Digital Liberty Submits Comments on FTC’s Proposed Personalized Pricing Policy

By Saara Khan

Digital Liberty has submitted comments to the Federal Trade Commission opposing its Proposed Enforcement Policy Statement Regarding Personalized Pricing and urging the Commission to withdraw the proposal. The FTC’s proposal would threaten businesses with enforcement actions under Section 5 of the FTC Act if consumers are not adequately informed about how their personal data is used to determine prices.

The FTC is concerned that businesses could use consumer data and artificial intelligence to offer different prices to different consumers. Under the proposed policy, businesses could be expected to disclose when a price is personalized, the basis for personalization, and the types of data used.

Digital Liberty argues that this approach misapplies consumer protection law and wrongly treats personalized pricing as a deceptive departure from a supposed norm of uniform pricing.

Personalized pricing is a long-established, ubiquitous, and economically efficient practice. The integration of AI into pricing mechanisms simply modernizes this practice.

Personalized pricing is not a new phenomenon created by AI. For centuries, buyers and sellers negotiated prices based on individual circumstances, bargaining power, and willingness to pay. Standardized posted prices only became widespread much later, particularly with the rise of large department stores.

Digital Liberty argues that AI can make personalized pricing more efficient by processing large amounts of information and responding to changing demand, inventory, and other market conditions. Rather than eliminating these practices, regulation could make it harder for businesses to offer targeted discounts to price-sensitive consumers.

Regulating AI-driven dynamic pricing through the threat of Section 5 enforcement will not protect consumers; rather, it will destroy targeted discounting, force businesses to adopt higher uniform prices, and disproportionately harm low- and middle-income Americans.

A uniform price is not necessarily the most consumer-friendly price. Without the ability to tailor discounts, businesses may instead set a single price designed to maximize revenue across their entire customer base – potentially putting products out of reach for more price-sensitive consumers. Loyalty programs, student discounts, financial aid, and different shipping options are examples of pricing arrangements that can benefit both businesses and consumers.

Digital Liberty also challenges the feasibility of the FTC’s proposed disclosure requirements. Modern AI pricing systems can synthesize hundreds of real-time variables rather than relying on a simple “if X, then Y” formula. Requiring businesses to translate these complex systems into consumer-facing explanations could produce lengthy boilerplate disclosures and contribute to “disclosure fatigue.”

The irony is that a policy intended to protect consumers from personalized pricing could make personalized discounts less available.

The proposed policy could ultimately discourage businesses from using potentially beneficial pricing technologies, increasing operating costs, and reducing opportunities for consumers to receive lower prices. Digital Liberty argues that personalized pricing should not be treated as inherently deceptive simply because software now performs calculations that merchants once made themselves.

Read the full comments here.