FTC Warns Businesses Against Using Personalized Pricing

Federal regulators are warning that companies using consumers’ personal data to set prices could be violating the law.

The Federal Trade Commission (FTC) published an enforcement bulletin on this topic Wednesday (Aug. 19), asking for public comment on the topic.

“When consumers see a listed price, they expect it to be the same price that everyone else sees, not the retailer’s estimate of how much they are willing to pay based on their personal data,” FTC Chairman Andrew Ferguson said in a news release. “The FTC does not have the legal authority to ban personalized pricing in all circumstances, but businesses that fail to tell consumers how their personal data is being used to set a price may be in violation of the FTC Act and other laws we enforce.”

The commission argues that retailers who imply that a price is static when it actually varies according to shopper are at risk of misleading their customers.

“Informed consumers might take measures to avoid higher personalized prices, such as using a virtual private network or private browsing session, or simply avoiding retailers engaged in personalized pricing altogether,” the FTC added.

The regulator said that the undisclosed use of personal data for personalized pricing could be in violation of the FTC Act, which outlaws unfair/deceptive marketplace practices.

As covered here last year, personalized pricing is not the same thing as dynamic pricing, which changes according to market factors, like airline tickets becoming more expensive during holidays, but does not take personal characteristics into account.

The commission’s actions come as many states are also taking measures to stop personalized pricing. As of May, more than 50 bills had been introduced in 26 states aiming to restrict or ban the use of tools like AI to set personalized prices, especially for essentials like food.

New Jersey last month passed a law forbidding businesses from using personal information to charge different shoppers different prices for identical products.

“If businesses want to compete, they should do so by offering better prices, not by finding new ways to squeeze shoppers,” Gov. Mikie Sherrill, a Democrat, said at the time. “This law puts New Jersey shoppers first by protecting their privacy and ensuring fairness in pricing.”

New Jersey’s Republican lawmakers countered that businesses had opposed the law, arguing it threatens loyalty programs, discount apps and member pricing.

“Grocery stores aren’t charging more money for milk, eggs and butter at 6 p.m. instead of 10 a.m.,” the New Jersey Assembly GOP said in an X post. “They are giving you a coupon when you left something in your cart and want you to buy it. This law threatens to take that all away.”