Shopify Inc.'s headquarters in Ottawa on May 3, 2022. During the pandemic, the company partnered with the government on an initiative to help small businesses grow, and on the COVID Alert app.Sean Kilpatrick/The Canadian Press
Vass Bednar is the founder of Regs to Riches, a senior fellow at CIGI, and the executive director of McMaster University’s master of public policy in digital society program.
I recently reported Shopify to … itself.
The Twitter account “Deceptive Design,” which illuminates deceptive design patterns, had noted two fishy apps available on the app store of Shopify Inc., the Ottawa-based e-commerce platform. One advertises the ability for merchants using Shopify to create fake low-stock indicators. Another adds faux time pressure for customers through a large animated countdown timer.
These apps are made by third-party app developers and are not necessarily Shopify’s fault. But Shopify claims certain standards in its official requirements for apps. By allowing these apps, Shopify is violating the bargain it has made with merchants. Further, having such apps on the platform can encourage merchants to deploy them because people assume that the app is compliant with the standards of the app store – to the detriment of shoppers.
Other than pointing out the issue to Shopify, the more traditional, and only regulatory option was for me to report the company to the Competition Bureau for facilitating false or misleading representations and deceptive marketing practices. In choosing to voluntarily report to the host company first, I was privileging the ability of a tech company to self-regulate over the government’s duty to vigorously enforce existing legislation.
That’s because the Competition Bureau seems unlikely to address it at all. This low likelihood is only partly due to resourcing constraints. The more substantive reason is that, domestically, there appears to be a regulatory vacuum around Shopify, and the company is rarely the subject of any digital policy debates. It seems that Canada has subconsciously made Shopify untouchable.
Shopify is beloved in Canada for wonderful reasons. But if there’s anything we have learned about the recent tech-lash that saw the industry’s stock plunge, it’s that high valuations often mask a lot of problems. It may be that Shopify’s weakened stock price will make the company more vulnerable to the kind of critical examination that other technology giants rightfully receive.
We cannot begin this conversation without noting that Shopify has been especially chummy with the federal government. During the pandemic, the company partnered with the government on an initiative to help small businesses grow, and on the COVID Alert app. Both times, Shopify did it for free. It has been reported that Shopify also sought even closer relationships, with proposals that at times make the company seem almost an extension of the federal government.
There is nothing to suggest that there is anything untoward about that relationship, of course. Shopify’s generosity in times of crisis should certainly be applauded. But in relationships between those on different ends of the regulatory process, some distance is beneficial. Overt friendliness can act to insulate a business from a critical eye, even if that is not the intention.
And Shopify does need a critical eye upon it. The company recently made headlines after settling with textbook publishers on a piracy lawsuit. They are occasionally the subject of viral Twitter threads lamenting seemingly arbitrary enforcement of their terms of service.
Another issue is that Shopify mandates that developers that charge their merchants for the apps must use Shopify’s own billing API system. That privileges Shopify with omniscient knowledge of purchases – information the company could abuse to inform the creation of new apps that directly compete with successful ones in the way Amazon has done.
Shopify is doing something just like that with Shopify Capital, using its exclusive merchant data to get an edge on its planned high-margin lending product.
Yet another issue was the example of Shopify removing the “Mailchimp for Shopify” integration from its app store in 2019. While that decision has since been reversed, at the time, it was a clear exertion of the app store’s gatekeeping power.
In jurisdictions ranging from South Korea to the Netherlands to the United States, regulators have been trying to do something about issues such as these. But arguably the only piece of public policy in Canada that materially involves Shopify is the debate around taxing employee stock options.
When Canada first proposed a national digital sales tax, it appeared to be constructed in such a way that Shopify would not meet the threshold for these new obligations.
As well, Canada’s previously proposed Online Harms bill would apply to “online communication service providers” and is intended to capture only what it deems to be major platforms – which does not include Shopify.
Thus far, it seems like the Shopify ecosystem is generally responsive to customer expectations of self-regulation. For instance, the company moved quickly early in the pandemic to voluntarily mitigate merchant price gouging and counterfeiting. After a 2021 report that Shopify’s platform is susceptible to fake reviews, the company’s app marketplace temporarily took down some apps that facilitate fake reviews.
But it would be naive to assume the company would forever be a responsible innovator out of the kindness of its heart.
The top three review apps on Shopify, still, all have capabilities of importing selective reviews or blatantly creating fake reviews. In the United States, the Federal Trade Commission has put hundreds of businesses on notice about fake reviews and other misleading endorsements, but no comparable campaign exists in Canada.
Regulators in the U.S. are struggling to tame the tech giants that they incubated under a policy regime of permissionless innovation, which made space for experimentation with new technologies in the absence of new regulations. Meanwhile, regulators in the European Union are introducing new legislation for digital markets. The Government of Canada’s semi-frequently stated aspiration to facilitate “more Shopifys” seems to have endowed the company with an immunity to any sort of formal regulatory attention. This is especially relevant as Shopify continues to build out its strategy on cryptocurrency and NFTs (non-fungible tokens), an area in which the regulatory regime is still playing catch-up.
Shopify’s public narrative of “arming the rebels” helps to paint the company as the new kid on the block, when in reality it is a large company that may duck scrutiny because it styles itself as a plucky underdog.
Perhaps more blindness needs to be built into the informal process whereby policy people determine what problems are prioritized. It will be difficult, painful, and potentially disingenuous for Canadian regulators to more closely scrutinize Shopify’s business in the future – like the fake reviews – if we don’t start thinking more critically about the company now. It may be that the chumocracy we’ve facilitated from a place of national pride will be impossible to unwind, mirroring some of Canada’s most infamous monopolies.
For now, we can at least report Shopify to itself – even though, as of publication, the two apps that I’d reported to Shopify are still displayed proudly in its app store.