Comment of J. Howard Beales on FTC’s Proposed Enforcement Policy Statement Regarding Personalized Pricing
I appreciate the opportunity to comment on the FTC’s Proposed Enforcement Policy Statement Regarding Personalized Pricing (“Proposed Policy”).[1] This comment offers my own views as a long-time student of and practitioner in the FTC’s consumer protection mission.[2]
The comment begins with a brief overview of personalized pricing and the issues it raises as a form of price discrimination in Section I. Section II then argues that when there are competing sellers, consumers can easily avoid any injury from personalized pricing by the simple expedient of searching for another price. Section III argues that the Commission’s premise that consumers generally expect one price for all customers is unsubstantiated. Consumers are well aware that different consumers pay different prices in ordinary purchase situations. Section IV considers discounts based on personal information. It argues that such practices benefit consumers, and that the Commission should create a safe harbor to avoid requiring disclosures for personalized discounts. Section v argues that disclosure is an inappropriate remedy for the problems the Commission seeks to address and should, in any event, be tested before it is required.
I. An Overview of Personalized Pricing
Some critics of the information economy have become concerned about personalized pricing, in which businesses use consumer-specific information to set different prices for different consumers. By definition, charging different prices for different consumers (assuming costs are the same) is price discrimination. The economics literature has long been clear that price discrimination can be either welfare increasing or welfare reducing, depending on the circumstances.[3] Whether a given instance of price discrimination is good or bad for consumers is thus an empirical question. Nevertheless, many scholars have argued that common forms of retail price discrimination lead to increased output and enhanced consumer welfare.[4]
As the Proposed Policy notes, “the extent to which businesses currently use personalized pricing is not well understood, and the effects of personalized pricing on consumers are unclear.”[5] Instead, the discussion is driven by concern about a wide variety of hypothetical business practices which are not known to have actually occurred, and which may never occur.
The hypothetical scenario that has attracted the most attention is the possibility that a monopolist could charge each individual consumer the maximum amount that consumer would be willing to pay, thus extracting all consumer surplus. Although a theoretically interesting polar case, such personalized pricing is not possible in practice: Statistical uncertainty remains. Even the best models cannot predict with certainty, and data, even in the physical sciences and especially in economics, are subject to measurement errors. Dubé and Misra show by example that, even in a monopoly model that incorporates statistical uncertainty, a database that allows different prices for different consumers may increase both profits and consumer surplus.[6] In their careful experimental study, personalized pricing never extracted more than 30% of consumer surplus that would result from uniform pricing, whereas “true perfect price discrimination … would extract all consumer surplus.”[7] Moreover, in their experiment, more than 60% of consumers received a lower price with personalized pricing. Why such a pricing outcome might warrant consumer protection enforcement is hardly obvious.
More important than the limitations of personalized pricing in the monopoly context is the fact that most industries are not monopolies. When there are competitors, the same tools and data that allow a monopolist to charge more to consumers who are more willing to pay also enable competitors to identify the consumers who are most overcharged and compete for their business through lower prices. Firms can also offer discounts to consumers who prefer their rival’s product, again pressuring the rival to lower price.[8] These uses of information-based pricing offer clear consumer benefits.
Empirical questions that underlie a public policy deserve empirical answers rather than adopting a policy that assumes an answer. The impact of price discrimination on consumer welfare is just such a question, as economists have recognized for decades. Empirical answers about the effects of personalized pricing as a method of price discrimination are, at present, lacking. Whether a particular implementation of personalized pricing benefits consumers or harms them should be central to the Commission’s enforcement decisions. Under the Proposed Policy, the Commission does not appear to ask that key factual question in deciding to bring a case.
The specific “personalized pricing” scenarios the Proposed Policy identifies as requiring disclosure highlight the important role of competition as a constraint. Marketing delivery services to those who are unable to leave home, milk to people with several children, hotels to people who need to travel, or home security to crime victims are examples that appear to be competitive markets. Information identifying these consumers makes competition, including offering a lower price, more likely, not less. Similarly, in the Commission’s example of a consumer standing in the store who is shown a higher price online, the consumer can buy the item off the shelf. Moreover, a competitor using the same information to offer online discounts to consumers who are in its rival’s stores would seem to produce clear consumer benefits. As discussed in the next section, consumers can easily avoid injury in such circumstances.
