Sašo Papp: Understood. But from what you've just said, Tjaša, Omnibus means more transparency from the standpoint of the consumer. But what does it mean for the entities conducting business online? Is this just another compliance burden, basically?
Tjaša Pirnat: Yes, the Omnibus directive gives consumers more rights and places more restrictions on businesses to protect the consumers. I imagine that complying with the Omnibus directive can be difficult, especially if you are a new company. As thanks to the Omnibus directive, businesses now have more restrictions to follow, which means that they need to review and update their pricing processes and transparency practices. They also need to review and update the terms and conditions for all digital goods and services sold to EU consumers, so that they include traditional consumer rights, etc. The new directive brings strict requirements, and it is important that businesses do their homework to ensure that they meet the new EU standards, as will be determined by national legislations, if not because it’s right to protect the consumer as a more vulnerable party, then, in order to avoid severe GDPR level fines for violations at the Omnibus directive introduces.
Sašo Papp: Okay, Jure, now we’ve kind of set up the stage, any thoughts on this from the other side.
Jure Čuk: I think the whole idea behind the regulation is good. It's good-heartedly meant, but it's quite a burden for a little startup. So, if we think about the industry as a whole, you know, how this will affect it, the way I see it, it won't be such a big problem for the big companies because they already have the departments, everything is programmed from scratch, so they can do pretty much whatever, uh, they want with the website, the way they treat data and so on. While for the little companies for the start-ups, for example ours, it is quite, first of all, a lot of work. A lot of thought has to be put into it because we have to learn about it, to understand how to implement it. We don't have departments that can read a law. Let's say I myself, I think about myself being quite well educated and already reading all these directives I get pretty lost. Um, so this is, you know, the whole industry will be fine. It's a good thing. So it will be good for the consumer, I believe. But implementing it technically for the little companies as ours will be quite hard, I believe, because, first of all, we're depending on which platform you're selling. Like what? On which platform your e-commerce is based on. We'll have to wait for the plug-ins to be made. We'll have to put those plugins in, as we did with the GDPR plugins. This will make our websites heavier. So, Shopify, I guess, will be the first to come up with a good solution for it and then followed by WordPress and so on. But it still will be technically quite challenging to follow all of it, especially if we have a lot of products because with all these price changes and things, I don't see how it’s possible, you know, following all this stuff. So I think the main problem for us is, as I see it from the way we do business, is not that much how we display prices. You know, it's pretty much a common thing. You go online. I mean, we programme so that it displays the regular price and then what the discounted price was. But what if we want to give discount to certain people? Let's say like VIP. You know, when people go into the store, they get all these, you know, VIP cards or whatever, discounts especially devoted to them. Um I don't see how we'll be able to do so because we do it pretty much on daily basis, the way we think that day. You know, for example, if we like one client, we'll give them a discount, will say like, Hey, you know, by by the cream for 20% off. And we don't want to do that for everyone coming onto our website. So reading the whole legislation, let's say I don't see how to do that. And I believe we'll just put out the fire when we have it. Because it's pretty impossible that we start to think about all these things start to implement them now, because it means, basically that I put the whole company into a stop, figure this out and then, you know, work with it. So we'll just see how the industry reacts to it, what people think and then try to follow, hoping that we don't get any fines on a way, because we want to do it. We want to do it well, we just don't know yet how we would implement all this.
Sašo Papp: Yeah, great answer. Okay, let's look at the topic of discount announcements. Maybe these regulatory measures aim to prevent price manipulations, such as false advertising of discounted prices that are not even discounted. So now online sellers as well as brick and mortar store retailers will have to indicate the lowest price applied to the product during the period not shorter than 30 days, as mentioned before, prior to the application of the price reduction. Definitely a good thing for a consumer. But what does this mean for the e commerce and retail in general? Does this mean that the seller has to hold the base price constant for at least 30 days before launching the sale? In a time of high inflation this can be quite a challenge. I could imagine. Jure, how do you think this effect will smaller online sellers in particular? How much problem will this be for for you, for example?
