The Federal Trade Commission is warning companies that using consumers’ personal data to determine individualized prices could violate consumer protection law if the practice is not properly disclosed, The Wall Street Journal reports.
Businesses increasingly collect detailed information, including browsing history, location, device type, purchasing habits and online behavior. Companies can use this information, often through AI-powered pricing software, to estimate consumers’ willingness to pay and create personalized prices.
Under the FTC’s new guidance, companies must provide “clear and conspicuous” disclosure when personal information is used to personalize a price, including identifying the type of data used to generate the offer. Although the FTC says it lacks authority to prohibit personalized pricing, it plans to use its enforcement resources against companies that fail to meet these disclosure standards.
The issue has become increasingly controversial following reports that Instacart allowed retailers to experiment with different prices for individual shoppers based on their shopping behavior. The practice has also raised concerns that consumers who are unfamiliar with a market could be charged more. The FTC previously studied personalized pricing during the Biden administration and found that consumer data could potentially be used to charge higher prices.
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