Catfishing prices on dating apps are a hook for competition reform

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Recent research from the Mozilla Foundation and Consumers International reveals how Tinder’s “opaque, unfair pricing algorithm” can charge users up to five times more for the same service in New Zealand, the U.S., the Netherlands, Korea, India, and Brazil.

They did so by collecting and comparing up to 31 unique prices quoted in one jurisdiction where, at the most egregious extreme, $22 separated the highest and lowest prices.

Tinder is a mobile application owned by the online dating service Match Group. While Tinder is free to download and use, people can buy individual in-app enhancements called “Super Likes” and “Profile Boosts,” or subscribe to a monthly premium plan.

It’s reasonable for a user to assume that the advertised price of these extra services is the same for every user, regardless of his or her demographic, geographic, or socio-economic status. But this isn’t the case; subscription plans double for users over 30.

It’s true that, in many contexts, consumers are aware of and accept modest price variance without complaint. “Elastic demand” affects the price of airplane seats and concert tickets in different areas of a venue, and consumers are used to discounts via loyalty programs.

In those cases, however, the discount is time-limited or the item being purchased is scarce. The data-driven personalized pricing that Tinder uses is far more duplicitous and lacks any rationale, other than the exploitation of consumers.

That said, there’s a universe where targeted, algorithmic pricing is pro-competitive. For the firm deploying the data-driven tactic, it’s “efficient”: It allows the firm to sell more subscriptions, which increases the likelihood of gaining more customers.

Apart from a general lack of information or acknowledgement of any variability in price for the customer, what’s the harm of personalized pricing?

Algorithmically determined price points are second-degree pricing on steroids. And they distort markets, as exemplified by the Orbitz price-discrimination scandal from a decade ago, when users of Mac computers were steered to higher-priced hotels by the online travel agency.

So, is “personalized” pricing simply a digital bazaar without the haggling? Or is it price gouging based on personal data?

new working paper published by Vivic Research explores competition concerns in data-driven markets in Canada. The paper applies a consumer-protection lens to data-driven business behaviours in nine case studies, one of which focuses on algorithmic and personalized pricing. It finds that concerted efforts by firms to collude via pricing algorithmics could be illegal under the criminal-conspiracy provisions of the Competition Act.

Unlike in the bazaars of old, an individual can’t “shop around” when a platform is advertising directly to him or her; alternative prices might not even be accessible from a different device, if both are linked to a common online identity.

Nor does the individual have recourse from the firm that’s advertising to him or her, either in explainability (why the product or service is being advertised for a particular price) or accountability (what other prices might exist).

This opacity raises the question: Is personalized pricing inherently discriminatory? And what recourse do people have if they can’t reliably access the lowest possible price? Tinder has been sued in the state of California for US$24 million for unfair pricing based on age.

Mozilla and Consumers International point to “meaningful transparency and access” as important next steps, and businesses absolutely need to be transparent in their use of personalized pricing, so that consumers can make informed decisions.

However, a more reliable policy intervention in Canada could come through broader competition reform.

Minister of Innovation, Science and Economic Development François-Philippe Champagne recently announced a future review of Canada’s competition law, which will focus on wage fixing, deceptive pricing, and anti-consumer practises.

The accompanying news release specifically mentioned “more clearly addressing drip pricing,” which is when an advertiser promotes something at one price while concealing the real price from consumers until later in the purchasing process.

subsequent publication from the Competition Bureau — a submission to Sen. Howard Wetston’s invited-stakeholder consultation, Examining the Competition Act in the Digital Era — went a step further, advocating that “drip pricing should be explicitly prohibited by the (Competition) Act.”

The rationale is that the Bureau has successfully enforced against this behaviour by using the false-or-misleading-representations provision in section 74.01 of the Competition Act, but that it requires significant resources to prove, over and over in court, why drip pricing is deceptive.

This direct attention paid to a form of deceptive pricing is encouraging, and suggests that decision-makers might be open to considering other instances where pricing is delusive.

While regulators weigh the utility of possibly banning drip pricing, they should also turn their attention to the harms of algorithmic or personalized pricing, which can be similarly fraudulent.

Absent from the conversation to date is the point of view of consumers themselves, and any consideration of what kinds of pricing deviations might be appropriate for them to experience.

A recent IPSOS poll revealed that 88 per cent of Canadians think it’s too easy for big businesses to take advantage of consumers.

Although a commissioned report for the consultation led by Wetston suggested that the concept of “fairness” has no place in narrow competition law, the limitations of the current Act’s purpose statement shouldn’t prevent us from asking ourselves, and each other, what kinds of pricing behaviours are acceptable in a digital context.

Although they might not mind paying two dollars more on Amazon for coffee filters, millennials do actually care about finding love.

They might also care about deceptive advertising and discriminatory pricing that use their personal information to take advantage of them at vulnerable moments. Our current lack of a legislative approach to this is a real heartbreaker.

Vass Bednar (@VassB) is a senior fellow at the Centre for International Governance Innovation (CIGI) and executive director of the Master of Public Policy Program at McMaster University.


The views, opinions and positions expressed by all iPolitics columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of iPolitics.

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