Recent research from the Mozilla Foundation and Consumers International details how Tinder’s “opaque, unfair pricing algorithm” can charge users up to five times more for the same service in New Zealand, the United States, the Netherlands, the Republic of Korea, India and Brazil. They isolated this inexplicable variability by collecting and comparing up to 31 unique price points quoted in one jurisdiction that, at the most egregious extreme, had a gap of $22 between the highest and lowest price.
Tinder is a mobile application owned by the online dating service company Match Group. While the Tinder app is free to download and use, people can purchase in-app enhancements called “Super Likes” and “Profile Boosts” individually or subscribe monthly to a premium plan. It is very reasonable for a user to assume the advertised price of these additional services is fixed or constant — the same price for every user, regardless of their demographic, geographic or socio-economic status. But this is not the case: for example, if a user is over 30 years of age, subscription plans double.
It is true that in many contexts consumers are aware of and accept modest price variance without complaint. “Elastic demand” affects the price of airplane seats or concert tickets in different areas of a venue, and consumers are used to discounting via loyalty programs. However, in those instances, the item being purchased or the discount is either scarce or time-limited. The kind of data-driven personalized pricing that Tinder is deploying is far more duplicitous and lacks any sort of rationale, other than the exploitation of consumers.
That said, there is a universe where targeted, algorithmic pricing is pro-competitive. For the firm deploying the data-driven tactic, it is “efficient” — it allows the firm to sell more subscriptions, which increases the likelihood of earning more customers. Apart from a general lack of information or acknowledgement of any variability in price for the customer, what is the harm of personalized pricing?
Algorithmically determined price points are second-degree pricing on steroids. And they distort markets — as exemplified by the Orbitz price discrimination scandal from a decade ago, when users of Mac computers were steered to higher-priced hotels by the online travel agency. So, is “personalized” pricing simply a digital bazaar without the haggling, or is it price gouging based on personal data?
A new working paper published by Vivic Research explores competition issues in data-driven markets in Canada. The paper applies a consumer-protection lens to data-driven business behaviours in a series of nine case studies, one of which focuses on algorithmic and personalized pricing, assessing that concerted efforts by firms to collude via pricing algorithmics could be illegal under the criminal conspiracy provisions of the Competition Act.
Unlike in the bazaars of old, an individual cannot “shop around” when a platform is advertising directly to them; alternative prices may not even be accessible from a different device if both are linked to a common online identity. The individual also has no recourse in terms of either explainability — why the product or service is being advertised at a particular price point — or accountability — what the other potential prices are—from the firm advertising to them.
This opacity raises the question of whether personalized pricing is inherently discriminatory and what recourse people have if they cannot reliably access the lowest possible price. Tinder has faced a US$24 million lawsuit for unfair pricing based on age in the state of California.
Unlike in the bazaars of old, an individual cannot “shop around” when a platform is advertising directly to them; alternative prices may not even be accessible from a different device if both are linked to a common online identity.
Mozilla and Consumers International point to “meaningful transparency and access” as important next steps, and businesses absolutely need to be transparent in their use of personalized pricing so that consumers can make informed decisions. However, a more reliable policy intervention in Canada could come through broader competition reform.
Recently, the Minister of Innovation, Science and Economic Development François-Philippe Champagne announced a future review of Canada’s competition law, with a focus on wage fixing, deceptive pricing and anti-consumer practises. The accompanying press release specifically mentioned “more clearly addressing drip pricing,” which occurs when an advertiser promotes something at one price while concealing the real price from consumers until later in the purchasing process.
A subsequent publication from the Competition Bureau, a submission to Senator Howard Wetston’s invited-stakeholder consultation on Examining the Competition Act in the Digital Era, went a step further, advocating that “drip pricing should be explicitly prohibited by the [Competition] Act,” with the rationale that the Bureau has successfully enforced against this behaviour by using the false or misleading representations provision in section 74.01 of the Competition Act, but that it requires significant resources to continually prove why drip pricing is deceptive over and over in court.
This direct attention to a form of deceptive pricing is encouraging and suggests that decision makers may be open to considering other instances where pricing is delusive. While regulators weigh the utility of potentially banning drip pricing, regulators should also turn their attention to the algorithmic harms of algorithmic or personalized pricing, which can be similarly fraudulent.
Absent from the conversation to date is the point of view of consumers themselves and any consideration of what kinds of pricing deviations may be appropriate for them to experience. A recent IPSOS poll revealed that 88 percent of Canadians think it’s too easy for big businesses to take advantage of consumers. Although a commissioned report for the consultation led by Senator Wetston suggested that the concept of “fairness” has no place in narrow competition law, the limitations of the current act’s purpose statement should not prevent us from asking ourselves and each other what kinds of pricing behaviours are acceptable in a digital context.
Although they might not mind paying two dollars more on Amazon for coffee filters, millennials do actually care about finding love. They might also care about deceptive advertising and discriminatory pricing that use their personal information to take advantage of them at vulnerable moments. Our current lack of a legislative approach to this is a real heartbreaker.
This article first appeared on iPolitics.