U.S. regulator targets personalised pricing as consumers worry about price hikes

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The U.S. Federal Trade Commission (FTC) is focusing on personalised pricing practices, and planning to aggressively enforce laws requiring sellers to inform customers if they are being shown different prices from others.

The U.S. FTC also wants businesses to disclose why personalised pricing is being used, and what customer data was collected in order to make these pricing decisions, in an effort to ensure lawful competition and transparency.

The U.S. regulator that focuses on consumer protections and fair business practices noted that the public and the government were “increasingly concerned that the massive amount of data collected and generated when consumers use modern technology is making it possible for merchants to personalise prices for goods and services that traditionally did not vary from person to person.”

The regulator defines personalised pricing as the “use of personal data to set prices according to the amount that a company believes an individual consumer is willing to spend.”

Personalised pricing is also called price discrimination, since it can involve offering different prices to different customers based on information that the seller has collected about them. ‘Surveillance pricing’ is another term that is sometimes used to describe this act, especially when online sellers track buyers’ internet activity in order to sell a product or service at the highest possible price they believe the user may pay.

For example, if two different customers living in the same community are searching for flights to the same location, one customer may be offered a lower price if the seller infers they plan to book tickets for their whole family. However, the other buyer may be charged far more if their seller is able to track aspects of their online activity to learn that they are trying to book tickets to attend a funeral and are desperate to leave as soon as possible.

Personalised pricing can take on a plethora of forms, and sellers use different tracking methods to analyse their customers’ ability to pay. There are additional concerns about sellers exploiting protected characteristics—such as their users’ gender or race or sexual orientation—in order to make them pay more.

For example, consider a hypothetical ride-hailing app that sets higher prices after dark for customers it has confirmed are female, rooted in the understanding that many women may be willing to pay more in order to reach home quickly. This same unfair standard could also apply to users over the age of 60 or users who have disabilities.

The rollout of AI tools, trackers, and agents has sparked fears of online platforms potentially automating the surveillance of customers, and selling more detailed insights about their online behaviour to their sellers and advertisers.

Data collection and processing play a massive role in enabling personalised pricing, as the statement noted that many Americans fail to realise how much data they generate every day and how it is monetised and used.

FTC Chairman Andrew Ferguson admitted that the U.S.