6.

2 Interview with Jan Trzaskowksi

Jan Trzaskowski, welcome to this interview. Could you please tell a bit about yourself,
your background, and what you're doing here at the CBS? >> Yeah. I'm an associate
professor here, at the law department, and my main area of research is consumer law
with particular focus on e-commerce and marketing, commercial practices. >> Mm-hm.
>> And what I've done, in recent years is that I have looked into behavioral economics
and neuroscience and other sciences, in order to determine to which extent that could
be used in setting standards for fair commercial practices. >> Mm-hm. >> And so on. >>
So, so what is is there anything in particular with neuroscience and the application of
neuroscience that changes, the, the spin of the discussion sort of speak. Is there any
changes in discussion? >> Well basically you can say that, that, marketing law, law, is
about marketing law is about setting standards for, what you can expect consumers to
understand and how they will behave and, you know, how you can expect traders to, to
behave as well. >> Mm. >> So, basically, you can say that it's, it's completely fair for, for
companies, from their perspective, to muh, maximize their profits. But from from a
market perspective the, the whole purpose of marketing is basically to inform
consumers because one of the foundations of market economy is the consumers is
expected to make rational choices, based on the information that is available. >> Mm-
hm. >> So, the whole purpose of marketing law or the law about the law on fair
commercial practices is to prohibit. Marketing that distorts the economic behavior of
consumers. >> Hm-mm. So it seems a part of the, the, of the premise here is this, actually
resting on the definition of rationality of >> Hm-mm. >> So it's assumed that given the
certain amount of information, that consumers are acting rationally. >> Hm-mm. >> So,
can you talk a bit about what the rationality mean in this term? >> Well, I mean if, if in, in
economic terms it's, it's very much linked to, to rationality, rationality as in the way that
you can, can calculate and process the information that is available to you. >> Mm-hm.
>> But as it's revealed through neuroscience behavior and economics and so on, it's, it's
obvious that our inti, intuition plays a much larger role in, our human decision making
than we believed earlier. >> Mh-hm. >> And that kind of contradicts the the general
approach or many years in, in EU that we have focused on information. So we' talk about
the information paradigm. So the, the essence of that is that, as long as you provide,
correct, not misleading information to consumers. They will be able to understand that
they will read the information, they will be able to understand it, and they will act on it.
>> Mm-hm. >> However what we see in Euro science behavioral economics and so on, is
that you might not be as rational in, in these terms. >> Hm. Yeah so the way I, I tend to
understand is that, you know, the, the classical understanding is that people are given a
load of information, they can they, they, they process that information, they weigh their,
their options and then, based on those information and the options they're weighing,
they're hitting on a particular choice that is, well maybe not perfect but at least,
approximation to being rational. >> Mm-hm. >> But what we see from SSA behavioral
economics and we see that from your economics and for example, is that people do tend
to on the one hand they tend to, to make choices that are deeply irrational. So deviate
profoundly from their, you know, optimal choices basically. >> Mm. >> But on the other
side they also tend to make those choices fast and very often unconsciously in a way, so
how does that change things you know, people are agree their conscious may be, does
that really change the discussion in a way,. >> Yeah it does, I mean it, it's proven that we,
we don't, process the information that we are supposed to under the information par,
paradigm. So it challenge the information paradigm. >> Mm >> So we must be looking
for, for new approaches to this way of regulating it. So the solution is not always to give
more information, but maybe to some extent give less information. And maybe prohibit
certain, marketing practices that we know notoriously stalling economic behavior of
consumers. >> Mm, so, moreover then, we might have this kind of dissociation. If we talk
about one thing is people aren't asking rationally or irrationally. And on the other side
people might be happy with there choices. >> Mm. >> So you can easily think about
different options. One person can make a choice and be perfectly happy with it, but
deeply irrational. >> Mm >> On the other side a person might make the rational right
choice, but still be unhappy with the choice. >> Mm >> So from that kind of set up. You
know, what kind of how would you evaluate that from >> Well, basically we can say that
rational choice is one that is linked to your preferences or that is in accordance with
your preferences. So if you have a preference for a promotional lottery and you get a lot
of pleasure. Dopamine or whatever you're getting out of buying a lottery ticket and, and
that is within your preferences. >> Mm-hm. >> Then it's a rational choice. >> Mm-hm. >>
so, so, the, the problem here will be to establish what is your preferences. >> Mm-hm. So
okay I'm being a bit devils advocate. >> Mm, please. >> What if I, then I get a kick out of
driving very fast without a kind of a seat belt for example. >> Mm. >> That, that's my
preference so to speak but we have a law against that. >> Yea. >> So, is there kind of a
divide here when we talk about traffic because it can cause harm to other people but
here we talk about consumer behavior. Then you're using this kind of preference in a
different way. >> Yeah, this is a matter of paternalism. Which is something that most
economists don't really like. So to which, extend should regulate behavior and make
choices for citizens. And that's something that we have accepted in, in traffic regulation
that you should wear a seat belt and, you know, you shouldn't drive too fast and so on.
