Why identical online products can cost you more than your neighbour

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Only one in four Australians is aware he or she may be charged different prices to other people when shopping online. 

Differential pricing – charging customers different prices for the same product – was considered unfair by 69 per cent of Australians in CHOICE’s Consumer Pulse survey. And 78 per cent of people believe rules or laws should be implemented to limit the practice. 

The results back up an investigation of Tinder’s pricing policies, in which CHOICE found the dating behemoth charges “wildly” different prices for some features, including much higher prices for older users.

“The dating platform doesn’t tell customers that it uses their personal information to tailor prices,” that report concluded.

“One subscriber can be charged up to five times as much as another. Prices varied according to age. On average, people over the age of 30 were offered prices that were more than double the prices given to those who were under 30.”

CHOICE says this personalised pricing approach enables companies to maximise how much a customer spends.

“But it’s terrible for customers. We can’t meaningfully compare prices with similar products, and we may be asked to unfairly pay more because of factors out of our control, such as our age, sexuality or gender.”

In 2015, the Executive Office of the US President examined how big data and differential pricing intersect. It concluded that whether differential pricing helps or harms the average consumer depends on how and where it is used.

“In a competitive market with transparent pricing, value-based pricing is unlikely to harm the average consumer, who can easily compare offers and switch sellers. However, when sellers obfuscate by bundling a low product price with costly warranties or shipping fees, use “bait and switch” tactics to attract customers with false promises, or bury important details in the small print of complex contracts, differential pricing can cross the line into fraudulent behaviour.”

The report said that “commercial applications of big data deserve ongoing scrutiny, particularly where companies may be using sensitive information in ways that are not transparent to users and fall outside the boundaries of existing regulatory frameworks”.

Five years on, CHOICE believes stricter controls are necessary in Australia.

“Our research tells us that some company pricing practices are out of step with consumer expectations. Most people don’t think differential pricing is fair and, at minimum, people expect transparency about how prices are set,” said CHOICE editorial director Marg Rafferty.

“Australians are concerned about personal information on social media (61 per cent), income level (61 per cent), browsing habits (60 per cent) and where they live (57 per cent) being used to set different prices.”

The Tinder investigation showed those concerns are well founded.

CHOICE could not find out how Tinder set its prices and the dating service would not let its customers know they would pay a different rate to others.

“Tinder is able to manipulate customers into paying more without them even knowing,” said CHOICE director of campaigns Erin Turner.

“Tinder customers are not told what data about them may be used, where it was sourced, if it is accurate or how it is being used. The company is in control. Not the customer. Tinder is more powerful because of this. It is able to manipulate customers into paying more without them even knowing.

“At CHOICE, we think this lack of information is so egregious that Tinder may be breaching the Australian Consumer Law.”

CHOICE points out that Tinder’s privacy policy and terms of use don’t mention that it uses personal information to price its offerings.

“It’s misleading by omitting one very important fact: this company will use your data against you,” said Ms Turner.

“It doesn’t matter what Tinder intended when it programmed its pricing algorithm, what matters is the impact on customers. 

“From our mystery shop we know that Tinder is asking older Australians to pay more for dating services. And while the pattern isn’t as clear for other factors, it could feasibly be using data to make people pay more based on gender, sexuality, or location.

“Without more transparency from Tinder, we cannot confirm if groups of people are facing unfair discrimination.”

CHOICE is calling for changes to laws to cover how companies use data.

“Our consumer regulator, the ACCC, has called for stronger privacy laws for the modern data-driven era, but privacy reforms alone won’t address the root cause of this problem,” said Ms Turner. “We need stronger privacy laws to put customers in control but also something much bigger: we need companies to act ethically when they use the data they have.”

CHOICE says companies must:

  • be transparent
  • clearly state how customers can control what information is kept and used
  • make prices easily accessible to all customers to allow real competition
  • treat customers fairly by making sure no-one is unfairly discriminated against.

Were you aware of this practice? Do you scrutinise the terms and conditions before clicking ‘agree’?

 

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Written by Will Brodie

9 Comments

Total Comments: 9
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    A little while ago I purchased some over the counter tablets online through SuperPharm for click and collect. While at the store I noticed the shelf price was significantly higher for the same item than what I had paid online. So in other words if some elderly person without a computer went to the pharmacy to purchase exactly the same thing they would pay more than I did. How unfair is that!

    • 0
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      Not just ‘some elderly person without a computer’ Hardworker. Every customer in store no matter what age would pay the higher price.

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      Hardworker, the answer may be the overhead costs. The overheads for the on-line product may be less than the overheads for the store bought item. The on-line product does not require costly shelf space in a brightly lit and airconditioned store. it sits on a shelf in a warehouse and does not have to be transported to any number of retails outlets. Is it unfair that the on-line product is cheaper because the supplier passes on savings to you?

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      Eddy just to clarify I picked up the tablets from the store the same day I purchased online and made the order click and collect. The store took them off the shelf and wrapped them for collection. It tells you online which stores have them in stock. I am still horrified as I have never come across this before.

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      I understand Hardworker, however I have come across a similar situation when I was buying a new washing machine. We went to a store specialising in home appliances and selected from a range of machines the machine we thought was suitable and was given a price which detailed the item plus delivery and installation charges. The same night I looked on an on-line store and found the price of the same machine plus delivery was a significant amount less than what I was quoted. When I approached the store next day I mentioned the on-line price hoping for some reduction, unfortunately they said it was uneconomic for them to reduce their price. Further I was told the reasons on-line are cheaper include:
      a. they have minimal overheads, no shopfront or sales staff and in some cases are working out of their garage at home;
      b. they have no staff to provide help or after sales service;
      c. they carry no stock, they order direct off the wholesaler/manufacturer for each order and the wholesaler delivers;
      d. they do not include installation or removal of an old appliance in their price; and
      e. if you need assistance with warranty claims etc they are usually non-existent.
      In the end I bought from the store because:
      a, my money contributed to someone else’s employment;
      b. I am too old to install large appliances nowadays; and
      c. how would I dispose of the old machine.
      This may be an extreme example compared to buying tablets at a pharmacy but the same principles apply.

  2. 0
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    I get annoyed when you see the price then it’s in US $ at the checkout SO what looked like a bargain is very expensive

  3. 0
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    I only get caught the once. Once I realise I’ve been duped by a particular establishment, it never receives consideration from me ever again – and I’m not backward in sharing the experience either! It’s the only way to make online businesses tow the line, but I have to admit, it doesn’t work all that well because there are too many fools out there ready to part with their money – and those in business know it – which is why they keep ripping customers off! A case in point are these stupid commercials on TV which advertise a product that has already done the rounds in the USA and found to be useless -so they attempt tp flog the stuff here in good old Aus. I always check it out on Product Review before I buy, just to get the low down on our useless most of it is. Two or three for the price of one and $300 worth of add-ons for free is still going to cost you an arm and a leg in the end! Buyer beware has never been so important.

  4. 0
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    You have to read the small print on TV ads about ‘buy one and get one free only pay for separate postage and handling”. The postage is usually $9.95 , almost $10 and you can bet your bottom dollar that it doesn’t cost the supplier $19.90 for postage when they send the 2 together. Also if you are not satisfied and send it back you have to pay the postage again.
    Anyway, being old I don’t do electronic banking , so don’t do online purchasing. I like to touch and feel the item before buying and you would be surprised at how different the size of an item can look on TV or your phone or computer as to when you receive it even when they give the measurements.


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