Key facts
- The FTC is considering requiring businesses to disclose their use of personalized pricing.
- A draft enforcement policy statement suggests undisclosed personalized pricing may violate deceptive practices laws.
- Surveillance pricing uses a consumer's personal data to set individualized prices.
- The FTC's proposal will be open for public comment for 30 days.
- California and U.S. lawmakers have also expressed concerns about personalized pricing.
The U.S. Federal Trade Commission (FTC) is exploring a new rule that would mandate businesses disclose when they employ personalized pricing strategies. This move comes amid growing scrutiny from state and federal officials regarding the practice, where companies use consumer data to set individualized prices.
The FTC voted 2-0 to issue a draft enforcement policy statement. This statement indicates that the law prohibiting deceptive practices likely covers the undisclosed use of personal data for price setting. Surveillance pricing involves using data such as browsing history, location, and shopping habits to algorithmically determine prices for individual consumers, rather than applying a standard market-wide price.
FTC Chairman Andrew Ferguson stated that consumers expect listed prices to be uniform and not based on an individual's perceived willingness to pay derived from their personal data. The agency highlighted potential improper methods, such as delivery companies charging more for milk based on household composition data or hotels increasing prices for consumers traveling for funerals.
The proposed policy will be available for public comment for 30 days. The FTC clarified it is not taking a stance on whether personalized pricing is unfair even when fully disclosed. This action follows a broader probe into personalized pricing initiated by California Attorney General Rob Bonta in January, and similar concerns raised by lawmakers in Congress.
Consumer advocates have welcomed the FTC's initiative. Grace Gedye of Consumer Reports emphasized that consumers should not pay more for goods based on their online search history, income, or household details. Lee Hepner of the American Economic Liberties Project urged the FTC to take more decisive action, likening undisclosed personalized pricing to seeing a train coming while tied to the tracks.
In related developments, Instacart ceased price tests that led to different shoppers seeing varied prices for groceries, following a study by Consumer Reports and other groups. Last November, lawmakers also questioned Delta Air Lines about its pricing practices, to which the airline responded that it does not set prices based on personal information.