>> Mm-hm. >> And the same argument you can use for, for having paternalism in, in
marketing law. >> Mm >> If you accept the, the foundation that. Much of our decisions
are based on our intuition rather than our rationality. >> Mm-hm. >> So that would be
an argument for actually regulating consumer behavior. Well, not regulating consumer
behavior, but regulating the techniques, the commercial practices that traders may use,
in order to make us buy their products. >> Mm-hm. >> And, and we have a history in, in
Europe of regulating certain areas or certain commercial practices, such as promotional
lotteries, premiums, buy this and get this thing for free, and so on. >> Mm-hm. >> That
we know distorts economic behavior. >> Mm-hm. >> Because from, from a, complete
rational perspective, you may be able to calculate what it is and you know what is the
value of it but you don't do that. You just focus on the free gift you get, or the lottery
ticket the the possibility of winning something. So it will, distract you from the main
product you are buying. And therefore, we have had bans, in, in many EU member states.
>> Right. >> But in 2005, we got a new directive on on fair commission practices, that
went into force in 2007. And that fully harmonized the area of business to consumer
marketing. >> Mm-hm. And there, in that directive are 31 commercial practices that are
banned under all circumstances. >> Mm-hm. >> And the court of justice of the European
Union has established that, we cannot have specific bans in member, national member
states prohibiting commercial practice, that are not at the list. >> Hm. >> So that meant
that we, in all these member states that had these prohibitions would have to take them
away. >> Hm. >> So that happened in Denmark. So we, we don't have the ban on
promotional larder. We don't have a ban on premiums anymore or the use of coupons
for that sake. >> Right. So given what you say about laws against coupons for example.
There are still some laws in marketing law. Again subliminal advertising for example. >>
Mm-hm. Yeah. >> So, what is the distinction, and is there a distinction between between
the, you know, subliminal and advertising and coupons for example? >> Well, you can,
you can say when it comes to subliminal marketing it's it's a fundamental requirement
in, in marketing law that, you should be able to recognize advertising as such. So the
commercial intent should be clear for, for consumers. >> Mm >> And that is one of the
basic reason why, subliminal marketing is, is prohibited. >> Mm >> And, so when it
comes to coupons for example, if you, if you look at the case from the court of justice of
the European union. You'll see that, they've recognized that consumers should be aware
that there are certain marketing techniques that do not relate to quality and price, but
rather to winning over consumers. >> Mm. >> So, they seem to accept that, you know,
these commercial practices are, you know, they're not fair, they, the consumers are
expected to understand them. >> Mm. >> And, and recognize them. >> Mm. >> The, the
problem here is that consumers might recognize these as, you know a commercial
practice, but they might not know how they influence their behavior and- >> Mm. >>
That is some of the, the insight that behavior economics and neurosciences on can, can
give us. >> I think one interesting point going to that is, is that you know, subliminal
perception is known to, well, it works. And we have all the way from the popcorn and
the, the Coke in the cinema, which turned out to be just a, you know, a, a fad. But it was
an even a lie, but we know today that subliminal perception works. That's one thing. But,
we also know that it's very short lived. >> Yeah. >> So it has a very short effect. A very
brief effect on people's, actual choice. >> Mm. >> So just lasting for something like a few
seconds to, you know, a few minutes. >> Mm. >> So given that, you know, subliminal,
subliminal messages in TV ads, for example. They don't really, I wouldn't expect them to
have, such a big effect. But who am I to be wrong. So, so going to kind of fitting in
marketing subliminal law in general marketing law in general. Are there any kind of
regional differences, of course I assume that, the most in the EU for example but also in
the U.S. there tends to be regional differences. To what extent do we see that the same
rules are applied, and are there, are there international debates about which law is the
right one? >> Mm. >> I mean, how does that work? >> well, this is a quite complida,
complicated question. So if you start from, from your European perspective, we have
common laws in, in in the European Union. So that means that we have the unfair
commercial practice directive that sets a frame for, a framework for how we should
assess commercial practices. >> Mm. >> And they basically focus on a requirement of
professional diligence, which is the requirement for the traders, how they should
behave, what they should foresee, and so on. And we should, and that should be
compared also to the behavior of the average consumer. So these are the two, measures
