The report from the Australian Competition and Consumer Commission recommends loyalty schemes - such as frequent flyer, supermarket and hotel operators - better inform consumers, improve their data practices and stop automatically linking members’ payment cards to their loyalty scheme profiles.
And it also calls for broader changes to consumer and privacy law.
“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.
The ACCC has also raised its concern that the profiling of consumers based on the data collected by some schemes, including through the sharing of consumer insights with third parties, could result in consumers receiving increasingly targeted advertising - which could also potentially result in different consumers being offered different prices for an identical product or service.
“Many consumers are increasingly concerned about receiving targeted advertising, in some cases from companies that they have never dealt with before,” Sims said.
“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. 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.”
Sims says another major concern with loyalty schemes are privacy policies that are very vague and seek broad consents and discretions from consumers about how they’re going to collect, use and disclose their data.
“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.”
The ACCC says that while some loyalty scheme operators made changes after it commenced its review and released its draft report, the it remains concerned about certain practices that a number of loyalty schemes continue to engage in.
The ACCC’s report reinforces recommendations from its Digital Platforms Inquiry Final Report regarding privacy and consumer law.
”We also recommend that unfair contract terms be prohibited, rather than simply being voidable, and that a new law against certain unfair trading practices be considered,” Sims said.
“Our recommendations would protect consumers and help ensure consumer trust in loyalty schemes, in the digital economy and in data-based innovation, which is a benefit for the broader economy.”