The most troubling of the Commission’s scenarios is the rideshare company charging a premium price for a consumer in dire need of transportation, particularly if the consumer has no reasonable alternatives. Here, however, the problem is more akin to duress, rather than a failure to disclose personalized pricing. The common law of contract has long policed closely related situations. For example, a seller may refuse to continue performance under a contract without a price higher than previously agreed. In another example, a seller who finds a prospective buyer in a sensitive position with few if any alternatives, raises the price to extraordinary levels. In either circumstance, common law courts scrutinize the contract with extra care and may refuse to enforce it.[9] Most importantly, although this exploitation may constitute a Section 5 violation,[10] the problem is not the failure to disclose. No amount of disclosure about how the price was set will either generate new alternatives or relieve the consumer of the dilemma.
II. When Alternatives Exist, Consumers Can Easily Avoid Any Injury from Personalized Pricing
Consumers cannot buy anything without first locating a seller. Although some may purchase from the first seller they find, consumers frequently gather information about the offerings of other sellers to choose the best option. That process of consumer search means that consumers do not come to a particular offering in ignorance. They have some information about prices at other sellers, or perhaps this seller at an earlier time, that provides context for the offered price. Even when a new seller or new product is first encountered, consumers can easily generate a context by searching for other offerings. In the online context that seems to be a primary concern of the proposed personalized pricing policy, the simple expedient of clicking the next link will generate additional information about whether the price is high or low.
Rather than focusing on the injury, the draft statement’s analysis of materiality and avoidability focuses on the process that allegedly generates the injury.[11] It is true that if consumers are unaware of personalized pricing they would not know to take steps like using a VPN or a private browser.[12] But the injury is not the process of setting the price, it is the high price that may result. Consumers can avoid the actual injury with the same simple process they routinely employ to avoid any price they think is high: check another seller. Consumers can therefore reasonably avoid any injury that might result from personalized pricing.
Of course, consumers may decide to purchase without additional search. That decision, however, is based on the perceived benefits and costs of further information gathering. The manner in which the seller determined the price does not affect the search decision. It is likely that consumers who choose not to search will pay a higher price on average, but not searching may nonetheless be a rational choice. In addition to avoiding the costs of search, some consumers prefer familiarity with one seller and will pay for that benefit. Choosing not to search also captures the Commission’s scenario of a rideshare company charging more for a consumer who has only one installed rideshare app. Moreover, installing another app would seem an easy way for a consumer to avoid injury. In any event, disclosure at the point of sale will not convert a non-searcher into a searcher and does nothing to reduce the costs of search.
The presence or absence of personalized pricing has no effect on search behavior in two of the most studied strategies in the economics literature. In a fixed sample size strategy, consumers choose a number of sellers to sample based on the costs of checking another price and the expected benefit of finding a lower price.[13] Personalized pricing does not affect either side of this equation. Another much-studied search strategy is an optimal stopping rule,[14] in which consumers continue to search until they find a price below some specified value. Again, nothing about the presence or absence of personalized pricing would affect this determination or the transaction price that results.
III. The Commission’s Premise that Consumers Expect One Price for All Is Unsubstantiated
The information that consumers need to make optimal choices is information about the price itself, not how it was determined. As Nobel Laureate Friedrich Hayek observed in his seminal paper The Use of Knowledge in Society, the beauty of the price system is that the price aggregates and summarizes all information about value and cost into a single statistic, one that provides the basis for decisions without exploration of the underlying details.[15] Whatever consumers may expect about how it was determined, that summary remains the same for the particular consumer and the particular proposed transaction. In most circumstances consumers can remain blissfully ignorant of the process by which prices are set and the range of information used to set them.
Charging different prices to different consumers is as old as retailing. Consumers who are more willing to pay for a product or service, or less sensitive to price, are often charged higher prices. Consumer characteristics may serve as a proxy, as is the case with discounts for students or for the elderly. But many traditional price discrimination techniques rely on consumers who care more about price to self-identify, usually by their willingness to jump over some “hurdle” to qualify for a lower price. Rebate offers or discount coupons are common examples: Consumers who are more price sensitive are more willing to clip coupons or jump the hurdles necessary to claim the rebate. As one economics textbook noted, “[i]t is a rare product whose seller does not use the hurdle model of differential pricing.”[16]
Indeed, nothing is more common in the experience of every consumer than the simple fact that prices vary. Different sellers offer the same goods at different prices, in different locations, at different times, and to different consumers. Similar goods that are close substitutes are available at a similar array of prices. The only way for any consumer to know whether a particular price is a good one is to compare it to other prices—to search for a price they are willing to pay.