you use to determine whether a commercial practice is unfair. >> Mm-hm. >> And under
the directive, a commercial practice is unfair if its contrary to the requirement of
professional diligent, and it is likely to distort economic behavior of consumers. >> Mm
>> That means they will make a decision they wouldn't have made if they were fully
informed. >> Mm-hm >> And, and that model is, is recognized in, in different guidelines
but it's similar in, in, in the U.S. or Australia, what, from what I've looked into. >> Mm-
hm. >> Of course, there might be different perceptions on, what professional diligence is,
and which requirements you can set to the average consumer. >> Mm-hm. >> But it, it is
exactly the the focus on the average consumer that is interesting from, from my
perspective. And, and when, when we're applying behavioral economics in neuroscience.
Because we base, a lot of these decision on an an average consumer. And, we might not,
there, there, there is no such thing as an average consumer. So, so it's just an abstraction
we make. >> Mm. >> You know, just one, you know, kind of consumer. So we're setting
basically a standard for, what consumers are expected to know and how they expected
to act. >> Mm. >> And if they fail to act that. If they fail to act like the average consumer
is expected to do, then is that right to self-determination as it's said? and, and my point
is that we can use behavioral economics and neuroscience to, better get an idea of where
should we set the threshold for. For the average consumer what can we expect from
them. >> Mm-hm. >> Especially when we talk about certain buyers and and heuris,
heuristics. We can use that to determine, how will an average consumer, behave in a
certain, in certain circumstances. >> Mm-hm. So, so, so one thing is having the average
consumer, then of course the obvious question is then, what about people who are in,
you know, in a situation or in a condition where they are not kind of, >> Mm >> They're
oddballs, they're kind of out of the average consumption behavior so they're going to be
compulsive buying disorder, like shopaholics, pathological gamblers, it could be obesity
for some reasons or some other disorder, how does that change anything to how, how
you can discuss this? Or does, does that incorporate, incorporate into the law. >> So, so
there are many approaches to vulnerable consumers and many concepts of
vulnerabilities, and there is some protection in, in commercial practices, the focus on,
vulnerable groups of consumers. >> Mm-hm. >> But only to the extent that the, the
trader could reasonable fore-, reasonably foresee that particular vulnerability. >> Mm-
hm. >> So if you take the example of promotional lotteries, for example you could argue
that the betrader should foresee that, that gamblers would be attracted to these kind of
promotional lotteries. >> Mm-hm. >> However, we have very little case law on, on the
directive, and we know from, from history that the Court has been very friendly towards
the, the internal market interpretation of directives, and, and not taking so much care of
vulnerable consumers. >> Mm-hm >> So we don't know how far that will, that will
actually go. >> And when it comes to, to the law I guess the, as always the, the people
from different schools, and different lines of thoughts, one you know some people might
be, hardcore Libertarians in a way, that they think all it's the market should be self
corrected in a way. And then you have, all the other way to you know paternalism in a
way. >> Mm >> So, what, how, what, how's the pendulum looking these days and where
do you position on that? >> Well basically we go back to the idea of, of the average
consumer. You can say the problem here is that the vulnerable consumers, will not meet
the standards of what is required of, of average consumers. So they are not protected
under the general rules, in the directive. So you can argue that, the only way you can
really protect these vulnerable groups is to introduce general prohibitions. So you could
actually prohibit gambling or you could promotion lottery coupons and so on practices
that you know notoriously is distorting a lot of consumers' economic behavior. >> Mm-
hm. >> And that would be perceived as paternalism, by some economists. >> Mm-hm. >>
On the other hand, you can, you can argue that the, the whole foundation of the of the
market economy, is that consumers are expected to make rational choices. That is,
choices in accordance with their preferences. And if we know that a lot of the decisions
are made, subconsciously. Then you could argue that at least information might not be
the solution to, to, you know, everything and you might actually use that as an argument,
for having prohibitions. >> Mm. >> Just as we talked about with with using seatbelts and
so on so. We, we might need to protect consumers from themselves. And that is not a
popular, [LAUGH] you know, attitude and all in, in, in all societies but- >> Right. So. >> So
at least you can say that it provides an argument, for paternal, paternalism. >> Right.
