Introduction and Summary

The Information Technology and Innovation Foundation (ITIF) appreciates the opportunity to comment on the Federal Trade Commission’s (FTC) Proposed Enforcement Policy Statement Regarding Personalized Pricing (“Policy Statement”).0F[1] ITIF is a nonprofit, nonpartisan think tank whose mission is to formulate and promote public policies that accelerate innovation and boost productivity to spur growth, opportunity, and progress.

ITIF supports the Commission’s efforts to protect consumers from deceptive pricing practices. Consumers should not be misled about the price they will pay, and businesses should not falsely represent a personalized price as a universally available price or conceal material information necessary for consumers to make informed purchasing decisions. However, the Commission should substantially narrow the proposed Policy Statement. Personalized pricing is not inherently deceptive, unfair, or anticompetitive. In addition, the use of consumer data to determine prices is not itself evidence of consumer harm. Personalized and algorithmic pricing encompass a broad range of longstanding and emerging practices, including targeted discounts, loyalty pricing, regional pricing, dynamic pricing, and automated markdowns.

The FTC should not treat personalized pricing as a presumptively suspect practice but instead distinguish legitimate price differentiation from genuinely deceptive or anticompetitive conduct. The Commission should enforce existing law against demonstrable violations while preserving the substantial consumer and efficiency benefits that data-driven pricing can provide.

I. Personalized Pricing Is Not Inherently Harmful and the FTC Should Not Treat It as a Distinct Category of Unlawful Conduct

The Policy Statement appropriately recognizes that Congress has not given the FTC authority to prohibit personalized pricing outright. But its proposed approach risks accomplishing indirectly what the Commission acknowledges it cannot do directly: establishing broad disclosure requirements that effectively discourage or prohibit a wide range of legitimate personalized pricing practices.

Algorithmic pricing is not a new economic phenomenon. Businesses have long adjusted prices in response to supply, demand, inventory, competitors’ prices, and consumer characteristics. Airlines charge different fares for the same route; hotels adjust room rates as occupancy changes; retailers provide different customers with discounts and promotions. What technology has changed is primarily the speed, granularity, and automation with which businesses can make these decisions.1F[2]

The use of an algorithm does not change the underlying economic character of a pricing decision. An algorithm that adjusts prices in response to market conditions is not inherently less competitive than a human employee making the same adjustment. Policymakers should evaluate how firms use pricing tools and their effects on consumers and competition rather than treating the technology itself as inherently problematic.

The same principle applies to personalized pricing. The fact that a business uses information about a consumer to determine a price does not establish that the business has harmed that consumer. Personalized pricing can include both higher prices and lower prices, and the latter can be particularly valuable to price-sensitive consumers.

Indeed, many of the Commission's own examples of potentially problematic personalized pricing can be reframed as examples of potentially beneficial personalized discounts. A grocery retailer could use information about a household to offer a family a discount on milk rather than charge that family more. A hotel could offer a traveler a discount based on information indicating that the traveler has limited flexibility. A rideshare company could offer a discount to a customer who is otherwise unlikely to use the service. A retailer could offer a discount to a consumer who has recently experienced a hardship.

The economic mechanism is the same: information about an individual affects the price that individual receives. Yet the welfare implications can be very different.

This is an important limitation of treating personalized pricing as inherently suspect. The Commission would not merely be constraining businesses’ ability to charge some consumers more. Its approach could also constrain their ability to charge some consumers less. A policy intended to protect consumers from individualized pricing should not inadvertently prevent businesses from using data to identify consumers who would benefit from lower prices.

II. The Relevant Question Is Not Whether Everyone Pays the Same Price, but Whether Pricing Produces Fair and Beneficial Outcomes

The Policy Statement places substantial weight on consumers' expectation that the price they see is the same price that other consumers at the same place and time would see. But identical prices are not necessarily the fairest prices.

A uniform price treats consumers as though they have identical circumstances and identical willingness to pay when they plainly do not. A consumer with a high willingness to pay and a consumer who can afford a product only if it is discounted may not be equally situated simply because they are purchasing the same product.

