The Case of the Missing Sale: The FTC’s Personalized-Pricing Blind Spot
Suppose a retailer charges $10 for a service. One customer values it at $11 and buys it. Another values it at $8 and walks away. The retailer sends the second customer a $3 coupon. She pays $7, gets something worth $8 to her, and the retailer makes a sale it otherwise would have missed. The customers paid different prices, but without the coupon, the likely outcome was one $10 sale—not two $7 sales.
That missing sale matters to the Federal Trade Commission’s (FTC) proposed enforcement policy statement on personalized pricing. The FTC acknowledges that Congress has not authorized a blanket ban on personalized pricing and that the practice’s effects remain unclear. Yet when consumers reasonably expect prices to stay the same regardless of their personal data, the proposal says sellers should disclose that a price is personalized, why, and what types of data they used. The FTC says failing to do so is likely unfair or deceptive.
The FTC has reason to worry about sellers who invent discounts, break promises about data use, or tack on charges buyers never agreed to. But its proposal goes further, casting suspicion on price differences that sellers do not explain. That risks overlooking both the sales that tailored offers make possible and the trial and error through which sellers discover what customers will buy. It also assumes that the agency can decide which pricing practices need an explanation despite its own limited knowledge and political incentives.
Truth on the Market readers have already seen important objections to the proposal. Alden Abbott explains why a consumer’s expectation alone cannot establish deception. Daniel J. Gilman asks whether the economic research cited by the FTC supports its claims. This post asks what happens to the market processes that generate prices once the government starts supervising them—and how officials might use that authority.
Austrian economics, with its focus on how buyers and sellers discover opportunities through exchange, and Public Choice theory, which examines the incentives facing government officials, point toward a narrower policy. The FTC should pursue proven lies and consumer injuries under existing law. But it must also leave room for sellers to test prices, and not turn ordinary price search into a presumptive violation merely because software makes the search more precise.