Crowdsourcing Consumer Confidence: How to Regulate Online Rating and Review Systems in the Collaborative Economy

Abstract

INTRODUCTION The rise of online platforms which facilitate peer-to-peer transactions has dramatically changed the digital economy over the last decade. New platform business models have emerged in various sectors from retail and travel, to transportation and banking. Many of the platforms are essentially ‘matchmakers’ that connect one group of customers with another group of customers. Ride-sharing apps such as Uber, Lyft or BlaBlaCar bring together drivers and riders; websites like Airbnb or Wimdu connect people with spare rooms with those who are looking for a place to stay; and Eat With helps food lovers to find home chefs for private dinners. The enabling factor that is essential for the functioning of such collaborative economy platforms is trust . A key role in building the necessary trust among strangers using a collaborative economy marketplace is played by so-called reputational feedback systems based on qualitative reviews and numerical ratings tied to the profile of a platform user. In order to promote trust, it is necessary that the reviews and ratings provided on the platform are trustworthy and free from bias or manipulation. Fake reviews or other forms of manipulation can undermine the trust in the reputation system and the business model of the platform itself. Recently regulators in several Member States have tackled this issue and started drafting rules for online reputation systems. While the establishment of quality criteria for rating and review mechanisms can support the functioning of the platform markets and help to avoid market failures, it is clear that differing national rules for reputation systems may create barriers in the European single market. The key argument of this contribution is that there is a case for harmonisation of the rules for online rating and review systems at the European level in order to create a level playing field for the collaborative economy. Following the model of the ‘new approach’ which has been efficient and successful in the area of product safety, a fl exible and innovative regulatory strategy could be a combination of an EU Directive, which defines ‘essential requirements’ for trustworthy and fair reputational feedback systems, and a harmonised European service standard which spells out the legal and technical details.