Personalized pricing can, in some circumstances, allow businesses to charge different consumers prices that better reflect their individual willingness or ability to pay. This can allow a business to serve consumers who otherwise would not purchase the product at all. In that sense, differentiated prices can sometimes produce a more equitable outcome than a single uniform price.

This is particularly relevant for products and services with high fixed costs and low marginal costs. If a business can charge some consumers more while offering others a lower price, it may be able to serve a broader customer base than if it were required to charge everyone the same price.

Consequently, policymakers should not assume that price equality is synonymous with fairness or maximizing consumer welfare. A rule requiring identical prices can actually make some consumers worse off by eliminating discounts that would otherwise allow them to participate in a market. ITIF has previously explained that banning personalized pricing does not necessarily lower prices; it can instead redistribute prices. Eliminating the ability to offer individualized discounts can raise prices for consumers who would otherwise have received them.2F[3]

The FTC should avoid treating differences in prices among consumers as evidence of unfairness. The relevant question is whether consumers are being deceived or subjected to unlawful conduct—not whether every consumer receives exactly the same price.

III. Competition and Arbitrage Already Constrain Many Forms of Personalized Pricing

The practical significance of personalized pricing also depends heavily on the characteristics of the market.

For many physical goods, competition and arbitrage naturally constrain the extent to which a seller can sustain personalized prices. When an identical product is readily available elsewhere at a lower price, a consumer charged more can switch sellers. Even where there is only a single initial seller, a sufficiently large price differential can create an opportunity for arbitrage through resale: a buyer who can obtain the product at a lower price has an incentive to resell it to a consumer facing a higher price. The greater the ability of consumers or intermediaries to compare prices and obtain the same product elsewhere, the harder it is for a seller to sustain large price differences based solely on an individual's willingness to pay. In this sense, arbitrage provides an important market discipline on personalized pricing.

That discipline is weaker, however, when the product or service cannot readily be transferred or resold, or when the price reflects characteristics of the individual transaction. For example, an airline ticket is tied to a particular passenger and itinerary, while a digital product licensed to a particular individual may not be transferable. A consumer quoted a higher price for either generally cannot simply purchase the lower-priced version offered to someone else and transfer it to themselves. In these markets, consumers may have fewer opportunities to circumvent a higher personalized price through arbitrage, making it particularly important to distinguish legitimate price differentiation from genuinely deceptive or unlawful conduct.

The FTC’s policy should account for these economic differences rather than assuming that personalized pricing necessarily gives firms unlimited ability to extract consumers' maximum willingness to pay.

IV. Consumer Expectations Are Not a Sufficiently Reliable Basis for Regulating Emerging Pricing Models

The Commission proposes to rely in part on whether consumers reasonably expect prices for a product or service to be the same for everyone at the same place and time. Consumer expectations can be relevant to deception analysis, but they are a poor basis for establishing broad ex ante rules governing innovative pricing models—particularly for new products and services for which consumers have no longstanding pricing expectations.

Consider on-demand delivery services. The price paid by a consumer may reflect not merely the underlying product but the cost and availability of a highly individualized delivery service. A delivery platform may need to account for where the delivery worker is located, how far the worker must travel, whether the worker is already completing another nearby order, how many other orders are available in the area, and current demand for delivery.

There may be no meaningful “standard price” that consumers reasonably should expect to receive regardless of these circumstances. Two consumers ordering the same product at the same time may impose very different costs on the platform because fulfilling their orders requires different routes, different amounts of travel, or different combinations with other deliveries. The problem becomes even more pronounced as entirely new business models emerge. There cannot be a longstanding consumer expectation about the pricing of a product or service that did not previously exist.

Regulation should not lock emerging markets into pricing conventions simply because consumers are more familiar with traditional models. Doing so could prevent innovative businesses from developing pricing models that better match prices to the actual costs and circumstances of individual transactions.

V. The Commission’s Examples Illustrate Why the Distinction Between Prices and Discounts Matters

Several of the examples in the Policy Statement involve businesses charging a consumer more because information suggests that the consumer has a particularly high need for a product or service. Those scenarios can reasonably raise concerns if a business secretly exploits highly sensitive information to charge a consumer more. But the same analytical framework also demonstrates why a categorical approach is problematic.

