Information Asymmetries in E-Commerce : The Challenge of Credence Qualities

The growth of e-commerce and the increase in online product information—allowing consumers to learn about almost any product with incredible speed—brought with it the great promise of better-informed consumers that can make better purchasing decisions. However, information is not within the consumer’s grip, as one may expect. Most of the existing literature on information problems in e-commerce discusses information overload, in which the consumer faces the challenge of noticing and assimilating information. This Article is the first to highlight an opposite problem: information that is absent in the online sphere. In particular, the Article focuses on the absence of credence qualities, which are product features that are unverifiable because they may never be required in the course of regular use of the product (for example, standards that the product is claimed to meet but that the consumer cannot verify).Despite the fact that credence qualities can significantly affect consumer welfare, e-commerce offers an increased amount of information relating only to other types of product qualities: search qualities (product features that can be detected prior to the purchase) and experience qualities (product features that can be detected only after the purchase). Furthermore, as shown in this Article, e-commerce creates a new type of credence quality: the deviation of the terms of the particular transaction from market terms, of which the consumer is unaware.This Article also shows that the existing toolkit of consumer protection law is inadequate to solve the problem of missing credence quality information. The most prevalent regulatory tool is mandatory disclosure, and it is particularly problematic because consumers are already overloaded with information about other qualities.After highlighting the challenge, this Article proposes a shift in the regulatory approach. Instead of imposing disclosure requirements, the regulator should endorse or facilitate the creation of platforms for the voluntarily sharing of credence information and for regulating its appropriate use, organization, and presentation. Such a platform will allow consumers to become better informed. The Article then suggests guidelines for implementing this proposal, including possible steps to protect the platform’s content and to encourage voluntary contribution and individual use