FTC Focuses on Personalized Pricing: What Does It Mean for Consumers?

The U.S. Federal Trade Commission (FTC) is seeking public comment onpersonalized pricingPersonalized pricing refers to the practice where businesses set different prices for different consumers based on their personal data and assessments of their willingness to pay.

"When consumers see a price tag, they expect that price to be the same as what others see, not an estimate of their willingness to pay based on their personal data," FTC Chairman Andrew Ferguson said in a prepared statement on Wednesday.

Consumers generally dislike pricing practices they perceive as unfair. As the FTC releases its proposedenforcement policy statement, businesses have more reason to be cautious about implementing personalized or surveillance pricing.

The FTC said it cannot directly ban personalized pricing, but businesses that fail to inform consumers how their data is used for pricing may violate Section 5 of the Federal Trade Commission Act and other relevant laws.

The FTC's attention to this issue also follows recent state legislative actions.Maryland has passed laws restricting surveillance pricing，Connecticut has banned the practice. According to law firm Holland & Knight, more than twenty states have introducedover 40 bills related to surveillance pricing。

According to Jeannie Walters, founder of Experience Investigators, the most well-known examples of personalized pricing appear in grocery delivery, ride-hailing services, travel, and hotel pricing.

AI technology has greatly amplified such pricing practices, allowing businesses to access information including the type of device used for shopping, location, purchase history, income, and credit ratings.

For example, ajoint investigationby Consumer Reports and Groundwork Collaborative into Instacart's pricing practices found that price differences for the same product among different customers could reach up to 23%. Following the release of that investigation, Instacart has stopped providing grocers with technology that allowed them to charge different prices to different consumers for the same product simultaneously.

Anotherinvestigationby Consumer Reports into Uber and Lyft found a median price gap of about 42% between the lowest and highest price groups.

"I know travelers often compare who got the best deal on a ride-hail or hotel. Five people in the same group might see five different prices, even for the same route from the same location," Walters said in an email to sister publication CX Dive.

Trust: Hard to win, easy to lose

When customers see others paying different prices for the same service, their trust in the company declines, which is not hard to understand.

"Trust is hard to earn and very easy to lose. Research shows that when businesses obscure or hide pricing, consumers actually spend less, not more. People want to be treated fairly. Charging different prices for the same thing inherently feels unfair," Walters said.

In fact, a 2024 study by Consumer Reports found thattwo-thirds of U.S. consumers opposethis practice.

"If you are embarking on a variable pricing strategy, set aside the temptation of revenue maximization for a moment and look at your approach from a fairness perspective," Jon Picoult, founder of Watermark Consulting, said in an email.

The FTC listed a series of cases that could raise fairness concerns and issues the Commission might worry about under Section 5:

• A food delivery company might quote a higher price to a consumer based on data suggesting they cannot leave home to buy food.
• A hotel might charge more to a consumer because data shows they are traveling for a funeral or another can't-miss event.
• A retailer might charge a higher price for a home security camera system to a customer because court documents show they recently became a crime victim.

Picoult said businesses should distinguish between the short-term financial gains of personalized pricing and its long-term impact on customer loyalty and trust.

"If your pricing strategy makes customers feel exploited, it won't end well. If you insist on moving forward with variable pricing, make sure the strategy is defensible to both consumers and regulators," he said.

Walters urged businesses to do the right thing, adding that acting under federal deadlines is not wise. But if companies decide to profile customers, they must monitor the practice.

"These automated systems can make mistakes. Auditing what actually happens is crucial to ensure decisions are based on real criteria, not algorithmic hallucinations," she said.