Artificial Intelligence and Consumer Law: An E-commerce perspective

The Colombian economy is predominantly made up of small and medium-sized businesses as well as entrepreneurs. One of the pillars for an economy in transition to have more development and be sustainable as well as inclusive is that there is consumer trust and legal protection in case the consumer is affected and harmed. Colombian companies have access to an extraordinary volume of information about their consumers through low-cost technological tools (including Artificial Intelligence AI apps) that are increasingly easy to implement that allow the analysis of data and its use practically without any major limits other than those established by law.

Introduction

As AI continues to permeate various aspects of consumer interactions, consumer protection laws will need to adapt to address the unique challenges posed by this technology and ensure that consumers are treated fairly, transparently, and ethically.

Treating consumers fairly, ethically, and transparently is not just a moral imperative. Consumers are more likely to trust and remain loyal to businesses that treat them fairly. Trust is the foundation of any successful business relationship, and ethical and transparent practices help establish and maintain trust over time.

Colombian businesses that prioritize fairness, ethics, and transparency tend to have better reputations in the marketplace. A positive reputation can attract new customers, retain existing ones, and even attract top talent who want to work for a company with strong ethical values. Ethical behavior reduces the likelihood of legal issues and regulatory scrutiny. Violating consumer rights or engaging in deceptive practices can lead to costly lawsuits, fines, and damage to a company’s reputation.

When Colombian consumers feel valued and respected, they are more likely to become repeat customers and advocates for the brand. Ethical treatment fosters customer loyalty, which can lead to long-term profitability and sustainable growth. Businesses that prioritize short-term gains over long-term relationships risk alienating customers and damaging their brand in the long run. Ethical and transparent practices contribute to sustainable success by fostering enduring relationships with customers and other stakeholders.

In today’s interconnected world, consumers are increasingly informed and demand transparency from the businesses they patronize. Meeting these expectations not only satisfies consumers but also demonstrates a commitment to integrity and accountability. Ethical behavior often involves considering the broader impact of business decisions on society and the environment. This mindset can drive innovation by encouraging businesses to develop products and services that meet consumer needs while also addressing social and environmental challenges

Challenges for Colombian consumer law in a data driven economy

Although companies in Colombia have scarce resources and their market is predominantly national (with the exception of the export sector in some areas), the use of technology and data has increased due to the relative success of public policies in ICT as well as of generational changes and greater access to technology training.

In a data-driven economy, Colombian consumer law faces several challenges due to the rapid advancements in technology and the increasing collection, analysis, and utilization of consumer data.

The collection and use of consumer data raise significant privacy concerns. Consumers may not fully understand how their data is being collected, used, and shared by businesses, leading to potential privacy violations. Consumer laws need to evolve to ensure adequate protection of individuals’ privacy rights in the face of advancing technology.

With the proliferation of data breaches and cyberattacks, ensuring the security of consumer data is paramount. Consumer laws must establish robust requirements for data security measures to protect against unauthorized access, breaches, and misuse of sensitive consumer information.

Consumers should have transparency and control over the collection and use of their data. However, in a data-driven economy, it can be challenging for consumers to understand complex data practices and provide informed consent. Consumer laws need to mandate clear and concise disclosures about data practices and ensure that consumers have meaningful options to consent to data collection and usage.

The concept of data ownership is complex in a data-driven economy. Consumers may not have full control over their data once it’s collected by businesses, leading to concerns about data ownership and rights. Consumer laws should clarify data ownership rights and empower consumers to control how their data is used and shared.

In a globalized economy, consumer data often crosses borders, posing challenges for data protection and jurisdictional issues. Consumer laws need to address cross-border data flows by establishing international standards for data protection and ensuring cooperation among jurisdictions to enforce consumer rights effectively. Data-driven technologies, such as algorithms and artificial intelligence, can perpetuate biases and discrimination against certain groups of consumers.

Consumer laws should address algorithmic transparency and accountability to prevent discriminatory practices and ensure fairness in decision-making processes.

As technology evolves rapidly, enforcing consumer laws in the digital realm can be challenging. Regulators need adequate resources, expertise, and enforcement mechanisms to ensure compliance with consumer protection laws and hold businesses accountable for violations.

In sum, consumer laws must adapt to emerging technologies, such as AI, Internet of Things (IoT), identity biometrics, and blockchain, which present new challenges and risks for consumer privacy and security. Regulators need to stay informed about technological developments and proactively address potential consumer protection issues.

Consumer protection and ai-powered systems

AI-powered systems are increasingly being used in consumer-facing applications such as chatbots for customer service, personalized advertising, and recommendation systems. Consumer protection laws need to evolve to ensure that consumers are not misled or harmed by AI-driven practices. This includes regulations regarding transparency, fairness, accuracy, and accountability.

