Data collected as part of customer loyalty schemes is being manipulated to discriminate against customers, according to Australia’s consumer watchdog.
The ACCC today released its final report into customer loyalty schemes, detailing a range of malpractices that currently exist.
It offers 21 recommendations to better protect the consumers using these schemes, including improvements to existing schemes and broader legislative reforms.
“We are calling on companies that offer loyalty schemes to improve both their data practices and how they communicate with consumers, to help consumers understand how these programs operate,” ACCC chair Rod Sims said.
“Even simple changes, such as more prominently alerting customers that their points are about to expire, for example, in the subject line of an email, could help prevent a consumer from losing points earned over several years.”
The report particularly hones in on the data collection practices used in such schemes, including sharing consumer insights with third parties for targeted advertising.
Consumers are given “limited insight and control” over the sharing of their data with third parties and are provided with a “limited ability” for to opt-out of these third-party ads.
“Many consumers are increasingly concerned about receiving targeted advertising, in some cases from companies that they have never dealt with before,” Sims said.
The ACCC is also concerned with how consumer data is being used to manipulate prices.
Data that is passed on to third parties can be leveraged to engage in “price discrimination”, the ACCC claims.
“There is also an emerging risk of real consumer harm if individual consumers were to be charged inflated prices based on profiling derived from their data,” said Sims.
“For example, if a person’s frequent flyer data or online search history indicates they can only travel on certain dates, or otherwise based on their income, geographic location or other information collected through the loyalty scheme they may be charged extra.”
Vague privacy policies that seek broad consent also open the door for data being misused.
“Many consumers would be shocked to find that some supermarket schemes continue to collect their customers’ data at the checkout even when they do not present their loyalty cards. They do this by tracking customers’ credit or debit cards from previous transactions,” Sims said.
“When a customer chooses not to present their loyalty card, we think it is reasonable that they would not expect their data to be collected for that transaction, and we are therefore calling on the relevant schemes to stop this practice.”