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What You Should Know About A Widespread E-Commerce Tactic That Has The White House Worried

Variable pricing–charging different prices for the same item–is a fact of e-commerce. Here’s why it worries the Obama administration.

What You Should Know About A Widespread E-Commerce Tactic That Has The White House Worried
[Photo: Flickr user Kevin Dooley]

The White House has been quietly tackling privacy issues related to big data, and they’re now taking on something close to Amazon’s heart: variable pricing. In a new report issued this week, the White House’s council of economic advisors issued criticism of the popular e-commerce tactic, which is used by everyone from Amazon to Staples to travel sites. Specifically, they’re troubled by the fact that customers see different prices based on data that e-commerce sites vacuum up on them.

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Because many sites offer different prices to different customers based on factors such as their geographic location, the device they use, or their annual income, the White House wants to create policies to protect user privacy and avoid punitive practices against poor or rural customers. In one example, cited by the Wall Street Journal, Staples charged users higher prices online if they lived out of driving distance of Office Depot and Office Max stores. Based on the assumption that users without access to competitors could be charged more, Staples raised the price of a basic item–a Swingline stapler–by more than $1.

In the report, the White House recommends a policy framework be put into place that protects customers online from discrimination, intrusive tracking, and price gouging when shopping online. One of the big recommendations is giving customers greater control over their personal information–and enacting what they call “strong property rights over personal information.”

But the biggest issue is that the White House’s report, which will circulate throughout government agencies and think tanks, doesn’t adequately address the elephant in the room: consumer education. Most Americans still don’t understand that they may see different prices for airline tickets if they use an iPad or an Android phone, or that Amazon might charge them 50 cents extra for a book as part of an A/B experiment on their website. For that, consumer advocates have to reach out to the public and explain just how to make sure they’re getting the optimal price from e-commerce sites.

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