Monday, August 31, 2015

Guest Post: Regulating Mobile Dating Apps

This guest post is by Chris Grisdale 
Twitter: @Cgrisdale Instagram: chrisgrisdale

From a certain point of view, mobile dating applications are a kind of trading floor—exchanges where personal profiles, not companies, are listed. And while Stock Exchanges have been with us for a long time, dating applications relatively recent. The Toronto Stock Exchange (TSX) has provided space for companies to access the public capital markets since 1861. Mobile phone applications like Tinder and Grindr have only provided a meeting point for the “love market” since 2009. 

Tinder and Grindr solve an old relationship problem known as “settling.” You know the scenario: two years ago your friend quietly whispers, “she could have done so much better” referring to you at a cocktail party and now you find yourself sympathizing. While our parents might have to live with the nagging feeling that their partner could have been more physically attractive, better educated or wealthier had they greater exposure in the “love market,” our generation doesn’t have the same problem. Sure, the problem of how long a person should stay on the market remains, but these applications create unprecedented exposure—there are more people to meet.  Better bargains are struck; fewer traders accept below market value.

There are market perils. While securities laws regulate access to public capital markets, it is worth wondering whether public access to the romance markets should also be regulated. And if so, what regulation is appropriate?

The principle means of regulating the public capital markets is through the prospectus, which requires a company to give full and complete disclosure of any matter material of the company, updated through a continuous disclosure regime. A company going public has to take steps to discover all the material information, and once public has to continue to account. Our real estate market, however, is still principally governed by the rule of caveat emptor—buyer be-ware. The rule puts the risk on the buyer. It’s the buyer’s responsibility to inspect the goods, not the seller’s duty to disclose material information. One exception, to the rule is a known latent defect. It’s illegal for a seller that knows of an invisible defect to not disclose it. But the exception does not impose a positive obligation to uncover problems.

Participants in the love markets often provide insufficient or inaccurate information because, in the course of a transaction, it may not be in the interests of a party to provide full or accurate information to the other. In the market for love, an informational failure spans from the banal to the serious. At best a party wastes time on a coffee because the counterparty’s profile inaccurately reflects their true assets and liabilities—the worst version of this is the catfish scenario. At worst there’s risks associated with sexually transmitted infections.

Occasionally a counterparty will purposefully use outdated and inaccurate photographs—be wary of instagram filters. The strategy is simple: entice a potential counterparty to incur a sunk cost, in this case, time. Once you’ve met for coffee, you’re not likely to immediately leave. You’re there for at least 30 minutes to an hour. Once you’re in for a penny, you’re in for a pound. But this strategy is only successful when the inaccuracies don’t deviate too far from the true value.

According to the Urban Dictionary a catfish is a person who pretends to be someone their not to pursue deceptive online romances. MTV capitalized on the catfish phenomenon with the reality show Catfish that films the public exposure of false online identities for all our amusement.

But from the legal point of view, perhaps the most interesting disclosure issue is whether legal liability arises from the failure to accurately disclose the existence of sexually transmitted infections. If we followed the securities regulation approach on this issue, we might impose a positive obligation to get tested and disclose the status to participating in these trading floors. Where we, however, to take a caveat emptor approach liability would only arise when the seller has knowledge of a sexually transmitted infection. Current law errs on the side of caveat emptor.

While the securities approach seems too harsh, the caveat emptor rule seems like bad public policy. People are less inclined to get tested.


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