Suppose, instead, that the business uses the same information to identify consumers who would benefit from a lower price. A hotel could charge less to a traveler with limited flexibility. A food-delivery company could provide a discount to a consumer who otherwise could not afford delivery. A grocery retailer could offer targeted discounts to households for which particular products represent a larger expense. A rideshare company could offer a discount to a customer who would otherwise choose a competing service. In each case, the business is using personal information to differentiate prices. Yet the consumer receives a lower price.

The Commission's proposed framework could therefore constrain both sides of the equation: the ability to charge more and the ability to charge less. This is an important unintended consequence. The policy question is not simply whether a price differs based on personal information, but whether the particular practice harms consumers, and whether existing law adequately addresses that harm.

VI. The Commission Should Focus on Deception—Saying One Thing and Doing Another

ITIF strongly supports enforcement against deceptive pricing.

If a business tells consumers that everyone receives the same price when that is not true, that is materially different from simply using information to determine prices. Likewise, if a business makes a specific representation about the factors it does—or does not—use to determine prices, it should not secretly do otherwise. For example, if a business tells consumers that it does not use information about how much battery power remains on a consumer's mobile phone to determine the price of a service, but in fact uses that information to charge consumers different prices, that would be a straightforward case of saying one thing and doing another. The problem in such cases is the deception, not the use of personalized pricing itself.

In other words, the clearest problem is when a business says one thing and does another.

That is the traditional province of consumer-protection law, and Section 5 already provides the FTC with substantial authority to address such conduct. The Commission therefore does not need to establish a broad presumption against personalized pricing to address deceptive practices. It can focus its enforcement resources on representations and omissions that actually mislead consumers.

If policymakers determine that consumers should receive more information about how businesses determine prices, Congress can enact legislation establishing such disclosure requirements. That would allow elected representatives to determine the appropriate scope, content, and tradeoffs of such requirements through the legislative process.

The Commission should not use an enforcement policy statement to effectively create a new, economy-wide transparency regime that extends beyond the prohibitions Congress has enacted.

VII. Privacy, Discrimination, and Pricing Should Not Be Conflated

ITIF agrees that businesses should handle personal data responsibly and that consumers should receive appropriate protections concerning the collection and use of their information. But privacy and pricing are distinct policy questions. The fact that a business uses personal data to personalize a price does not establish that the underlying data collection was unlawful or that the resulting price was unfair. If a business collects personal information without appropriate authorization or makes deceptive representations about its data practices, existing consumer-protection and privacy authorities can address that conduct directly.

Likewise, discrimination based on protected characteristics is already prohibited under existing civil rights laws. Policymakers do not need to prohibit broad categories of data-driven pricing to address unlawful discrimination.3F[4] The Commission should therefore avoid using personalized pricing as a proxy for potentially unrelated concerns about data collection, privacy, or discrimination.

VIII. Personalized Pricing Should Not Be Treated as an Antitrust Problem Absent Evidence of Anticompetitive Conduct

The Commission should also distinguish consumer-protection concerns from competition concerns. Algorithmic pricing can create legitimate competition issues when firms use algorithms as part of an agreement to fix prices, share competitively sensitive information, facilitate collusion, or otherwise engage in exclusionary conduct. But the existence of an algorithm or the use of personalized pricing does not itself establish any such conduct.

As ITIF has previously explained to the Canadian Competition Bureau, algorithms are tools. The relevant question is how firms use them and what effects their conduct has on competition. Pricing algorithms can produce efficiency gains, improve price discovery, reduce search costs, facilitate entry, and allow businesses to respond more quickly to changing market conditions.4F[5] Where competitors actually agree to fix prices, existing antitrust law can address the conduct whether the agreement is implemented by humans or algorithms. Similarly, where a dominant firm uses pricing technology to exclude rivals or otherwise abuse market power, the relevant antitrust provisions remain applicable. However, the FTC should not treat as unlawful the mere existence of differentiated prices or the use of sophisticated pricing technology absent evidence establishing unlawful conduct.5F[6]

IX. Recommendations

ITIF recommends that the FTC revise the proposed Policy Statement to:

1. Clarify that personalized pricing is not inherently unlawful.

The final Policy Statement should expressly state that personalized pricing, dynamic pricing, and algorithmic pricing are not inherently unfair or deceptive and that the use of personal data in pricing does not itself establish a Section 5 violation.