Even in circumstances most favorable to the Commission’s assertion that consumers have “reasonable expectations” of one price for all, it is highly likely that consumers understand that the transaction price will differ for different consumers. Consider a posted price for an item in a grocery store, arguably an express representation of one price for all. Consumers understand that at checkout some will pay the posted price, but others will pay less because they use a coupon on the purchase (and perhaps different coupons offering different discounts). Still others may receive a different loyalty program discount or take advantage of a volume discount. The range of prices expands even further when we consider competing brands, including store brands that may be functionally identical. Each of these arrangements means that different consumers pay different prices, based on their personal choices and behavior. Such pricing arrangements are ubiquitous in retailing, obvious to consumers, and make clear that the posted price is not “one price for all.”
The Proposed Policy cites evidence that consumers do not understand the nature and extent of data collection and use.[17] It does not follow that they therefore expect “one price for all,” despite their everyday experience to the contrary. Moreover, the Commission recognizes that consumers do expect individualized pricing in some circumstances, but it offers no principled distinction between those instances and others where consumers allegedly expect a single price, and no way for a company to assess what consumers “reasonably expect” in any particular instance.
In any event, consumer expectations about prices and how they are set are a foundation of quicksand for enforcement that actually benefits consumers. The Commission has a sad history of using claims of “deception” to attack discounters and other low-price sellers,[18] spurred on by competitors seeking to suppress competition that benefits consumers. Presumably most consumers who choose to buy “expect” that the price they are paying is a good one. By the logic of the Proposed Policy, however, the failure to disclose that the price is in fact higher than most other offerings in the market would seem to be a deceptive practice. That approach, however, would make the Commission a price regulator, something it clearly is not under its statute.
IV. The Proposed Policy Ignores Personalized Discounts that Benefit Consumers
Although the possible downsides of personalized pricing are at this point largely hypothetical, concrete benefits of information-based pricing abound. Using the same data and techniques as personalized pricing, loyalty programs and discount email marketing are widespread. Industry estimates indicate that millions of consumers are members of loyalty programs, often multiple programs, that offer discounts and other promotional benefits based on the consumer’s history with the seller. Capital One Shopping reports that discounts are the strongest drivers of loyalty program participation.[19] Zoho, a provider of online platforms for loyalty programs, reports that 80% of Americans are members of at least one loyalty program.[20] EMARKETER reports that the average consumer is a member of a surprisingly high 17 loyalty programs,[21] and notes that the best programs tailor offers and content based on the individual member’s preferences and behavior. Email marketing also makes extensive use of consumer information. Capital One reports that 77% of consumers want to receive emails offering discounts, and that personalized promotional emails with discounts are opened 29% more often and clicked 41% more often than those without.[22]
These programs offer clear consumer benefits, reducing the costs of living for American families. They use the same kinds of data, and the same or similar analytical techniques, to determine how large a discount (if any) to offer any individual consumer. Unless the Commission creates a safe harbor for such discounts, the analysis of the proposed policy statement would seem to require exactly the same personalized pricing disclosure that the policy statement contemplates when personalization leads to higher prices. In the Commission’s example of a price for a security system based on knowledge that the consumer was a recent crime victim, the seller would have to disclose that “this price is personalized based on data showing you are a recent crime victim” whether the price was higher or lower than the usual price. When the price is a discount, however, the disclosure offers no benefits whatsoever. Defining “discounts” with enforceable precision is a difficult challenge, but the Commission can clearly state that it does not intend to require disclosure when information is used to offer discounts, and consider whether a given price is in fact a “discount” on a case-by-case basis.
Although the Proposed Policy is based on disclosure rather than a prohibition of personalized pricing, given the well-known fact that any communication can confuse or mislead a significant number of consumers,[23] required disclosure when prices are discounted risks harming consumers. The legal risk, the cost of the disclosure itself, and the risk of consumer misinterpretation of the disclosure will discourage sellers from offering these discounts. The Commission’s past attacks on discounting argue strongly for a safe harbor, rather than reliance on the Commission’s enforcement discretion.
V. Disclosure Is an Inappropriate Remedy
The proposed policy statement would require that firms using personalized pricing “disclose not just that the price is personalized, but also the basis for that personalization and the types of data on which the personalization is based.”[24] In its evaluation of disclosures, the Taskforce on Federal Consumer Financial Law Report noted that “when disclosures are required, it should be with a clear, and articulated, goal in mind.”[25]
The contemplated disclosure fails this test. Is it simply intended to discourage personalized pricing? It will likely have that effect, but, as noted above, that will raise prices to the many beneficiaries of personalized discounts. Is it intended to motivate additional consumer search for a better price? If so, it would seem equally valuable to require any seller to disclose that its price is relatively high, whether personalized or not. Is the goal to encourage consumer use of behaviors and technologies that seek to conceal their information? If so, the disclosure should be at the point at which information is collected, when consumers can act on its message. Disclosure when a price is offered is in the wrong place and at the wrong time.