But, so many perspectives, paternalism is, seen as kind of a bad thing. >> Mm. >> I guess,
especially from economists, so. >> Yeah. >> Why, why is paternalism a bad thing? And
it's good for seat belts. >> Yeah. >> But it's bad for consumer behavior, and I- >> Well,
the, the, the economist view would be that how can the government, know better than
the market itself, what is good for consumers. >> Mm-hm. >> So, so, that is you know. >>
But, so, that means if it turns out that through research, we can know that consumers
are making, you know, bad choices. >> Mm. >> We know why. We can also help them
inhibit that. >> Mm. >> But they don't, you can't get them to the point by themselves. >>
Mm. >> That, that, that kind of im, implies that there needs to be some level of
paternalism. Yeah >> So they will accept that, or will it still be >> Well that there are
certain groups that focus on, on the idea of nudging, which is you know what's called soft
paternalism or whatever I mean it's kind of paternalism, but you know it's, it's soft
they're trying to, they talk about libertarian paternalism >> Right >> It is paternalism
and I've, you know, I've, I'm a paternalist myself, [LAUGH] I have to admit. I mean, I've,
I've become a paternalist from, from seeing these issues and, and, and the whole idea or
the reason why I, I think it makes sense to, to regulate this is that that the whole idea of
the market is that we should make efficient choices, but if we're not making efficient
choices, the market isn't working. So, so you could actually use a market argument, for,
for regulating these things because you want the market to function properly. >> Mm-
hm. >> You want consumer to buy the products that are best, and then the argument will
be why should, why should you allow for example the use of promotional lotteries,
coupons and so on, if you know it distorts the behaviour in the market. >> Mm. >>
Doesn't make sense. I mean why, why should I buy a lot, why should I receive a lottery
ticket when I'm buying a bottle of Coca-Cola? >> Right. >> And it doesn't I, I mean, for,
for me it doesn't make sense. >> Mm >> And then the economist argument will be that
well some consumers might have a preference for that exact thing to, to get a lottery
ticket when you buy a Coca-Cola. >> Mm >> But argument the counter argument again
would be that while there are a free market well not a free market. There's a market for
gambling so, if you like lottery tickets you can by lottery tickets and if you need a Coca-
Cola you can buy a Coca-Cola and you can focus on the products that you actually buy. >>
Mm >> It makes it much easier to compare you know competing products and so on
because you will not have to, value aids, you know, premiums or lottery tickets or
whatever you're getting with the with whatever you're buying. >> Right. When it comes
to looking at some of our colleagues for example looking at the publications, there are
even some, some claims that you know, the application neuroscience into behavioral an
economics for example. It's been argued that, it's becoming you know [INAUDIBLE] it's
becoming too effective. >> Mm. >> It's almost like we are becoming consumer zombies.