2. Focus enforcement on material deception.

The Commission should target false or materially misleading representations concerning whether a price is personalized, the price a consumer will actually pay, or the basis for a price where that information is material to a reasonable consumer's purchasing decision.

3. Avoid treating price differences as evidence of unfairness.

The fact that consumers receive different prices does not establish consumer harm. In some circumstances, differentiated pricing can make markets more accessible and provide lower prices to consumers who would otherwise be unable to purchase a product or service.

4. Recognize both sides of personalized pricing.

The Commission should expressly recognize that the same technologies used to charge some consumers higher prices can be used to provide other consumers with discounts. Policy should not inadvertently restrict both practices.

5. Account for arbitrage and competition.

The Commission should recognize that competition and arbitrage substantially constrain personalized pricing for many physical goods and other readily comparable products. The ability to compare or purchase elsewhere is an important market discipline.

6. Avoid using generalized consumer expectations as an economy-wide regulatory standard.

Consumer expectations should not become a substitute for evidence of deception, particularly in new and emerging markets where no established pricing convention exists.

7. Distinguish individualized service costs from personalized price discrimination.

For on-demand and other services, prices may legitimately reflect transaction-specific factors such as distance, location, demand, available workers, routing, or the ability to combine multiple orders. These factors should not automatically be characterized as personalized pricing based on an individual's willingness to pay.

8. Preserve personalized discounts and other pro-consumer forms of price differentiation.

The Commission should recognize that loyalty discounts, targeted coupons, promotional offers, and other personalized discounts can benefit consumers and should not be restricted merely because they are personalized.

9. Leave broad transparency mandates to Congress.

If Congress determines that consumers should receive additional information concerning how businesses determine prices, Congress can establish appropriate disclosure requirements by statute. The Commission should not use an enforcement policy statement to create an economy-wide disclosure regime beyond existing statutory requirements.

10. Address unlawful discrimination and anticompetitive conduct under existing law.

Where businesses engage in unlawful discrimination, collusion, or exclusionary conduct, the FTC should enforce the applicable laws. The mere use of personal data or algorithms in pricing should not substitute for evidence of such violations.

Conclusion

ITIF supports the FTC’s objective of protecting consumers from deceptive pricing practices. Businesses should not tell consumers one thing about the price they will pay and then do something materially different.

However, personalized pricing is not synonymous with deceptive pricing, and identical prices are not synonymous with fairness. Data-driven pricing can provide discounts to price-sensitive consumers, expand access to products and services, improve the efficiency of on-demand markets, reduce waste, and allow businesses to respond to the actual circumstances and costs of individual transactions.

The FTC should also recognize the important economic constraints on personalized pricing. For many physical goods, arbitrage makes sustained individualized pricing difficult: if one consumer can obtain the same product more cheaply than another, the higher-priced consumer can often purchase from the lower-priced seller. For many services, meanwhile, prices legitimately vary because the transactions themselves differ in ways that cannot be reduced to a single uniform price.

Most importantly, the Commission should focus on deception rather than differentiation. When a business falsely represents that everyone receives the same price or makes a specific representation about what information it does or does not use to determine prices and then violates that representation, Section 5 provides an appropriate basis for enforcement. The same principle applies to other material misrepresentations about how prices are determined or what consumers will pay. But the mere fact that a business uses data to offer different prices to different consumers does not establish deception or unfairness.

If policymakers conclude that consumers should receive broader information about pricing practices, Congress can determine through legislation what transparency requirements are appropriate and what costs and benefits those requirements entail.

The FTC should accordingly revise the proposed Policy Statement to preserve legitimate personalized and algorithmic pricing while targeting actual deception and other demonstrable violations of law.

