The Federal Trade Commission (FTC) has proposed penalties for companies that use personal consumer data to tailor prices to individual customers without disclosing the practice, according to an Aug. 19 announcement.
In a draft enforcement policy statement, the FTC outlined concerns that personalized pricing—where businesses adjust prices based on a customer’s browsing history, purchase behavior, or other personal data—may violate federal laws against unfair or deceptive practices.
Core Facts of the FTC’s Proposal
- The FTC’s draft policy targets companies that fail to disclose how personal data influences pricing, warning such practices could mislead consumers and breach the FTC Act.
- The agency is seeking public input for 30 days on the proposed policy, which does not outright ban personalized pricing but clarifies enforcement risks for non-disclosure.
What the FTC Says About Personalized Pricing
The FTC argues that consumers reasonably expect uniform pricing for products and services, whether in physical stores or online. The agency stated in its policy statement: “When consumers walk into a retail store, for example, they reasonably expect the price on the shelf to be the same price offered to any other consumer shopping at the same store at the same time.”
Chairman Andrew Ferguson emphasized that while the FTC cannot ban personalized pricing outright, businesses using such methods without transparency may face legal action under the FTC Act. He added: “We are seeking public input on this draft statement, which would put businesses engaged in or considering personalized pricing on notice that the FTC will not hesitate to enforce the law in this space.”
Key Distinction: Personalized vs. Dynamic Pricing
The FTC distinguishes personalized pricing—which relies on individual consumer data—from dynamic pricing, which adjusts based on market conditions like demand or supply. Examples of dynamic pricing include holiday surcharges or Uber surge pricing after major events.
Potential Impact on Consumers
The FTC noted that consumers with less technical literacy may unknowingly pay higher prices if they are unaware of data-driven pricing strategies. While tools like VPNs or private browsers can limit data collection, the agency highlighted concerns about unequal access to pricing fairness.
Next Steps and Public Comment Period
The FTC has opened a 30-day public comment period on the draft policy, allowing stakeholders—including businesses, consumer advocates, and privacy experts—to weigh in. The agency has not specified a timeline for finalizing the policy but indicated it would proceed with enforcement actions if violations are identified during the comment period.
Ferguson concluded: “The proposed policy puts businesses on notice that the FTC will take action against unfair or deceptive practices where companies engage in personalized pricing without revealing the data behind the variances.”