FTC says "personalized pricing" based on consumer data could violate law

The Federal Trade Commission (FTC) has issued a warning to companies that utilize consumers' personal data to set different prices based on their perceived ability to pay. In a proposed enforcement policy statement released on Wednesday, the FTC stated that customers expect prices for products and services to remain consistent for all individuals, rather than varying according to factors such as online browsing habits, purchase history, or other indicators of willingness to pay.

The agency emphasized that when consumers visit a retail store, they expect the displayed price to be the same for everyone, just as they would expect the same price for a product listed on a retailer's website.

The FTC explained that businesses that adjust prices for individual shoppers without disclosing this practice are misleading consumers and may be engaging in deceptive practices that violate federal law. While the FTC cannot outright ban personalized pricing, it has the authority to penalize businesses that fail to inform consumers about how their personal data is being used to determine prices. FTC Chairman Andrew Ferguson stated that the FTC Act prohibits unfair or deceptive practices in the marketplace.

Personalized pricing practices that could be considered illegal include charging a grocery store delivery customer more for milk because the company knows the customer has several children, or a hotel raising a guest's rate due to the belief that the trip is essential, such as attending a funeral. Similarly, a ride-hailing company could charge a user more to travel to a hospital based on data suggesting they are facing a medical emergency.

Consumer advocates have expressed support for the FTC's efforts to regulate personalized pricing. Consumer Reports senior policy analyst Grace Gedye emphasized that nobody should have to pay more for essential goods due to a company's knowledge of their online searches, income, household size, or other personal factors. However, Gedye noted that it would ultimately be up to consumers to carefully read businesses' policies to avoid paying higher prices.

Public comments on the FTC's proposal have largely been supportive, with many consumers arguing that the practice undermines fair markets by replacing transparent pricing with data-driven discrimination against buyers. Some consumers have also highlighted the disproportionate burden this places on those with less time, technical literacy, or resources to detect and circumvent these practices.