Jure Čuk: We don't change prices that often, even though inflation is ridiculous, because we basically anticipate them going forward. So we know in what quarters or half years we will increase the prices. So the time period is not a concern. And also, for us, we have just three products online. It won't be that hard to programme it. Also, because we keep the prices the same. All the time. I think what we'll do is just We won't give discounts anymore, because and we'll give coupons to people. Because basically you can always go a bit around the law, you know, So if we want to reward someone, will just give them a coupon. Let's say, you know, here you have €20 coupon and they can apply on the website and we're not using discounts anymore. It doesn't even matter if we have it. I think also it's good in a way because then websites won't be able to have discounts all the time and tricked people into buying stuff. But it's still quite a challenge to think about all of it, you know. How will we do it? Also, if we want to apply coupons, say we won't be doing discounts anymore. Here's 20 bucks to buy our products. Um, I have to think how to, you know, pay the tax on that and just put my head into it. So I, for me now, like when you guys introduced me actually to this thing, you know, I wasn't paying attention that much, so you called me, and you're like, what do you think about Omnibus? I was, I'm like, oh, I have to read all this stuff, you know? I know. I heard of it. I haven't done it. I haven't done my homework. And looking at it now, I'm just confused, you know, at the start, don't know how to implement it. So the way I usually do it is when this stuff comes, I phone someone up or, you know, I go to law offices or whoever, get a consultant and, you know, try to figure with them how to how to work this out.
Sašo Papp: Yeah, especially for, as you said, start-ups and smaller businesses this this can be a nightmare, probably. Tjaša, you've also mentioned that reviews will be taken under the scrutiny of the regulators across EU. Uh, can you explain and expand on this a little bit? In what way?
Tjaša Pirnat: Yeah, of course. Um, in an effort to increase transparency and online marketplaces, the Omnibus directive blacklisted manipulation of reviews such as posting fake reviews, deleting negative reviews and publishing only the positive ones, claiming that consumer reviews have been verified where they haven't been, transferring endorsement from one product to another, not disclosing paid search rankings, etc. Um, it's also essential under the new directive for businesses who provide access to customer reviews of products to disclose information, if and how they ensure that the published reviews come from genuine customers so from consumers who actually used and purchased the product. This does not, of course, mean that businesses now have a duty to verify reviews, but they have to disclose if they have these procedures in place to verify their use or not. And if yes, to provide information, how the checks are made, how they use their process. And of course, if you do not disclose this information and do not have these processes in place, then you should not put on your website that your customer reviews are being verified. Um, the Omnibus directive will not, of course, achieve the complete eradication of fake reviews, but I think that it is certainly a step in the right direction. But how this transparency regarding consumer reviews and verifying these reviews will work in practice is another question. And Jure, I imagine that this will not be as simple as it looks at first sight.
Jure Čuk: Yeah, definitely. Like listening to you guys, um, I have a whole head just full of too much information exploding right now, but we were trying to solve this review thing. Already, we've been solving it for two years now, searching for platforms that will thrive throughout all this period. That won't get too affected by laws that people will still trust them. Like, for example, Trust Pilot and all these big systems that provide verified reviews. And I'm also, as a consumer, quite upset because I see a lot of websites launching, having awesome reviews, selling terrible things to consumers, tricking them all the time. And you can't even, you know, reply to everything or give a bad review to the company because everything's just fake. So I want to put that to an end as well. And I feel like all this directive is pretty much on my consumer side, where stuff is technically very challenging. When we go into the way, you know, programming and things work because we'll always be able to programme something around it. I don't think they will be an inspector who will go into a company and pull all codes, especially the codes that are made from scratch apart and figure out how these reviews are happening, how people are getting it on the website. So I'll give you an example. We're using Trust Pilot. I think it's the best platform: people still trust in it, believe it, and it increases our sales. But what we could do is when Sašo, for example, buys the product from us, I sent him an automatic email saying like, “Hey, Sašo, how are you satisfied with our product, la, la, la?” And if he's not, I do everything that he won't give us a bad review, and then Trust Pilot review comes “How would you review, you know, Chicatella?” And Sašo would even go like, first of all, I would make him not write a review because I would give him a good refund or whatever, but like, he could go as well, oh, this company is awesome, you know, like I had a problem and they solved it. So it's all good. Because he was upset before, he's not upset when he gets a review and the second, the request to the review from the Trust Pilot. And the second thing is also we can fake it in a way that I buy