller number of more-involved peers”.

It found: “None [of the platforms] give information to users about the representativeness and reliability of user reviews or ratings – although they hold data to establish the relevant percentages.”

The EC concluded: “The core trust-building tools on such platforms are neither fully reliable nor transparent.”

P2P platforms in numbers

The EC estimates 191 million consumers across the EU engaged in at least one platform transaction involving a payment in the 12 months to May 2016.

It estimates the annual turnover of the sector at €27.9 billion.

€17.29 billion (62%) of this went to ‘peer’ providers.

€10.61 billion (38%) went to the platforms and third-party providers of payment services, insurance and ID checks

Accommodation platforms like Airbnb and its third-party service providers take 35%-40% of payments.

More than half the total revenue involves 10% of users and providers, suggesting either these are “very active” private consumers and providers or they are “commercial sellers”.

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