Personalized pricing is "abhorrent," but FTC limits may increase costs, critics say

Key Highlights

• But FTC Chair Andrew Ferguson said new industries are increasingly tracking customers to set individualized prices, blindsiding consumers who expect a listed price in markets like retail “to be the same price that everyone else sees,” Ferguson said.
• ” These disclosures would further give customers a chance to dispute incorrect data influencing their prices, the FTC said, or to “avoid the collection of that data in the first place.
• FTC’s plan to combat surveillance pricing The FTC said that there’s little economic research on how personalized pricing is impacting consumers, and it’s unclear how many businesses may be using it.
• But “the rise of data-driven ‘personalized pricing’ has the potential to transform our history of relatively limited variation in pricing from one consumer to the next,” the FTC’s policy statement said, potentially propping up more monopolists.
• That’s misleading, the FTC said, since customers who know how prices are set could take defensive measures, such as using a private browsing session or a virtual private network to mask their browsing history.

Predatory pricing Some Americans fear the FTC may be thinking about personalized pricing all wrong.

Some Americans worry that the Federal Trade Commission’s rush to limit personalized pricing in the name of consumer protection could end up killing discounts they depend on or, counterintuitively, raising prices.

The FTC has no power to ban personalized pricing, in which a business uses a customer’s personal data to determine the highest price that person might be willing to pay for a product or service.

But the agency believes it could set limits on the practice, including potential penalties for businesses that fail to disclose when customers may be paying more because data suggests they won’t balk at the price.

In a request for public comment on a proposed policy statement, the FTC acknowledged that personalized pricing is common in some industries.

But FTC Chair Andrew Ferguson said new industries are increasingly tracking customers to set individualized prices, blindsiding consumers who expect a listed price in markets like retail “to be the same price that everyone else sees,” Ferguson said.

“The FTC does not have the legal authority to ban personalized pricing in all circumstances, but businesses that fail to tell consumers how their personal data is being used to set a price may be in violation of the FTC Act and other laws we enforce,” Ferguson said.

Members of the public were given 30 days to submit comments on the proposed change in enforcement.

FTC’s plan to combat surveillance pricing The FTC said that there’s little economic research on how personalized pricing is impacting consumers, and it’s unclear how many businesses may be using it.

But “the rise of data-driven ‘personalized pricing’ has the potential to transform our history of relatively limited variation in pricing from one consumer to the next,” the FTC’s policy statement said, potentially propping up more monopolists.

What research does exist, the FTC said, suggests that “while personalized pricing is likely to increase business profits, benefits to some consumers are accompanied by losses to other consumers and that the more sophisticated personalized pricing practices become, the less likely consumers are to benefit.

” If the public agrees with the FTC’s plan, personalized pricing could be found to violate the FTC Act when a seller misrepresents a price as static or widely available when it is actually personalized.

Additionally, the FTC wants businesses that use personalized pricing to disclose what data is used to set an individual’s price and to get consent to collect data for personalized pricing purposes. That would ensure businesses aren’t hiding the factors that influence pricing, the FTC said.

The agency explained that “consumers who reasonably believe that a personalized price is a discount based on their purchase history with that retailer when it is in fact a higher price based on information about their disposable income or their shopping habits with other firms, for example, may be deceived into not taking action to avoid the personalized price.” These disclosures would further give customers a chance to dispute incorrect data influencing their prices, the FTC said, or to “avoid the collection of that data in the first place.”

Originally reported by Ars Technica. TechVeb news desk.