Online Price Discrimination and Data Protection Law

Abstract

Online shops can offer each website customer a different price – a practice called first degree price discrimination, or personalised pricing. An online shop can recognise a customer, for instance through a cookie, and categorise the customer as a rich or a poor person. The shop could, for instance, charge rich people higher prices. From an economic perspective, there are good arguments in favour of price discrimination. But many regard price discrimination as unfair or manipulative. This paper examines whether European data protection law applies to personalised pricing. Data protection law applies if personal data are processed. This paper argues that personalised pricing generally entails the processing of personal data. Therefore, data protection law generally applies to personalised pricing. That conclusion has several implications. For instance, data protection law requires a company to inform people about the purpose of processing their personal data. A company must inform customers if it personalises prices.

NB: a newer paper, which is based on this working paper, is also published: http://ssrn.com/abstract=3009188.

Keywords: price discrimination, personalised prices, data protection law, privacy, discrimination, cookie, tracking, personal data, consumer law

JEL Classification: K12, K00, D10, D11, D20, D30, D40, D60, D70, L00, L11, L20, L51