Unmasking the hidden data algorithms behind your daily purchases
In this OpEd, Christopher Elliott digs into the Federal Trade Commission’s latest attempt to regulate "surveillance pricing," the corporate practice of using your private location, device type, and family data to charge you higher prices. Elliott exposes why the government's proposed disclosure mandate is a step in the right direction, but ultimately leaves everyday buyers exposed to algorithmic price gouging.
What if a grocery store charges you more for milk because it knows how many kids you have in your house? Or a ride app quotes you a higher fare because you haven’t installed a competitor’s app on your phone?
Those aren’t random “what ifs.” They’re scenarios the Federal Trade Commission (FTC) published as examples of pricing that would raise legal concerns under the law, an uncharacteristically pro-consumer position from an agency that seems to go out of its way to protect the interests of businesses.
A few months ago, I argued that banning surveillance pricing, as some states have done, was the wrong move. Requiring disclosure was the answer. Make them show their work. Several readers wrote to say this consumer advocate had gone soft. So it was a little surreal when the FTC agreed with me last week.
What the agency wants
The government has proposed a rule requiring businesses to clearly disclose when a price is personalized, along with the basis for it and the types of data behind it. FTC Chairman Andrew Ferguson said shoppers expect everyone to see the same price.
Last year, a rule on unfair or deceptive fees took effect, barring hidden total prices for live-event tickets and short-term lodging, a partial victory that the FTC narrowed from an original proposal covering restaurants, food delivery and car rentals. So a hotel has to show you the all-in number for your room. The car rental counter in that hotel’s garage doesn’t.
Sure, there have been other small advances. StubHub agreed to refund $10 million over deceptive ticket pricing in an FTC action announced earlier this year. But it’s not nearly enough. This business-friendly administration has been dragging its feet on protecting consumers, but now it appears to have finally drawn a line in the sand.
Why disclosure could work
The FTC said Congress hasn’t given it the authority to prohibit personalized pricing. Disclosure is the next best thing.
When a company has to put in writing that it charged you more because your data suggested you’d pay it, that sentence becomes evidence, not just in the court of public opinion, but potentially in an actual court. A state attorney general can subpoena it. A plaintiff’s lawyer can quote it to a jury. Companies don’t change their ways because shoppers squint at fine print. They reform because someone made them write down the sentence, and it went viral. Oops.
What an honest price looks like
When you go grocery shopping in Paris or Berlin, the number on the shelf is the total amount you pay. European law defines the selling price as the final price, including VAT and all other taxes, and requires that any advertised price cut reflect the lowest price charged in the prior 30 days. No invented “was” number. Australia’s competition regulator requires the same: a single total figure, including taxes, duties and any unavoidable fee.
That’s the standard we deserve. One price. No base fares, no pre-tax subtotals and no drip pricing that hides the real number until checkout.
We’re not getting it this year. What we have instead is a weakened commission arguing that companies should at least have to explain themselves, still better than the complete lack of oversight we had a month ago.
Say something
Comments go to the FTC website, and the deadline is Sept. 18. Mine will say what this column says: Disclosing a personalized price is a good start, but we shouldn’t stop there. Until then, when a price appears on your screen, consider it a work of fiction. Ask yourself: Is this everything? If the answer is no, walk away.
Christopher Elliott is an author, consumer advocate and journalist. He founded Elliott Advocacy, a nonprofit organization that helps solve consumer problems. He publishes Elliott Confidential, a travel newsletter, and the Elliott Report, a news site about customer service. If you need help with a consumer problem, you can reach him here or email him at chris@elliott.org.