Location based advertising – Legally correct or ethically questionable?

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Advertisements are everywhere. Media companies use every bit of information we leave on the internet to target potential customers with personalised advertising. Traditionally, cookies were the go-to instruments, but recently the data collection toolkit has been extended with geotracking, a technology in which an individual’s locations are being monitored on his or her smartphone or laptop. When used for marketing purposes, the technique is also referred to as location based advertising or LBA. It represents a commercially very attractive option for effective campaigning, because the places we regularly visit are highly indicative of our activities and interests. So clearly, for marketeers this is valuable information. But what about the rights of the individuals whose movements are being recorded? In this blog we will look at the various relevant aspects of LBA. What exactly is it and how does it work? What are the potential problems from a legal point of view? And, depending on the severity of these issues, to what extent does the law offer adequate protection?

What is LBA?

LBA uses recorded real-world locations to present personalised advertisements to selected audiences. These location data may be left on the internet by users themselves, in the form of geotags on social media for instance, or automatically collected as a by-product of the functions of various apps. These data offer information about a person’s place of residence and work, preferred shops and travel destinations. Next, specialised algorithms take care of posting targeted commercial content to audiences selected on the basis of recorded behaviour and movement patterns. A great solution for brands and marketeers, because it is cheap as well as selective and offers a large effective range.

Problems with location data

Over twenty years ago, location based price differences at Amazon were first reported. In the past, location driven price discrimination appears to also have been common practice with hotel booking sites and car rental companies. This so-called geopricing – different process at different locations for the same products from identical providers – is one of the issues in LBA as well, along with the use of geoblocking, where certain sites, services or products are not accessible to consumers in specific geographical locations.

Geoblocking, geopricing and the law

In 2018, having acknowledged the issue of geolocation based discrimination, the EU issued Regulation (EU) 2018/302 on unjustified geoblocking and other forms of discrimination.
This regulation addresses the problem of consumers not having access to products and/or services offered by providers from other EU member states because of their nationality, place of residence or place of establishment. Another source of possible legal protection lies in the European privacy legislation, which at the very least allows for the interpretation of location information qualifying as personal data in the sense of the GDPR. Discussion is ongoing on the matter, but if this is found to be the case, location data would be subject to all objections, considerations, requirements and conditions applying to the collection, processing, transfer and use of personal data in general. Then, we’re talking consent from the data subjects, we’re talking purpose limitation and data minimisation.

Adequate legal protection?

In the case of geoblocking, the law offers a reasonably appropriate level of protection in relation to cross-border e-commerce. But there is an area of arguably inadequate legal coverage which can be illustrated with a simple example. The legal provisions on geoblocking protect consumers against active exclusion from access to websites, products and services. But what if they are not being denied access, but simply not provided with specific information? What if an algorithm decides that a certain job opening does have relevance to people from the relatively high-end city district A where many residents have similar positions, but is not of interest to possibly equally suited candidates who happen to live in the low-status, less prosperous neighbourhood B? In this case, no one is actively being denied access to the job advertisement, which anyone can search for and find. Except that the people living in district A never have to do any searching at all and as a result have a head-start before the race has begun.

The problem with geopricing, on the other hand, is that theoretically, existing legislation does not have much practical significance if people do not realise they are being directly or indirectly discriminated. How is a consumer from posh city district A to know he is being charged higher prices for identical products from identical providers than residents from the low-end neighbourhood B because somewhere in the unseen background an algorithm is making choices based on geolocations? Comparison to prices paid by those in his direct environment will show no discrepancies, as the people closest to him have the same location characteristics. Here, the lack of transparency is counterproductive to the awareness of discrimination. In theory, consumers could exercise their GDPR-based right to information on the process of pricing, but this is a complicated matter. Besides, where in this example the (presumably) well-off are being overcharged, in reality the poor usually pay the highest prices.

In short, the law does not offer complete protection. Geoblocking regulation notwithstanding, it is still possible to reduce specific consumers’ access to products, services or, as in the example above, career opportunities, simply by not offering them the relevant information. In relation to geopricing as well, the law falls short of providing adequate protection. As a result of the information gap and the non-transparent nature of advertising algorithms, consumers are often unaware of and do not even think of objecting to indirect discrimination no matter how clear and present it may actually be. To prevent ethical issues from becoming true problems, legislative intervention is required. Unless international e-commerce were to set out on a sudden course of moral excellence and high-grade social responsibility which, in view of the numerous scandals in the sector, seems highly unlikely.

Conclusion

LBA uses geolocation data to present personalised advertisements to targeted consumer audiences. More often than not, geopricing and geoblocking are part of the package. Some success in tackling location-restricted service offerings across EU member states has been achieved by the European Regulation on Geoblocking. But this does not apply to geopricing, which under certain conditions remains legally unchallenged. The ethical problems come in when consumers are disadvantaged without being aware of it, which is exactly what happens with LBA. This is where the legislator is facing the admittedly complex task of facilitating the consumer protection needed for a not only legally appropriate but also ethically acceptable implementation of LBA.

TPF Team

TPF Team

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