my own products. So I find someone who finds people who buy my products, write reviews, and this is what was happening pretty much all the time, especially on Amazon. You have these big marketplaces that people treat pretty much the same way. So it's a lot of fake stuff, and therefore it's on the part of a consumer to understand how to deal with this. Because if I'm educated as a consumer, what a fake review looks like, then I'm safe and you need to think about it a lot, because if I give you an example, I go on the website. If there's fake reviews, I'll know straight away these are fake reviews. There is no way a copywriter, which companies use, even if they have different copyrighters would fake reviews so that they would look real because it's really hard if someone is coming from their own guts, like deep inside. First of all, reviews, lots of times people curse, for example, you know there's very emotional reviews going on. And also, if a company solves a big problem, these reviews are way wider. They explain how and you know when or whatever you solved their problem. It's same if you're interviewing people for the job. They say, like I did this, I did that. When you answer them like how did you do this? You'll see if the story you know it's good or not. So you'll know whether they really made this. And same is with reviews. So when you scroll through them as a consumer, you need to look for real stories. You know, a deep emotional connection to a product. That's how people write it. You also find some random stuff that just doesn't belong there. For example, we get people writing their address in a review, and that's actually a problem because they write a review. We like, a Trust Pilot sends them, uh, an invitation, you know, how did you like Chicatella’s product? And they write a review with all their data on it, and they just post it. Because they don't know how to use the thing. It happens all the time. So you’ll see all these reviews coming in saying just some random things. Each 10th review is like that. And that's why, as I said, it's on the consumer to be educated. You know, what are fake reviews? To know how to use all the platforms, Google and so on. Because Facebook, Google, these big companies have an amazing system to, um, you know, save us from all this stuff. For example, Facebook, apart from what we do, is asking people how are they satisfied with our services? And that's how we get a score. And I think this is a good thing that It will be really hard to prevent it in terms of law, because it's way too many parameters that have to be addressed. When you're building such a law, it's, you know, the directive is in a good thing. But if we think in a way like they, I think they should just step back and think how stuff is made technically and say like, hey, technically, this has to be made differently. This has to be based on such encryption technology or, you know, so just take a step back and not think about that much as a law and how to protect people, but basically how to set it up technically so that it will function in favour of the consumer.
Sašo Papp: Great! Tjaša, this influence the marketing also fall under this whole scope, the big umbrella of the new directive?
Tjaša Pirnat: Yes, to a certain extent it does, and this also touches a bit what you said previously, Jure about hiring other company's copywriters to write fake reviews. The Omnibus directive blacklisted commissioning another legal or natural person. So copywriters or influencers submitting false consumer reviews or endorsement or misrepresenting these reviews on social media in order to promote products. So businesses will have to really ask themselves how an influencer they will work with can substantiate their reviews, and how can they prove that they aren't paying the influencers to give them five star reviews? Then, another thing is that under the new directive providers of online marketplaces should inform the consumers whether a third party offering good services or digital content is a trader or a non-trader. And this is based on the declaration that this third party makes to the online marketplace and if such a third party is a non-trader than the EU consumer rights do not apply, which should stimulate the influencer to declare and disclose on social media platforms to the consumers if they are a trader or non-trader. Other than these, the main provisions that can come into play in the context of influencer marketing is still the prohibition of misleading omissions under the Unfair Commercial Practices Directive, where, as with other forms of hidden marketing, the failure to clearly declare the commercial element in influences content or practice, such as paid post affiliate content tagging the brand and so on, may be considered as misleading practice if the influencer is seems to be a trader or acting on behalf of the trader. And the commercial element is considered to be present whenever the influencer receives any form of consideration or endorsement, so this includes all payments discounts, percentage from affiliate things, free products to prevent invitations and also non-monetary payment. However, there is still considerable uncertainty regarding influencer marketing in EU, as certain influencer practices may still fall out of the scope of this directive and there are different rules in all member states. In Slovenia for example, social media and influencers are not yet regulated, and we only have non-binding recommendations on influencer marketing by the Slovenian advertising chamber. So it will be interesting to see how the Omnibus directive will be transposed in our national law. And if we will then maybe have more clear rules on influencer marketing. As in my opinion, we should, at least to some extent, regulate influencers.
