New Research: Consumers worldwide concerned by opaque online pricing
In a global investigation by Consumers International and the Mozilla Foundation, 97% of people surveyed registered some level of concern about personalised pricing, with a lack of transparency and potential for unfairness identified as greatest risks.
Whilst consumers across the globe are knowledgeable about the potential risks and benefits of algorithmic personalised pricing, this type of opaque online pricing is causing concerns and distrust in the digital marketplace. Consumer advocates are calling for immediate actions from regulators and businesses to increase transparency and prevent unfairness in such algorithmic practices.
A case study into the pricing practices of global dating app Tinder was conducted across six countries, including the U.S., Republic of Korea, New Zealand, India, the Netherlands, and Brazil. It was found that some users of Tinder Plus are being unknowingly charged up to five times more for the same service.
What are the findings of this report?
1. Consumers are concerned
97% of those surveyed registered concerns about personalised pricing, citing the potential for unfairness and the lack of transparency.
Respondents participated in a mystery shopping exercise which revealed that users are offered a wide range of prices for Tinder Plus – with up to 31 unique price points identified in a single country, and some users being charged up to five times more than others in the same country.
2. Minimal transparency at the point of sale
77% of respondents called for greater transparency on how prices are set.
3. Age and other unknown factors drive pricing
Users in five out of the six countries were charged higher prices based on age; on average, people aged 30-49 were charged 65.3% more than those aged 18-29. These pricing differences persist even after Tinder faced a $24 million lawsuit for unfair pricing based on age in California.
However, our research showed that older people are no less concerned about unfair pricing, and that those aged over 30 were in fact nine percentage points more likely to identify unfairness as a top concern.
Consumers International and the Mozilla Foundation reached out to Tinder to allow for response to our research.
Tinder’s response: Tinder told us they do not factor gender identity, sexual orientation, race, religion or other social demographic data into pricing. Tinder also told us they have previously offered lower prices for subscribers aged 18-28, but that this practice is being discontinued in the US, UK, Brazil, and Australia, and that they are in the process of doing the same around the world. Tinder further added that they occasionally run randomized tests to measure the effectiveness of various price points, and that prices may vary across platforms.
Consumers International's response: As our report shows, there is strong support among consumers worldwide for greater transparency in online pricing. Personalised pricing is a growing issue in the digital marketplace, and unless it is implemented fairly and transparently, consumers are going to lose trust in the businesses practicing it.
Should personalised pricing be banned?
We are not calling for a ban on personalised pricing. In fact, personalised pricing can be used to benefit consumers — for example, when implemented to assist those who are less able to pay to access goods and services. However, for this to be in the interest of consumers, it must be done transparently, with proper regulation and safeguards to prevent discrimination.
But in many cases, the way personalised pricing is calculated is totally opaque, and consumers are not happy about it. 76% were supportive of more transparency on how their personal data is being used and shared.
And although Tinder is the subject of this study, we suspect that it is just one of many companies using technology to charge different prices for different people. More research is needed to find out how prevalent this practice is, but consumer groups are concerned that the technology used to assign pricing to individual users could cause even greater harm if used irresponsibly in essential services that have access to enhanced data, like insurance, utilities, or even healthcare.
What are the solutions?
This report concludes with a set of recommendations for businesses and policymakers, to help ensure that personalised pricing always considers the rights and needs of consumers. We’re asking that businesses and governments:
1. Make it clear. Individuals have a right to know whether, and how, personalised pricing is being applied. Governments and regulators must establish and enforce the need for this transparency.
2. Enhance agency for consumers. Consumers must be able to easily access information on how their data is being used, and have the ability to opt out of personalised pricing schemes.
3. Keep transparency in the forefront. Businesses must be diligent in ensuring that any personalised pricing algorithms don’t infringe the rights of consumers, and be able to offer transparency to regulators so that their practices can be audited and laws enforced.
“Consumers must be given greater agency over the use and dissemination of their personal data collected for personalised pricing purposes, while measures must be introduced to uphold data protections for all.
"Consumer associations, civil society organisations, and enforcement and supervisory bodies should be given meaningful access to the algorithms that determine personalised pricing in order to establish if the practice is fair.”
– Helena Leurent, Director General, Consumers International