AI often relies on vast amounts of personal data to function effectively. Data Protection Laws impose strict requirements on how companies collect, use, and secure personal data. AI systems must comply with these laws to protect consumers’ privacy rights.

AI algorithms can inadvertently perpetuate or amplify biases present in the data used to train them. This can lead to discriminatory outcomes, such as in lending decisions or hiring practices. Consumer laws may need to address algorithmic bias and ensure that AI systems are fair and unbiased, particularly in regulated industries like finance and employment.

As AI systems become more autonomous and make decisions with real-world consequences, questions arise regarding liability when these systems fail or cause harm. Consumer protection laws may need to clarify who is responsible when AI systems malfunction, make errors, or behave unpredictably.

With the rise of AI-generated content such as deepfakes or automated news articles, consumer laws may need to address issues related to authenticity, misinformation, and intellectual property rights. Consumers should be protected from deceptive or harmful AI-generated content.

Consumers have the right to understand how AI-driven decisions that affect them are made. Laws may require companies to provide explanations or disclosures about the use of AI in consumer interactions, especially in areas like credit scoring, insurance underwriting, or automated decision-making.

Governments are increasingly considering regulatory frameworks specifically for AI to ensure its safe and ethical use. The reform of consumer protection laws may incorporate provisions related to the development, testing, and deployment of AI systems to safeguard consumers from potential risks and abuses.

 Consumer law beyond the platform paradigm

Addressing the challenges of consumer law in the electronic platform economy powered by AI requires a comprehensive approach that considers the unique characteristics of AI technologies, the dynamics of electronic platforms, and the evolving needs and expectations of consumers in the digital age.

Consumer law in the electronic platform economy powered by artificial intelligence (AI) faces several unique challenges and considerations due to the complex interactions between consumers, platforms, and AI-driven technologies.

AI algorithms power many aspects of electronic platforms, including product recommendations, search results, pricing, and advertising targeting. However, the opacity of these algorithms can lead to concerns about fairness, bias, and discrimination. Consumer laws may need to require transparency and explainability of AI algorithms to ensure that consumers understand how decisions affecting them are made.

AI-driven electronic platforms often facilitate automated transactions, such as online purchases and subscriptions, without direct human intervention. Consumer laws must ensure that consumers are adequately protected in these transactions, including provisions for dispute resolution, refunds, and recourse in case of errors or malfunctions.

AI relies heavily on data, including personal information, to make predictions and decisions. Consumer laws need to address data privacy and security concerns in the context of AI-driven platforms, including requirements for data protection, consent mechanisms, data minimization, and safeguards against unauthorized access or misuse of consumer data.

In cases where AI algorithms make decisions that impact consumers, such as loan approvals or job candidate screenings, questions arise about liability and accountability. Consumer laws may need to clarify the legal responsibility of platform operators, AI developers, and other stakeholders for the consequences of AI-driven decisions, especially in cases of harm or discrimination.

Electronic platforms powered by AI may achieve significant market dominance, raising concerns about fair competition and consumer choice. Consumer laws may need to address antitrust issues, platform monopolies, and unfair practices that limit competition or harm consumers’ access to alternative options.

Many consumers may not fully understand how AI-driven platforms operate or the implications of their use. Consumer laws can play a role in promoting consumer education and awareness about AI technologies, including rights, risks, and best practices for using AI-driven platforms safely and responsibly.

Regulators need to have the expertise and resources to effectively oversee AI-driven electronic platforms and enforce consumer protection laws in this context. This may involve collaboration with technical experts, industry stakeholders, and international partners to develop regulatory frameworks that balance innovation with consumer rights and interests.

Our proposal

The reform of the Consumer Protection Law in Colombia in light of disruptive technologies must include specific rules that allow a balance between innovation and protection of weak parties in electronic transactions.

Law 1480 of 2011 regarding electronic commerce only established general bases. With disruptive and emerging technological changes, it is necessary to update the scope of the law to the explosion in the creation and processing of data as well as the widespread use of algorithms.

The reform of consumer protection regulations and data protection must advocate for the consumer to regain confidence in the use of platforms not only for the acquisition of traditional products and services but also crypto assets.

Consumer protection in cross-border transactions by electronic means and that use AI technologies must favor international and regional solutions that reflect an adaptation of regulatory systems to globalized technological use.

Law 1480 of 2011 was written at a historical moment with other technological paradigms and with a Colombian society in which the importance of data was less. Now it is necessary to strengthen protection through convergence with Law 1581 (Data Protection Law) and its possible reforms, as well as ensure that the regulation stimulates and does not hinder digital entrepreneurship.