Respectfully submitted,

Daniel Castro
President, ITIF

Introduction and Summary

The Information Technology and Innovation Foundation (ITIF) appreciates the opportunity to comment on the Federal Trade Commission’s (FTC) Proposed Enforcement Policy Statement Regarding Personalized Pricing (“Policy Statement”).0F[7] ITIF is a nonprofit, nonpartisan think tank whose mission is to formulate and promote public policies that accelerate innovation and boost productivity to spur growth, opportunity, and progress.

ITIF supports the Commission’s efforts to protect consumers from deceptive pricing practices. Consumers should not be misled about the price they will pay, and businesses should not falsely represent a personalized price as a universally available price or conceal material information necessary for consumers to make informed purchasing decisions. However, the Commission should substantially narrow the proposed Policy Statement. Personalized pricing is not inherently deceptive, unfair, or anticompetitive. In addition, the use of consumer data to determine prices is not itself evidence of consumer harm. Personalized and algorithmic pricing encompass a broad range of longstanding and emerging practices, including targeted discounts, loyalty pricing, regional pricing, dynamic pricing, and automated markdowns.

The FTC should not treat personalized pricing as a presumptively suspect practice but instead distinguish legitimate price differentiation from genuinely deceptive or anticompetitive conduct. The Commission should enforce existing law against demonstrable violations while preserving the substantial consumer and efficiency benefits that data-driven pricing can provide.

I. Personalized Pricing Is Not Inherently Harmful and the FTC Should Not Treat It as a Distinct Category of Unlawful Conduct

The Policy Statement appropriately recognizes that Congress has not given the FTC authority to prohibit personalized pricing outright. But its proposed approach risks accomplishing indirectly what the Commission acknowledges it cannot do directly: establishing broad disclosure requirements that effectively discourage or prohibit a wide range of legitimate personalized pricing practices.

Algorithmic pricing is not a new economic phenomenon. Businesses have long adjusted prices in response to supply, demand, inventory, competitors’ prices, and consumer characteristics. Airlines charge different fares for the same route; hotels adjust room rates as occupancy changes; retailers provide different customers with discounts and promotions. What technology has changed is primarily the speed, granularity, and automation with which businesses can make these decisions.1F[8]

The use of an algorithm does not change the underlying economic character of a pricing decision. An algorithm that adjusts prices in response to market conditions is not inherently less competitive than a human employee making the same adjustment. Policymakers should evaluate how firms use pricing tools and their effects on consumers and competition rather than treating the technology itself as inherently problematic.

The same principle applies to personalized pricing. The fact that a business uses information about a consumer to determine a price does not establish that the business has harmed that consumer. Personalized pricing can include both higher prices and lower prices, and the latter can be particularly valuable to price-sensitive consumers.

Indeed, many of the Commission's own examples of potentially problematic personalized pricing can be reframed as examples of potentially beneficial personalized discounts. A grocery retailer could use information about a household to offer a family a discount on milk rather than charge that family more. A hotel could offer a traveler a discount based on information indicating that the traveler has limited flexibility. A rideshare company could offer a discount to a customer who is otherwise unlikely to use the service. A retailer could offer a discount to a consumer who has recently experienced a hardship.

The economic mechanism is the same: information about an individual affects the price that individual receives. Yet the welfare implications can be very different.

This is an important limitation of treating personalized pricing as inherently suspect. The Commission would not merely be constraining businesses’ ability to charge some consumers more. Its approach could also constrain their ability to charge some consumers less. A policy intended to protect consumers from individualized pricing should not inadvertently prevent businesses from using data to identify consumers who would benefit from lower prices.

II. The Relevant Question Is Not Whether Everyone Pays the Same Price, but Whether Pricing Produces Fair and Beneficial Outcomes

The Policy Statement places substantial weight on consumers' expectation that the price they see is the same price that other consumers at the same place and time would see. But identical prices are not necessarily the fairest prices.

A uniform price treats consumers as though they have identical circumstances and identical willingness to pay when they plainly do not. A consumer with a high willingness to pay and a consumer who can afford a product only if it is discounted may not be equally situated simply because they are purchasing the same product.

