FTC personalized pricing proposal targets data disclosures, not a ban
The FTC is seeking comment on a proposed approach to personalized pricing, while critics warn broad limits could affect discounts.
By Dominic Okoye · Staff Writer
· 3 min read
The FTC personalized pricing proposal would put companies on notice that using consumer data to set individualized prices can trigger enforcement if the practice is presented misleadingly. The Federal Trade Commission has opened a 30-day public-comment period on the proposed policy, which is not a blanket prohibition and would not ban personalized pricing in all cases.
Personalized pricing, as described by the FTC in reporting by Ars Technica, is the use of a customer’s personal data to determine an individual price. The agency says it lacks authority to prohibit the practice categorically, but FTC Chair Andrew Ferguson said businesses may violate laws the commission enforces if they fail to tell consumers how their data affect prices.
For technology companies, retailers and platforms with mature customer-data operations, the immediate issue is less whether individualized offers can exist than whether their data collection, pricing logic and customer-facing claims can withstand scrutiny. No final policy has been adopted.
What would the FTC personalized pricing proposal do?
The FTC’s reported theory is that a company could deceive consumers by portraying a personalized price as fixed or broadly available. The proposal also contemplates requiring companies that use such pricing to disclose the data used to produce an individual’s price and obtain consent to collect data for that purpose.
Those disclosures could give customers an opportunity to challenge incorrect information or decline data collection, according to the FTC’s position as reported by Ars Technica. The agency said consumers may otherwise mistake a higher, data-derived price for a loyalty discount or other ordinary offer.
- A delivery service charging more after inferring that a customer cannot leave home.
- A grocer raising a family’s milk price based on data indicating it has more children.
- A hotel quoting more to a traveler whose data suggests they are attending a funeral and have limited nearby choices.
- A rideshare service increasing a fare after determining that competing ride-hailing apps are not installed on a customer’s phone.
The FTC offered those situations as examples of conduct it could regard as deceptive, not as findings that any particular company engaged in them.
What evidence is there on consumer effects?
The commission acknowledged that economic research on personalized pricing’s consumer effects is limited and that it is unclear how widely businesses use it. The agency said the research available to it indicates that personalized pricing is likely to increase business profits, while gains for some consumers can coincide with losses for others. It also said consumer benefits appear less likely as the techniques become more sophisticated.
Early commenters cited by Ars Technica largely urged aggressive limits, describing opaque individualized prices as discriminatory and difficult to detect. Some argued that consumers with fewer resources, less time or lower technical literacy may be less able to avoid them.
Other commenters argued that an overly broad policy could put lower targeted prices at risk. One warned that customers could lose discounts they rely on, with possible higher costs as a result. That is a concern raised in comments, not an outcome established by the evidence available to the FTC or by the reporting. The supplied material does not quantify any likely effect on prices, discounting or company compliance costs.
The consultation therefore puts a narrow but consequential issue before data-driven businesses: whether price personalization can be explained clearly enough for consumers to understand when their information changes what they pay.
This story draws on original reporting from Ars Technica.
