US proposes mandatory disclosure of personalized pricing
The US Federal Trade Commission (FTC) is proposing a new policy that would require businesses to clearly disclose if they engage in personalized pricing. The move aims to protect consumers from potentially unfair pricing practices.
The US Federal Trade Commission (FTC) is moving to regulate personalized pricing, warning that companies adjusting prices based on an individual's willingness to pay, using personal data, may violate federal law. The FTC does not have the authority to ban the practice outright but proposes requiring businesses to "clearly and conspicuously" disclose their use of personalized 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," stated FTC Chairman Andrew Ferguson. Digital platforms would also need to disclose the types of data used to set varied prices. Non-compliance could be seen as a violation of Section 5 of the FTC Act, which prohibits unfair or deceptive practices.
This initiative follows actions in some US states, such as New Jersey's Fair Price Protection Act, which prohibits charging different prices for identical products based on personal data. Senator Joe Cryan criticized "surveillance pricing" as an abuse of technology that exploits consumers through algorithms and data.
The issue has broader implications, particularly for markets like India where e-commerce and quick-commerce platforms are known to use "dark patterns" and alter fees, leading to higher end prices. While dynamic pricing is not banned in India, using purchase history, location, or behavioral data to vary prices without consent or adequate disclosure could attract regulatory scrutiny under consumer protection laws and guidelines against dark patterns.
Concerns over pricing algorithms have been growing globally. Ride-hailing apps have faced allegations of charging different prices based on device type, and discussions around differential pricing have reached legislative bodies. However, India currently lacks a specific law to regulate personalized pricing, leaving companies potentially vulnerable if they employ such tactics without transparency.