Consumers have gained tremendous power over businesses that meet their disapproval. Many firms should have more to fear from concerted activism on social media than they do from a regulator’s knuckle-rap
The closing lyrics of Beyond the Son, a song by Swedish electro-jazz duo Koop, offer the perfect sign-off for any cordial correspondence: “May the winds be at your back, the dice be kind and the gods turn the occasional blind eye.”
The track was released in 2006, the year of Twitter’s birth. To brands, the millions of consumers who use the social network have become the gods who never turn a blind eye. They constantly demand transparency from organisations and are incredibly quick to upbraid any firm or sector whose behaviour falls short of their expectations.
If the online clamour isn’t handled adroitly by those on the receiving end, it can soon turn into hysteria. At that point, the traditional media will often notice and pile on too. Eventually, if the furore is sufficient, an industry regulator may get involved. But the serious reputational damage will already have been done by then. Boohoo, Nestlé and Zara are among a number of brands that have been shamed on social media for various reasons and boycotted by consumers in recent years.
“Social media is vital in bringing bad business practices to a wider audience, including regulators,” says Rick Evans, strategy director at marketing company R/GA London. “Because social media allows the impact of consumer action to be amplified, companies will often change before the slow wheels of regulation and legislation move.”
Evans cites the case of buy-now-pay-later (BNPL) finance as an example of how public pressure can help to trigger legislative action. The £2.7bn sector had attracted a storm of criticism on social media for failing to prevent vulnerable consumers from running up high levels of debt. In October 2021, the Treasury published a consultation paper setting out its plans to impose tight regulations on BNPL credit agreements and put the Financial Conduct Authority (FCA) in control of the UK market.
Abbie Morris is the co-founder and CEO of Compare Ethics, a search platform that helps eco-conscious consumers to find brands that match their values. She is pleased that the authorities have started catching up with organisations that have been publicly criticised as exponents of so-called greenwashing. Only recently have “governments started to impose tougher legislation following the reaction of consumers”, she says, citing BP’s “Possibilities Everywhere” TV advertising campaign as a recent example.
“The energy firm caused public outrage when it highlighted its solar and wind energy projects, having also revealed that about 96% of its annual spending went on fossil fuels. This prompted authorities to step in and present the case that ‘fossil-fuel companies’ should not be able to buy a good reputation for their climate-damaging products through advertising,” Morris says.
In terms of consumer pressure prompting both companies and legislators to act, advertising is an interesting topic, suggests Vikki Williams, customer experience officer at Starling Bank. “Phishing attacks are on the increase”, she says, “and many of these attempted frauds are generated through ads on social media platforms such as Meta’s Facebook and Instagram, which don’t require financial services providers such as crypto platforms to be regulated by the FCA.”
Starling Bank has recognised that this lack of regulation is problematic, which is why it no longer pays Meta for advertising. Moreover, Williams and her colleagues have lobbied the government to extend its online safety bill to cover fraudulent adverts. They have also spoken to “tech giants directly, to encourage them to follow in Google’s footsteps and rethink their advertising practices”.
Williams has noted “encouraging signs of progress” on both fronts. A recent parliamentary report strongly advised amendments to the draft legislation, while Meta has announced that it will alter its advertising policies and procedures. “It’s proof that businesses and their customers working together can achieve real change,” she says.
The court of public opinion has never been so busy in the digital era. Consumers are more willing than ever to praise good experiences and carp about bad ones on social media. Recent research by reviews platform Feefo indicates that we are 29% more likely to leave feedback about our dealings with businesses than we were before the pandemic.
Businesses and regulators alike have little choice but to listen as the public become increasingly vociferous about a range of key topics. This year, data privacy will be one such topic, predicts Rafi Azim-Khan, partner at law firm Pillsbury Winthrop Shaw Pittman and leader of its data privacy and cybersecurity practice in Europe.
“In the digital economy, even if a regulator in one country is slow to respond to a complaint, regulators in other nations will take direct action. For instance, France’s data privacy regulator has recently fined Google and Facebook in the US,” he says.
In addition, more “US-style class actions” are being brought in jurisdictions where previously such cases were rarities. Take Lloyd v Google, for instance, which reached the UK Supreme Court in November. Richard Lloyd, a former director at the Consumers’ Association, brought a representative compensation claim under the Data Protection Act 1998 on behalf of about 4 million people who, he argued, had been affected by a workaround enabling Google to collect browser-generated data from their iPhones in 2011-12. The Supreme Court found unanimously for Google, overturning the Court of Appeal’s landmark decision, but Azim-Khan argues that the direction of travel is now clear.
“The trading and compliance landscape has changed dramatically. Companies must wake up to this fact and respond accordingly,” he says. “When the court gave its verdict, several newspapers and commentators trumpeted that it slammed the door on the possibility of US-style class actions in the UK. But they were missing an important point: even though Google was victorious on the facts before the court on this occasion, the verdict wasn’t a bar to anyone bringing representative actions that take a different approach.”
Stressing the significance of the case, Azim-Khan warns: “The upshot is that businesses are facing a kind of double jeopardy: if regulators don’t punish their missteps, customers could still do so through the courts. We appear to be at the start of a new phase of increased liability for businesses. It’s the calm before the storm – and companies are sailing into dangerous waters.”
Given that the consumer gods are becoming even less inclined to turn a blind eye to any firm that veers off the approved course, businesses will be hoping that they’ll at least have the winds at their backs.