Sašo Papp: Yeah, definitely. But it's yeah, like what? Whatever you mentioned now is kind of really confusing, at least for me, because influencing marketing is huge at the moment. Jure, any thoughts on this?
Jure Čuk: Definitely. I think it has to be put to a stop. Because what's going on social media is ridiculous. That pretty much everything is paid for. Also with this, let's say nano, micro influences people having 1000 followers, all their friends promoting things that are paid. But the main group of people that gets affected by this, I believe is, little girls, especially children, not so much men as there are women because they have this peer-to-peer, you know, following idea, they like to follow other girls who used hair products. They want to be like them. They want to have the same shine to the hair and so on. So this definitely has to be put to a stop. But I don't find it that easy as well to do so, because it will be first of all, technically quite challenging. But I also think there will be a lot of companies that will start doing things differently, moving into other places that are not that regulated where the law can't catch them. Because if you think about it, the Internet is a pretty global thing. So I can do my business from Liechtenstein or I can do it from Slovakia, where the rules don't apply that much. And you see this happening already. So countries that are one of the good ones, let's say, for business are opening this market they don't have. Let's say, for example, if you do stuff in America, it's completely different, and I see companies like my colleagues moving to countries and to markets where it's easier to do business this way. So I don't know how the law will address that right. It's definitely a good thing that influences say this was a paid thing, but also it's again on the consumer to think about it. There's children using social media, and there's moms pulling like parents, pulling cards for different products that they're just buying online. So I think we have to put also in education and everything; it's a way wider problem to see, like who to trust, actually, and it's some people you have to understand. I find it ridiculous how there's one influencer promoting each week different thing. Like age, You know, I changed my mind. This is the best thing now. And people are like, Wow, you know, I have to get it. So I believe that also, in foreign countries, bigger markets, influencer marketing is pretty much in a decline. It was a big thing, whereas now, especially now that my generation thinks of it, you know, they're full of rubbish. Uh, they talk rubbish. We … I don't trust pretty much anyone online when I see a commercial. But if I see, you know, this is a paid add, and someone is talking about it responsibly, openly, transparently, then I'm like, all right, you know, I give credit to this person. So it's good, but it's still always on me to understand who does good content, who thinks about, who cares. Let's say, paid advertising for just certain brains and not advertise everything that they get under their hands.
Sašo Papp: Yeah, true. Looking at the provision of Omnibus, it looks like the legislator is just responding to the existing unfair practices in the sector with a lack of future facing solutions. The same has happened with the EU privacy framework, which is now outdated. The retail industry is experiencing accelerated digitalisation, so the role of data is increasingly important. If cookies were a threat to the consumer's privacy, how will we handle the increased use of artificial intelligence in e-commerce? Jure? Maybe you start
Jure Čuk: Well, again, I think the lawmakers have to take a step back and think about it from a technical perspective because it just can't be solved piece by piece, adding laws to control a frame that just can't be to put stuff in a frame that can't be controlled. I think it's a very hard thing to do the way we're doing it now. Like law on law on law. It just shouldn't function this way because it's pretty easy to solve if you think about it technically. Because what's happening now? Let's say we have all these GDPR [regulations] and stuff. It's good for the big companies, because what happens is Facebook opened their own shop, you know? So you're within their platform, you buy there, it's their data. It's all good. Same with Google. You know, it's their data. They have all these cohorts that put you in a group and pretty much have their own data. Apple will have their own data as well. So all these companies … what we did actually with the GDPR is that all these big companies will own more and more data and will be more and more profitable. Because, basically, I can’t see, you know, who buys on my website and things like this. I think the law is pretty ridiculous. Because the real world functions completely differently. You know, if you think how people shop in a store and how I, as a person, can get their data when they're in a store. For example, they're looking at toothbrushes, and I see them looking at toothbrushes. I have a promotion there, and, you know, I try to sell them something different. Basically, I can say transfer this information to someone else who could sell to them something else in another place and so on. It's a big, I think we should just put people like all this data into certain groups, like, for example, in a way, what Google is doing now, so that it's anonymous, but [we] still know how people behave. And also, if they're on my website, if all this data is anonymous, so that I know what types of people like, how do they behave on a website and so on. It's very essential for us, you know. Basically, they're taking everything away that improves the website that helps people also shop. Because I want to know who comes on my website. I want to know if there's older people buying or younger people buying, this is how I'll be able to make content for them, and this has to be addressed again, technically, so it's quite easy to solve it just put people into groups, make all the data anonymous, you know, like don't connect it to IP addresses or whatever, and that's pretty much it, like put some crypto technology on it. And I think you know, this is how it should be treated because with the law, you won't be able to make it. Because, as you said, there's AI coming. When we'll have API on our websites, there will definitely be technological, technical things that will connect all this so we'll be able to go around the whole system, like straight, you know. I think in a year we already get all the data from different sources and treat people differently because of the way they behave on our website, and you know, when I get their email and stuff with all, let's say profiling when we do quiz funnels or whatever, we'll own a lot of data that will be pretty much well hidden from the regulators. So that's why it has to go hand in hand, not like police, you know, banging on people like do this, do that! They don't even know how stuff functions. It has to be like big companies, small companies, startups, that everyone sitting together with the lawmakers and thinking about all these things.