Personalized pricing can, in some circumstances, allow businesses to charge different consumers prices that better reflect their individual willingness or ability to pay. This can allow a business to serve consumers who otherwise would not purchase the product at all. In that sense, differentiated prices can sometimes produce a more equitable outcome than a single uniform price.

This is particularly relevant for products and services with high fixed costs and low marginal costs. If a business can charge some consumers more while offering others a lower price, it may be able to serve a broader customer base than if it were required to charge everyone the same price.

Consequently, policymakers should not assume that price equality is synonymous with fairness or maximizing consumer welfare. A rule requiring identical prices can actually make some consumers worse off by eliminating discounts that would otherwise allow them to participate in a market. ITIF has previously explained that banning personalized pricing does not necessarily lower prices; it can instead redistribute prices. Eliminating the ability to offer individualized discounts can raise prices for consumers who would otherwise have received them.2F[9]

The FTC should avoid treating differences in prices among consumers as evidence of unfairness. The relevant question is whether consumers are being deceived or subjected to unlawful conduct—not whether every consumer receives exactly the same price.

III. Competition and Arbitrage Already Constrain Many Forms of Personalized Pricing

The practical significance of personalized pricing also depends heavily on the characteristics of the market.

For many physical goods, competition and arbitrage naturally constrain the extent to which a seller can sustain personalized prices. When an identical product is readily available elsewhere at a lower price, a consumer charged more can switch sellers. Even where there is only a single initial seller, a sufficiently large price differential can create an opportunity for arbitrage through resale: a buyer who can obtain the product at a lower price has an incentive to resell it to a consumer facing a higher price. The greater the ability of consumers or intermediaries to compare prices and obtain the same product elsewhere, the harder it is for a seller to sustain large price differences based solely on an individual's willingness to pay. In this sense, arbitrage provides an important market discipline on personalized pricing.

That discipline is weaker, however, when the product or service cannot readily be transferred or resold, or when the price reflects characteristics of the individual transaction. For example, an airline ticket is tied to a particular passenger and itinerary, while a digital product licensed to a particular individual may not be transferable. A consumer quoted a higher price for either generally cannot simply purchase the lower-priced version offered to someone else and transfer it to themselves. In these markets, consumers may have fewer opportunities to circumvent a higher personalized price through arbitrage, making it particularly important to distinguish legitimate price differentiation from genuinely deceptive or unlawful conduct.

The FTC’s policy should account for these economic differences rather than assuming that personalized pricing necessarily gives firms unlimited ability to extract consumers' maximum willingness to pay.

IV. Consumer Expectations Are Not a Sufficiently Reliable Basis for Regulating Emerging Pricing Models

The Commission proposes to rely in part on whether consumers reasonably expect prices for a product or service to be the same for everyone at the same place and time. Consumer expectations can be relevant to deception analysis, but they are a poor basis for establishing broad ex ante rules governing innovative pricing models—particularly for new products and services for which consumers have no longstanding pricing expectations.

Consider on-demand delivery services. The price paid by a consumer may reflect not merely the underlying product but the cost and availability of a highly individualized delivery service. A delivery platform may need to account for where the delivery worker is located, how far the worker must travel, whether the worker is already completing another nearby order, how many other orders are available in the area, and current demand for delivery.

There may be no meaningful “standard price” that consumers reasonably should expect to receive regardless of these circumstances. Two consumers ordering the same product at the same time may impose very different costs on the platform because fulfilling their orders requires different routes, different amounts of travel, or different combinations with other deliveries. The problem becomes even more pronounced as entirely new business models emerge. There cannot be a longstanding consumer expectation about the pricing of a product or service that did not previously exist.

Regulation should not lock emerging markets into pricing conventions simply because consumers are more familiar with traditional models. Doing so could prevent innovative businesses from developing pricing models that better match prices to the actual costs and circumstances of individual transactions.

V. The Commission’s Examples Illustrate Why the Distinction Between Prices and Discounts Matters

Several of the examples in the Policy Statement involve businesses charging a consumer more because information suggests that the consumer has a particularly high need for a product or service. Those scenarios can reasonably raise concerns if a business secretly exploits highly sensitive information to charge a consumer more. But the same analytical framework also demonstrates why a categorical approach is problematic.

