FTC targets personalized prices based on consumer data

The Federal Trade Commission is putting companies on notice over personalized pricing — when businesses use consumers’ personal data to help determine the prices they see.

In a proposed enforcement policy, the FTC says companies should clearly disclose when a price is personalized, explain why it was personalized and identify the types of personal data used to set it.

The agency says it does not have the authority to ban personalized pricing across the board, but it plans to aggressively enforce existing consumer protection laws when the practice is unfair or deceptive.

Under Section 5 of the FTC Act, unfair or deceptive acts or practices in commerce are unlawful.

The FTC says a company could be in violation of that law if it uses a consumer’s personal data to personalize a price, without disclosing it, in situations where shoppers would normally expect everyone to see the same price.

The FTC included several hypothetical examples of personalized pricing practices that could raise concerns, including:

• A food delivery company quoting a higher price to consumers on the basis of data personal to those consumers that leads the company to believe they are less likely or unable to leave their homes to purchase food.
• A grocery chain charging a delivery customer a higher price for milk based on data showing that several children live in the customer’s household.
• A hotel charging a higher price to a consumer on the basis of data personal to that consumer leading the hotel to believe the consumer is traveling for a funeral or some other can’t-miss personal business.
• A ride-share company charging a user more on the basis of data revealing that the user has not installed any of the company’s competitors’ apps on the user’s phone.
• A ride-share company charging a user more for transport to a medical facility on the basis of data suggesting that the user has a life-threatening medical emergency or condition.
• A retailer charging more for a home-security camera system based on court filings indicating a particular customer has recently been the victim of a crime.
• A retailer charging more for a product sold on its website on the basis of data revealing that the consumer is in one of the retailer’s physical locations or parking lots at the time of browsing the retailer’s website.

Several states have already moved to restrict the use of personal data to set prices.

Maryland and New Jersey have passed laws restricting personalized pricing involving groceries and food purchases.

Connecticut has passed a broader ban on surveillance pricing by retailers and third-party delivery services that takes effect in 2027.

In New York, lawmakers have passed legislation that would more broadly ban surveillance pricing, though it has not yet become law.

Not every use of personal data in pricing means a shopper will pay more.

The National Retail Federation points to loyalty and rewards programs, which use data to offer shoppers tailored discounts, savings and promotions. The trade group has said it wants to protect those programs.

The FTC’s proposed policy focuses largely on transparency. Where consumers reasonably expect prices not to vary based on their personal data, the agency says businesses should clearly tell them when a price is personalized, why it was personalized and what kinds of data were used.

The FTC is seeking public comment on the proposed policy from now through Sept. 18.

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