FTC says "personalized pricing" based on consumer data could violate law

The Federal Trade Commission has issued a warning that businesses using consumer data to implement “personalized pricing” could be violating federal law. In a proposed enforcement policy statement released on Wednesday, the FTC stated that such practices, where prices vary based on a customer’s online behavior, purchasing history, or perceived willingness to pay, could constitute deceptive or unfair trade practices under the FTC Act. The agency emphasized that consumers reasonably expect uniform pricing for products and services, regardless of who they are or what data a company holds about them. According to the FTC, personalized pricing involves adjusting prices for individual shoppers without clear disclosure. This could occur in various scenarios, including a grocery store charging a delivery customer more for milk due to knowledge of their family size, a hotel increasing rates for guests deemed to have urgent travel needs, or a ride-hailing service charging more for trips to hospitals based on inferred medical emergencies. These examples illustrate how companies might leverage consumer data to tailor prices, potentially leading to financial disadvantage for certain individuals. The FTC clarified that it cannot outright ban personalized pricing, but it has the legal authority to take action against businesses that fail to inform consumers about how their data influences pricing decisions. FTC Chairman Andrew Ferguson noted that transparency is key, stating that companies must disclose how personal data is used to determine prices. The agency argued that such practices mislead consumers and undermine fair market competition. The FTC’s guidance highlights the potential harm of personalized pricing, particularly for less informed consumers who may not be aware of how their data is being used. While tools like virtual private networks or private browsers can help users avoid tracking, many shoppers remain unaware of these options. The commission stressed that businesses must provide clear disclosures explaining that prices are influenced by estimates of a customer’s willingness to pay, based on historical data. Consumer advocacy groups have expressed support for the FTC’s stance. Grace Gedye, a senior policy analyst at Consumer Reports, praised the agency’s effort to address this issue, noting that no one should be charged more for essential goods simply because a company knows details about their online activity, income, or household composition. However, she also pointed out that the burden currently falls on consumers to scrutinize fine print and understand how their data might affect pricing. The FTC’s proposal comes after a 2025 investigation by Consumer Reports found that major retailers, including Kroger, were collecting extensive data to build detailed consumer profiles. These findings underscored the growing prevalence of personalized pricing strategies and raised concerns about privacy and fairness. The agency’s new guidelines aim to establish clearer boundaries around how companies can use consumer data, ensuring greater transparency and accountability. As the FTC moves forward, it will likely engage with industry stakeholders, lawmakers, and consumer advocates to refine its approach. Businesses may need to update their privacy policies and pricing disclosures to comply with the agency’s expectations. Meanwhile, consumers may benefit from increased awareness of how their data is being used and what steps they can take to protect themselves from discriminatory pricing practices.