Businesses that fail to disclose that they use consumer data to set personalized prices for goods or services are likely engaging in deception or unfairness and can expect the Federal Trade Commission to pursue enforcement actions, according to a proposed policy statement recently issued by the FTC.
The proposed statement cites growing public concern that modern data collection capabilities will allow businesses to set personalized prices in markets that traditionally have not used such methodologies. Personalized pricing in those markets “would therefore run contrary to longstanding practice and consumers’ reasonable expectations that the price they see for a product or service is the same price that any other consumer at the same place and time would see,” the FTC said.
The FTC acknowledges that Congress has not given it the authority to prohibit personalized pricing in all cases. Still, the proposed statement would assert the commission’s intent to pursue the failure to disclose the practice under Section 5 of the FTC Act, which regulates unfair or deceptive practices, “or any other law enforced by the commission.”
The FTC also left the door open to unfairness actions even when disclosures are provided, stating that it “declines at this time to take any position whether some personalized pricing practices are unfair even when fully disclosed to consumers.”
“Where consumers reasonably expect that prices for a product or service will not vary based on their personal data, businesses that engage in personalized pricing should clearly and conspicuously disclose not just that the price is personalized, but also the basis for that personalization and the types of data on which the personalization is based,” the FTC said in the proposed statement.
The statement would remind businesses that the collection, use or disclosure of consumers’ personal information without adequate disclosures or without consent can violate Section 5, citing several past enforcement actions. At the same time, the policy would not apply to risk-based pricing in credit transactions and insurance.
Public comments on the proposed statement are due 30 days from publication in the Federal Register.
