The U.S. Federal Trade Commission said on Wednesday it is considering requiring businesses to disclose whether they use personalized pricing data, a practice that has drawn mounting scrutiny by state and federal officials.
The FTC voted 2-0 to release a draft enforcement policy statement that would say the law barring deceptive practices likely prohibits undisclosed use of personal data to set prices.
Surveillance pricing is a strategy where companies use a consumer's personal data — such as browsing history, location and shopping habits — to set individualized, algorithmic prices for products, as opposed to using standard, market-wide pricing.
"When consumers see a listed price, they expect it to be the same price that everyone else sees, not the retailer’s estimate of how much they are willing to pay based on their personal data,” said FTC Chairman Andrew Ferguson.
The agency cited a number of potential improper surveillance pricing methods. Potential red flags would include delivery companies charging customers higher prices for milk based on data showing that multiple children live in a household or hotels charging higher prices on the basis of personal data showing consumers were traveling for a funeral.
The FTC's proposed enforcement policy will be open for public comment for 30 days. The FTC said it was not taking a position on whether some personalized pricing practices are
unfair even when fully disclosed.
In January, California Attorney General Rob Bonta announced a broad probe into the practice of using personal data to set individualized prices. Republican and Democratic lawmakers in the U.S. Congress have also raised concerns.
Grace Gedye, senior policy analyst at Consumer Reports, praised the FTC action.
"Nobody should have to pay more for groceries or other essential goods because a company knows what they’re searching for online, what their income is, the makeup of their household, or where they go," she said.
Lee Hepner, a senior legal counsel at the American Economic Liberties Project, called on the FTC to take further action. "Getting hit by a train is no less painful if you’re tied to the tracks and see it coming," Hepner said.
In December, Instacart (CART.O) ended price tests that resulted in different shoppers being shown different prices for groceries. The company's retreat from the practice followed a study by Consumer Reports and two other nonprofit groups that showed some shoppers saw prices up to 23% higher than others browsing the same items from the same store.
In November, lawmakers asked Delta Air Lines to answer if it set personalized prices and other pricing practices. Delta responded it does not set prices based on personal information.
