U.S. FTC considers requiring disclosure of personalized pricing practices

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FTC considers personalized pricing disclosure

Highlights

The U.S. FTC released a draft policy statement, open for 30 days of public comment, warning against undisclosed personalized pricing based on consumer data.
California Attorney General Rob Bonta and U.S. Congress members increased scrutiny on data-driven pricing, signaling mounting regulatory and political pressure across the market.
Instacart ended variable grocery price tests in December after reports showed some shoppers saw prices up to 23% higher for identical items at the same store.

Draft policy targets undisclosed data-driven pricing

As reported by Reuters, citing the U.S. Federal Trade Commission, the agency voted 2-0 on Wednesday to release a draft enforcement policy statement saying the law against deceptive practices likely prohibits the undisclosed use of personal data to set prices.

Surveillance pricing is a strategy in which companies use information such as browsing history, location and shopping habits to generate individualized algorithmic prices instead of standard market-wide pricing. FTC Chairman Andrew Ferguson says consumers who see a listed price expect it to match what others see, rather than reflect a retailer's estimate of how much they are willing to pay based on personal data.

The agency cites potential warning signs including delivery companies charging higher prices for milk when household data indicates multiple children live at an address, or hotels raising prices when personal data suggests a customer is traveling for a funeral. The proposed enforcement policy is open for public comment for 30 days, and the FTC says it is not taking a position on whether some personalized pricing practices are unfair when they are fully disclosed.

Broader pressure builds across U.S. market

Regulatory and political pressure on personalized pricing is already expanding beyond the FTC. In January, California Attorney General Rob Bonta announced a broad probe into the use of personal data to set individualized prices, while Republican and Democratic lawmakers in the U.S. Congress have also raised concerns.

Consumer advocates welcomed the FTC move. Grace Gedye, senior policy analyst at Consumer Reports, says people should not pay more for groceries or other essential goods because a company knows what they search for online, their income, household makeup or where they go, while Lee Hepner of the American Economic Liberties Project urges the FTC to go further.

The issue has already affected major companies. In December, Instacart ended price tests that showed different grocery prices to different shoppers after a study by Consumer Reports and two nonprofit groups found some shoppers saw prices up to 23% higher than others viewing the same items from the same store, and in November Delta Air Lines told lawmakers it does not set prices based on personal information.

In our earlier article on the UK Competition and Markets Authority’s drip-pricing investigation, we covered how the regulator launched probes into Trainline, Virgin Atlantic and Red Driving School over concerns that mandatory fees may be revealed too late in the booking process. We noted that the CMA can require customer compensation and impose fines of up to 10% of global turnover if it finds breaches, while the companies said they were cooperating and working to improve fee transparency.

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