How do you kind of respond to that idea. >> Yea >> Others are they say. How do you
relate to that? >> The whole idea of consumer protection grow out of, of the fact that
traders know more than consumers, about how the consumers are behaving. So we need
to protect the, the weaker consumer against the stronger trader. So it's always been that
way that the the trader knows a lot about their customers and, and that behavior. And
now, they've gotten better tools to do that. And you could argue that it would be
unethical towards shareholders not to pursue these techniques. >> Mm >> To maximize
profits for, for, from the business perspective. So you could argue that it's unethical from
a business, in relation to the shareholders not to, to use these techniques. >> Mm. >>
And I would say as, as long as you're not, distorting the economic behavior of
consumers, if you're using it to provide products that consumers want, I, I don't see the
problem in it. >> Mm. >> So that will be a competitive advantage but it's information
techniques that available to, you know, actually most competitors. Even smaller, because
the prices are going down for making these things. And, and you can read about, you
know, both behavior economics and, and, and neurosciences, so you have access to that
information in the market. >> Mm. >> So what, what we need to reconsider is, what is
professional diligence here? >> Mm >> Which is when we talk about markets and low,
which is the standard for what we can expect, how we can expect traders to behave? And
thereby also what can be expected them to understand about how their consumers will
behave. >> Mm-hm. >> You know? So, so, so you can argue that knowledge of
neuroscience and behavioral economy can raise the bar for, what we can expect from
traders when they are, have to to act in accordance with professional diligence. That is
that they should foresee certain behaviors in, in consumers, and if they arrange it in a
way that they are actually distorting the economic he, behavior, by, you know, making
marketing that distracts consumers because that's what the research has shown. Then it,
then it's a problem. >> Mm >> But if it's a matter of building proble, building products
that, you know, are more attractive to consumers. Better fulfill the the expectations
consumers have making commercials that work better than others. You know,
introducing elements in, in marketing and taking away. >> Mm. >> I don't see it's
unethical. I think it's a necessity,. >> Mm. >> As it is. I mean, as long as we want a market
economy we need to have, competition and, and you can say that these tech technologies
and sciences here as, as part of a competitive, I mean you can get a competitive
advantage by being good and using these things, and your product design and your, in
building your marketing campaign, and so on. >> So given that we, we can think about
the ways in which, which we can regulate. But might there be some kind of, still some,
some self regulating mechanism, for example, you know CSR, corporate social
responsibility. >> Mm. >> Is that, you know, will companies align their behaviors to what
they believe or factually what, what consumers are expecting them to do. >> Mm. >> The
stakeholders are expecting them to do. So, can, could, could there be kind of a self-
regulated maint, mechanism, do you think? >> Yeah, well, I mean, of course, I mean, the
companies can restrain themselves from using certain techniques, but, I don't, I, I mean,
the, to be honest, I don't think it's unethical to, to use this technique, as long as you use
them for better understanding with your consumers, but because that's what a company
should do. So they should understand what is, what is the, demand that we're trying to
satisfy with our products, or with which demand what do we want to, to create, you
know? >> Right. I think there's one, core topic that we need to touch upon, which is the
concept of preference. >> Mm >> Because the way I hear that preference is used is it's
used as if it has a particular definition. >> Mm >> So, can we talk about what do you
mean by preference? Consumer preference, what is that to you? >> [COUGH] well to be
honest I, I, I can't give your a real definition because I've, I've just used it as an abstract
concept. >> Right >> I know you have you know certain ideas of it that you know I can
not elaborate on but, but from my perspective we just use it as a standard so in order
better to understand what rationality is. Because that's something that is, said in
marketing law, that we want consumers to make rational choices. >> Mm >> But can you
argue that it's irrational to pay 100 or 200 euros for a computer just because it has an
apple on it. >> Mm. >> And yes, it might be perfectly rational, if it's in accordance with
your preferences. So, so that is the whole idea of introducing the preferences but I
haven't gone deeper down to what are the preferences. How do you satisfy them. >> So
does the preference here mean, a kind of stated preference or the realized behaviors so
to speak. There might be dissociation then. >> Yeah, and and it's a very good question
that I can not give you a good answer to it. >> Okay, so the way that you know one of the
things we would do I have done with this course to, to this point, is actually to
demonstrate that, we might be talking about two different levels of motivation and
preference. >> Mm-hm. >> By that token. So one is the kind of, the conscious state of
preference. And that has a very particular kind of neur, neural substrate. But we also
have a, an unconscious very often kind of fast and furious preference response. >> Yeah.