Suppose, instead, that the business uses the same information to identify consumers who would benefit from a lower price. A hotel could charge less to a traveler with limited flexibility. A food-delivery company could provide a discount to a consumer who otherwise could not afford delivery. A grocery retailer could offer targeted discounts to households for which particular products represent a larger expense. A rideshare company could offer a discount to a customer who would otherwise choose a competing service. In each case, the business is using personal information to differentiate prices. Yet the consumer receives a lower price.

The Commission's proposed framework could therefore constrain both sides of the equation: the ability to charge more and the ability to charge less. This is an important unintended consequence. The policy question is not simply whether a price differs based on personal information, but whether the particular practice harms consumers, and whether existing law adequately addresses that harm.

VI. The Commission Should Focus on Deception—Saying One Thing and Doing Another

ITIF strongly supports enforcement against deceptive pricing.

If a business tells consumers that everyone receives the same price when that is not true, that is materially different from simply using information to determine prices. Likewise, if a business makes a specific representation about the factors it does—or does not—use to determine prices, it should not secretly do otherwise. For example, if a business tells consumers that it does not use information about how much battery power remains on a consumer's mobile phone to determine the price of a service, but in fact uses that information to charge consumers different prices, that would be a straightforward case of saying one thing and doing another. The problem in such cases is the deception, not the use of personalized pricing itself.

In other words, the clearest problem is when a business says one thing and does another.

That is the traditional province of consumer-protection law, and Section 5 already provides the FTC with substantial authority to address such conduct. The Commission therefore does not need to establish a broad presumption against personalized pricing to address deceptive practices. It can focus its enforcement resources on representations and omissions that actually mislead consumers.

If policymakers determine that consumers should receive more information about how businesses determine prices, Congress can enact legislation establishing such disclosure requirements. That would allow elected representatives to determine the appropriate scope, content, and tradeoffs of such requirements through the legislative process.

The Commission should not use an enforcement policy statement to effectively create a new, economy-wide transparency regime that extends beyond the prohibitions Congress has enacted.

VII. Privacy, Discrimination, and Pricing Should Not Be Conflated

ITIF agrees that businesses should handle personal data responsibly and that consumers should receive appropriate protections concerning the collection and use of their information. But privacy and pricing are distinct policy questions. The fact that a business uses personal data to personalize a price does not establish that the underlying data collection was unlawful or that the resulting price was unfair. If a business collects personal information without appropriate authorization or makes deceptive representations about its data practices, existing consumer-protection and privacy authorities can address that conduct directly.

Likewise, discrimination based on protected characteristics is already prohibited under existing civil rights laws. Policymakers do not need to prohibit broad categories of data-driven pricing to address unlawful discrimination.3F[10] The Commission should therefore avoid using personalized pricing as a proxy for potentially unrelated concerns about data collection, privacy, or discrimination.

VIII. Personalized Pricing Should Not Be Treated as an Antitrust Problem Absent Evidence of Anticompetitive Conduct

The Commission should also distinguish consumer-protection concerns from competition concerns. Algorithmic pricing can create legitimate competition issues when firms use algorithms as part of an agreement to fix prices, share competitively sensitive information, facilitate collusion, or otherwise engage in exclusionary conduct. But the existence of an algorithm or the use of personalized pricing does not itself establish any such conduct.

As ITIF has previously explained to the Canadian Competition Bureau, algorithms are tools. The relevant question is how firms use them and what effects their conduct has on competition. Pricing algorithms can produce efficiency gains, improve price discovery, reduce search costs, facilitate entry, and allow businesses to respond more quickly to changing market conditions.4F[11] Where competitors actually agree to fix prices, existing antitrust law can address the conduct whether the agreement is implemented by humans or algorithms. Similarly, where a dominant firm uses pricing technology to exclude rivals or otherwise abuse market power, the relevant antitrust provisions remain applicable. However, the FTC should not treat as unlawful the mere existence of differentiated prices or the use of sophisticated pricing technology absent evidence establishing unlawful conduct.5F[12]

IX. Recommendations

ITIF recommends that the FTC revise the proposed Policy Statement to:

1. Clarify that personalized pricing is not inherently unlawful.

The final Policy Statement should expressly state that personalized pricing, dynamic pricing, and algorithmic pricing are not inherently unfair or deceptive and that the use of personal data in pricing does not itself establish a Section 5 violation.