Rather than facilitating consumer choices, which should be the goal of all required disclosures, the proposed disclosure appears to be a “normative” disclosure – information provided not because consumers are interested, but because policymakers think consumers should take it into account.[26]
Like any disclosure, this one may be misunderstood. The Commission’s own research has shown that additional information can lead to worse consumer decisions, either because it is misunderstood or because consumers assign it more significance than it should have.[27] To ensure that consumers actually benefit from disclosure, the Commission should first test it, and only then consider requiring it.
Conclusion
In most circumstances, personalized pricing is unlikely to harm consumers. There may be harm, and a Section 5 violation, if there are instances in which personalized pricing borders on duress. Disclosure, however, does nothing to address the problem, and leaves a possibly better-informed consumer with the same unpalatable choice.
It is generally easy for consumers to avoid any injury from personalized pricing by the simple expedient of searching for a better price. The Commission’s premise that consumers generally expect one price for all is unsubstantiated. It seems highly likely that most consumers are aware that prices differ from one consumer to another because of coupon use, volume discounts, and loyalty programs. Because personalized discounts offer substantial consumer benefits, the Commission should create a safe harbor making clear that disclosures are not necessary when information is used to offer a discount. Disclosure, particularly untested disclosure, is an inappropriate remedy.
[1] Fed. Trade Comm’n, Proposed Enforcement Policy Statement Regarding Personalized Pricing, Matter No. P034101 (Aug. 19, 2026) [hereinafter “Proposed Policy”], https://www.ftc.gov/system/files/ftc_gov/pdf/p034101-ftc-enforcement-policy-statement-re-personalized-pricing-proposed-for-public-comment.pdf.
[2] I am currently Emeritus Professor of Strategic Management and Public Policy at the George Washington School of Business and a Senior Scholar at the GW Regulatory Studies Center. I was on the staff of the FTC in the Bureau of Economics and in the Bureau of Consumer Protection as an Assistant to the Director, Associate Director, and Acting Deputy Director from 1977 to 1986, and Director of the Bureau of Consumer Protection from 2001-2004. I am grateful to the International Center for Law and Economics for financial support.
[3] See Jean Tirole, The Theory of Industrial Organization 138 (1988) (“The welfare effects of third-degree price discrimination are ambiguous.”).
[4] See 14 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application ¶ 2340c (2024) (“most price discrimination is socially beneficial in that it produces higher output and thus yields greater consumer benefits than forced nondiscriminatory pricing”); see also Benjamin Klein, Price Discrimination and Market Power, in 2 Issues in Competition Law and Policy 977, *20 (Wayne D. Collins ed., 2008), available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1657202 (“[P]rice discrimination can be used and in some circumstances accepted as a legitimate competitive business justification. . . .”).
[5] Proposed Policy, supra note 1, at 3.
[6] See Jean-Pierre Dubé & Sanjog Misra, Personalized Pricing and Consumer Welfare, 131 J. Pol. Econ. 131, 142 tbl. 1 (2023).
[7] Dubé & Misra, supra note 7, at 170. They note that “[e]ven with expanded data collection, it is unlikely that a firm could truly perfectly price discriminate using consumer data.” Id.
[8] See Jacques-François Thisse & Xavier Vives, On the Strategic Choice of Spatial Price Policy, 78 Am. Econ. Rev. 122 (1988).
[9] See, e.g., Restatement (Second) of Contracts §§ 175–76 (Am. L. Inst. 1981). See also Timothy J. Muris, Opportunistic Behavior and the Law of Contracts, 65 Minn. L. Rev. 521 (1981).
[10] The most promising theory is unfairness. There is substantial injury. By hypothesis, there is no alternative, and there are no offsetting benefits of the practice to consumers or competition. See, e.g., Holland Furnace Co. v. FTC, 295 F.2d 302 (7th Cir. 1961) (seller’s servicemen dismantled home furnaces and then refused to reassemble them until the consumers had agreed to buy services or replacement parts).
[11] Materiality is the injury inquiry in the context of deception: Would the consumer have done something differently to avoid the problem? Avoidability is the same question in the context of unfairness: Is there an injury-free alternative the consumer could reasonably have chosen?
[12] The proposed policy also points to correcting information and avoiding information collection in the first place as possible responses. But disclosure of personalization does not create an opportunity for correction, and existing disclosure requirements apply where correction rights exist. As discussed in Section v below, the point of sale is the wrong place for a disclosure aimed at information collection practices.
