Written by: Haim Ravia, Dotan Hammer
The Federal Trade Commission published a proposed enforcement policy statement regarding personalized pricing, and is seeking public comment on it. The statement addresses the practice of using a consumer’s personal data — such as browsing habits or purchase history — to set a price based on what the seller believes that individual consumer is willing to pay.
The Commission’s position is that consumers expect prices to reflect supply and demand rather than their own personal data, and that “the undisclosed collection or use of personal data for the purpose of personalized pricing could violate the FTC Act, which prohibits unfair or deceptive practices.” The statement advances both theories: a deception theory, on the footing that a retailer who represents or implies a static price when the price in fact varies by individual risks misleading customers; and an unfairness theory addressed to the undisclosed collection and use of the underlying data. FTC Chairman Ferguson stated that “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.”
For businesses that use consumer data in pricing, the practical takeaway is that disclosure is the operative safeguard the Commission has identified, and that the analysis will turn on whether consumers were properly told how their personal data feeds into the price they are shown.
Click here to read the FTC’s announcement of the proposed enforcement policy statement.
