FTC Targets Personalized Pricing as Algorithms Reshape Retail

The agency is seeking public comment on a draft enforcement policy statement addressing the practice, according to the FTC announcement. The FTC describes personalized pricing as using information about an individual consumer to determine what a company believes that person is willing to pay.

The initiative adds a data-privacy dimension to a broader regulatory debate over price transparency. Rather than proposing a blanket prohibition on companies varying prices among customers, the commission is focusing on whether businesses adequately disclose how consumer information influences the prices they present.

FTC Chairman Andrew Ferguson said the agency lacks authority to prohibit personalized pricing in every circumstance but warned that companies could violate the FTC Act or other laws if they fail to disclose the use of personal information in determining prices, according to the agency’s Aug. 19 statement.

The distinction could be significant for companies increasingly able to analyze browsing behavior, purchasing histories and other customer information. According to the FTC, consumers generally understand that prices can fluctuate because of factors such as supply and demand, but may not anticipate that their own online activity or shopping history could affect the price displayed to them.

The draft policy warns that a retailer could risk misleading customers if it gives the impression that a displayed price is uniform while actually varying that price from one person to another. It also says collecting or using personal information for personalized pricing without disclosure could run afoul of the FTC Act’s restrictions on unfair or deceptive practices, according to the commission.

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The FTC said consumers who know personalized pricing is being used may alter their behavior — including by browsing privately, using a virtual private network or choosing not to shop with a retailer that employs the practice. That possibility underscores why disclosure is central to the commission’s approach: information about how a price is generated could affect both purchasing decisions and how consumers manage their online data.

The move comes as the FTC places greater emphasis on price transparency and practices that can obscure what consumers ultimately pay. The commission characterized the personalized-pricing initiative as part of a series of actions under President Donald Trump’s administration targeting hidden fees and unexpected charges.

In a separate action announced the same day, the FTC and Connecticut secured a proposed $4 million settlement with Manchester City Nissan and related defendants over allegations that customers were charged unauthorized or deceptive fees. The agency said that case also reflects its focus on transparent pricing in consumer markets.

The personalized-pricing statement, however, raises a newer question for businesses: how traditional prohibitions against deceptive conduct should apply when algorithms and customer data allow prices to be tailored at an individual level.

For companies considering such systems, the FTC’s message is that the legality may depend in part on what consumers are told. Ferguson said the draft is intended to alert businesses already using or considering personalized pricing that the commission is prepared to enforce applicable law, according to the FTC’s announcement.

The commission voted 2-0 to authorize publication of the notice. Once it appears in the Federal Register, the public will have 30 days to submit comments electronically, according to the agency.

Source: FTC