Sašo Papp: Great. One last question regarding the marketplaces. I understand the benefits of disclosing whether the party offering good services is a trader on a non-trader. But what are the benefits of disclosing the main parameters of the ranking of offers presented on the marketplaces? We know that consumers generally skip reading terms and conditions. We all do that, of course, privacy, data policy. Who reads this? And now we are imposing additional policies for the end consumer. Tjaša?
Tjaša Pirnat: Yeah, the idea behind this is that when looking for an offer on an online marketplace or a price comparison site, many consumers will only look at the top results. So it is important that the consumers know what criteria is used to rank the offers and if the offers appearing on search page is a paid advertising. For example, an online booking platform responds to the consumer search requests with a list of offers ranked by relevance. So, rather than being based on objective criteria that the consumer would normally expect this sorting by relevance, some offers appear on top of the list because the accommodation providers pay a higher commission to the platform. But it's also important to note here that this does not mean businesses will have to disclose the detailed functioning of the ranking mechanisms, including algorithms, so this will remain a company secret. But the consumers will be informed about the general process of the ranking system. I agree with you, Sašo. Most likely the majority of consumers will not check what criteria is used for ranking the offers. So it is actually questionable how much consumers will benefit from this additional obligation imposed on the business. But this falls under the overall goal of making online marketplaces more transparent. So we will, I guess, see over time, if this is a good thing or not.
Sašo Papp: Jure?
Jure Čuk: I think it's ridiculous. Because, if you think how the whole retail market functions, you go into a store, there's different levels on the shelf, like who's on the middle shelf? No one discloses that stuff. You know why this tuna is on the middle shelf and why my tuna is on the bottom shelf? Like who's paying more? Who's paying less? Stuff just doesn't work like that. That's why, in a way, it's good to know this is a paid ad. Okay? Like it's a payday. They click it. Some people don't click paid ads, um, I don't even care. It's always on a consumer like, I don't understand how people buy bad stuff on the Internet. You know, like you. You check also like different sources. Whether the reviews on, I don't know, Glassdoor or whatever are good. You know, there's certain like when the company is big enough, especially, you can understand if the service is good or a product and so on. You know, you have various sources where you can check these things, so I don't think it's a good thing. It should function. I mean, the real world functions completely differently, in a way. So why are we making all these digital things so complicated? I don't understand.
Sašo Papp: That's a good closure, I think. Why be more complicated in the digital world? And why more legislative? Okay, uh, Tjaša, Jure, it was a pleasure. I'm sure we opened some new doors or started to talk about it. And, thank you to all of you who took the time to join us today for yet another episode of At Centre Stage. If you want to receive an invitation to our next episode in your inbox, subscribe to the podcast notifications through our web page, where all previous episodes can also be found. Until next time, stay safe. And Tjaša, Jure, thanks again.
Jure Čuk: Thank you Sašo. Thank everybody.
Tjaša Pirnat: Thank you.
Sašo Papp: Bye bye.