>> That very often kind of tends to dominate when we are making particular choices, so
consumer choices, consumer goods, for example, whether to gamble or not, and when
we look at for gamblers, these are some of the parts of the brain that, tend to respond
more strongly. >> Yeah. >> So that the person, just like a drug addict actually, can say,
consciously I don't want to do this. >> Mm >> I need to stop like a smoker for example as
well. I need to stop, this is bad for me. I know that. >> Yeah. >> But unconsciously they're
driven to make that choice. It's kind of an unconscious preference. >> Yeah. So, you
know, I'm, I'm this is not to challenge that concept too much, but it's, it, could there be
kind of, kind of an element, you know, when you're a scientist, when we talk about
preference it always has this kind of dual edge, edge, sort of, this kind of dual meaning to
it. >> Yeah. >> Does that kind of conflict, just your take on that, does that kind of conflict
with your, your preference concept? Mm the I mean the way I would put it is that if, if
you read into the case law from, from the Court of Justice of the European Union they
seem to have be very much focused on what our preferences are, or what rationality is
and rationality is you know being able to understand information, so they look very
much about. On the, on the conscious part of, of, of the brain. >> Mn. >> So, I mean the, I
believe that will be the starting point, but it's, it's important to remember when we
apply it in, in law, that we are not so specific, because it will be an abstractions, and
whenever we talk about distortion of the economic behavior of. The average consumer.
We are not talking about a particular consumer we are talking about a consumers in
general. So in that sense it doesnt really make such a big difference which or how we
define preferences or rational basically. I mean we need to have a concept offered but
It's more. Normative in its approach. So, it's, it's more about like, you know, I think this is
ir, irrational behavior. This is encouraging irrational behavior or you know, rather than
going into the finer details of. What do we understand when we say how we do we
perceive rationality and how do we receive preferences. That is far to detail for the way
we use in law because it is normative abstraction we are focusing on. >> Right. Okay. So
give me this the discussion we had so far. Kind of taking the last question is more
focused on the future. So looking five, ten years into the future, what we see these days is
an exponential growth in the use of technology, the use of signs. We see new
technologies emerging and being employed and used, you know, to quantify themselves
for example. Or the, you know, big data which is really. Up in the air these days as well.
And, and of course, you're wanting in a pure neuroscience. Mm. >> How do you, is there
any kind of expectancy of what, what would happen, you know, the next five to 10 years?
Is that even too long, far out, to, to look on? >> No. I think, I mean, the things move,
moves rather slowly in, in, in the low are, low areas. The the discussions right now going
on, to, to which extent can we actually use these sciences in our normative assessment of
marketing? >> Mm. >> And, and that, that is one of the challenges. And, and, and the
second question would then be, how can we use it. So because in all circumstances it's
going to be an argument to words that for an example coupons are likely to distort
economic behavior. You know, but we, we, we don't want to have the situation where
we'll have to in, in, in, in, each case we'll have to make, you know, neuroscience studies
behavioral economic studies. How that works. >> Mm. >> Because that will be very
cumbersome, it will be very expensive. And it will still not determine, I mean, we, we, we
still won't be able to find that, you know, that average consumer. So it is, at the end of
the day, it's still a normative, resolve we are, we are aiming at. >> Mm. >> So, I believe
that. That neuroscience behavior economics and so on will be used as arguments in
cases. And then we will see whether the Court of Justice of the European Union, whether
national courts will take that on as evidence for that it's likely that economic behavior
will be distorted. There are certain signals both in the commission and also in the court
of justice that they seem likely to. Accept these things. >> Hm-mm. >> But it's important
to know it also, that in that the standard of the average consumer it's, it's not a statistical
test. >> Hm-mm. >> So it's not that we can define this is the average consumer It's still of
concept. >> Hm-mm.