2. Focus enforcement on material deception.

The Commission should target false or materially misleading representations concerning whether a price is personalized, the price a consumer will actually pay, or the basis for a price where that information is material to a reasonable consumer's purchasing decision.

3. Avoid treating price differences as evidence of unfairness.

The fact that consumers receive different prices does not establish consumer harm. In some circumstances, differentiated pricing can make markets more accessible and provide lower prices to consumers who would otherwise be unable to purchase a product or service.

4. Recognize both sides of personalized pricing.

The Commission should expressly recognize that the same technologies used to charge some consumers higher prices can be used to provide other consumers with discounts. Policy should not inadvertently restrict both practices.

5. Account for arbitrage and competition.

The Commission should recognize that competition and arbitrage substantially constrain personalized pricing for many physical goods and other readily comparable products. The ability to compare or purchase elsewhere is an important market discipline.

6. Avoid using generalized consumer expectations as an economy-wide regulatory standard.

Consumer expectations should not become a substitute for evidence of deception, particularly in new and emerging markets where no established pricing convention exists.

7. Distinguish individualized service costs from personalized price discrimination.

For on-demand and other services, prices may legitimately reflect transaction-specific factors such as distance, location, demand, available workers, routing, or the ability to combine multiple orders. These factors should not automatically be characterized as personalized pricing based on an individual's willingness to pay.

8. Preserve personalized discounts and other pro-consumer forms of price differentiation.

The Commission should recognize that loyalty discounts, targeted coupons, promotional offers, and other personalized discounts can benefit consumers and should not be restricted merely because they are personalized.

9. Leave broad transparency mandates to Congress.

If Congress determines that consumers should receive additional information concerning how businesses determine prices, Congress can establish appropriate disclosure requirements by statute. The Commission should not use an enforcement policy statement to create an economy-wide disclosure regime beyond existing statutory requirements.

10. Address unlawful discrimination and anticompetitive conduct under existing law.

Where businesses engage in unlawful discrimination, collusion, or exclusionary conduct, the FTC should enforce the applicable laws. The mere use of personal data or algorithms in pricing should not substitute for evidence of such violations.

Conclusion

ITIF supports the FTC’s objective of protecting consumers from deceptive pricing practices. Businesses should not tell consumers one thing about the price they will pay and then do something materially different.

However, personalized pricing is not synonymous with deceptive pricing, and identical prices are not synonymous with fairness. Data-driven pricing can provide discounts to price-sensitive consumers, expand access to products and services, improve the efficiency of on-demand markets, reduce waste, and allow businesses to respond to the actual circumstances and costs of individual transactions.

The FTC should also recognize the important economic constraints on personalized pricing. For many physical goods, arbitrage makes sustained individualized pricing difficult: if one consumer can obtain the same product more cheaply than another, the higher-priced consumer can often purchase from the lower-priced seller. For many services, meanwhile, prices legitimately vary because the transactions themselves differ in ways that cannot be reduced to a single uniform price.

Most importantly, the Commission should focus on deception rather than differentiation. When a business falsely represents that everyone receives the same price or makes a specific representation about what information it does or does not use to determine prices and then violates that representation, Section 5 provides an appropriate basis for enforcement. The same principle applies to other material misrepresentations about how prices are determined or what consumers will pay. But the mere fact that a business uses data to offer different prices to different consumers does not establish deception or unfairness.

If policymakers conclude that consumers should receive broader information about pricing practices, Congress can determine through legislation what transparency requirements are appropriate and what costs and benefits those requirements entail.

The FTC should accordingly revise the proposed Policy Statement to preserve legitimate personalized and algorithmic pricing while targeting actual deception and other demonstrable violations of law.

Endnotes