[13] Stigler examines a fixed sample size strategy in his seminal article on the economics of information. See George J. Stigler, The Economics of Information, 69 J. Pol. Econ. 213 (1961).
[14] See J. McCall, Economics of Information and Job Search, 84 Q.J. Econ. 113 (1970); Martin L. Weitzman, Optimal Search for the Best Alternative, 47 Econometrica 641 (1979).
[15] See Friedrich A. Hayek, The Use of Knowledge in Society, 35 Am. Econ. Rev. 519 (1945). Price conveys information even when the information is not observed directly, even when the information is not disclosed, and even when it may not be “consciously articulable” by any market participant. See Randal K. Quarles, Vice Chair for Supervision, Bd. of Governors of the Fed. Rsrv. Sys., Friedrich Hayek and the Price System Remarks at the Ninth Annual Conference of the William F. Buckley, Jr., Program at Yale 5 (Nov. 1, 2019), https://www.federalreserve.gov/newsevents/speech/files/quarles20191101a.pdf. For a formal model in a slightly different context, see Sanford Grossman, On the Efficiency of Competitive Stock Markets Where Trades Have Diverse Information, 31 J. Fin. 573 (1976).
[16] Robert H. Frank, Microeconomics and Behavior 434 (4th ed. 2006).
[17] See Proposed Policy, supra note 1, at 2–3 & nn. 4, 7.
[18] See Robert Pitofsky, Beyond Nader: Consumer Protection and the Regulation of Advertising, 90 Harv. L. Rev. 661 (1977); Robert Pitofsky, Randal Shaheen & Amy Mudge, Pricing Laws Are No Bargain for Consumers, 18 Antitrust 62 (2004); Timothy J. Muris & Paloma Zepeda, The Benefits, and Potential Costs, of FTC-Style Regulation in Protecting Consumers, 8 Competition L. Int’l 11 (2012).
[19] See Discount Marketing Statistics, Capital One Shopping (last updated June 15, 2026), https://capitaloneshopping.com/research/discount-statistics/.
[20] See 30+ Loyalty Program Statistics Businesses Should Know in 2026, Zoho Thrive (last visited Sept. 22, 2026), https://www.zoho.com/thrive/loyalty-program-software/statistics.html.
[21] See Arielle Feger, Why Loyalty Programs Are Hitting a Growth Ceiling, EMARKETER (July 31, 2026), https://www.emarketer.com/content/why-loyalty-programs-hitting-growth-ceiling.
[22] See Discount Marketing Statistics, supra note 20.
[23] As Karl Popper said, “Always remember that it is impossible to speak in such a way that you cannot be misunderstood: there will always be some who misunderstand you.” Karl Popper, Unended Quest: An Intellectual Autobiography 29 (1976) (emphasis in original). Academic studies of brief communications find that 20 to 30 percent of the audience misunderstand some aspect of the message. Regarding televised messages, see Jacob Jacoby, Wayne D. Hoyer & David A. Sheluga, Miscomprehension of Televised Communications 64 (1980). Regarding print communications, see Jacob Jacoby & Wayne D. Hoyer, The Comprehension and Miscomprehension of Print Communications: An Investigation of Mass Media Magazines (1987). Both studies compare advertisements with excerpts of editorial content designed to be roughly equal in length and find no significant differences in the extent of miscomprehension.
[24] Proposed Policy, supra note 1, at 1.
[25] Consumer Fin. Prot. Bureau, Taskforce on Federal Consumer Financial Law Report vol. I, at 326 (Jan. 2021, amended Jan. 2022) [hereinafter “Taskforce Report”], https://files.consumerfinance.gov/f/documents/cfpb_taskforce-federal-consumer-financial-law_report-volume-1_2022-01_amended.pdf. The CFPB’s Taskforce included four members with vast FTC experience, including me.
[26] See the discussion in the Taskforce Report, id. at 327–28 (noting that disclosures that reduce information costs help consumers achieve their goals but “normative disclosures seek to change their goals.”).
[27] See James M. Lacko & Janis K. Pappalardo, Fed. Trade Comm’n, Bureau of Econ., The Effect of Mortgage Broker Compensation Disclosures on Consumers and Competition: A Controlled Experiment 28–29 (Feb. 2004), https://www.ftc.gov/sites/default/files/documents/reports/effect-mortgage-broker-compensation-disclosures-consumers-and-competition-controlled-experiment/030123mortgagefullrpt.pdf. The experiment tested alternative disclosures on the closing forms required under the Real Estate Settlement Procedures Act, and found that when the broker’s compensation was disclosed, consumers were less likely to select the low-cost mortgage.