Online price discrimination and personal data: A General Data Protection Regulation perspective

doi:10.1016/j.clsr.2017.05.008

Computer Law & Security Review

Volume 33, Issue 6, December 2017, Pages 768-785

https://doi.org/10.1016/j.clsr.2017.05.008 Get rights and content

Abstract

The General Data Protection Regulation (GDPR) contains various provisions with relevance to online price discrimination. This article, which analyses a number of essential elements on this junction, aims to provide a theory on whether, and, if so, how the GDPR affects price discrimination based on the processing of personal data. First, the contribution clarifies the concept of price discrimination, as well as its typology and relevance for big data settings. Subsequent to studying this topic in the context of the Commission's Digital Single Market strategy, the article tests the applicability of the GDPR to online price personalisation practices by applying criteria as ‘personal data’ and ‘automated processing’ to several discriminatory pricing cases and examples. Secondly, the contribution evaluates the possible lawfulness of price personalisation under the GDPR on the basis of consent, the necessity for pre-contractual or contractual measures, and the data controller's legitimate interests. The paper concludes by providing a capita selecta of rights and obligations pertinent to online discriminatory pricing, such as transparency obligations and the right to access, as well as the right to rectify the data on which price discrimination is based, and the right not to be subject to certain discriminatory pricing decisions.

Section snippets

Price discrimination – conceptual remarks²

Price levels for consumer products diverge extensively within the European Union and beyond: firms may award quantity or loyalty rebates to their purchasers and student discounts to youth, identical drugs may cost more in Belgium than in Greece, and prices of airplane tickets rapidly change. Furthermore, Uber introduced a ‘surge pricing’ system through which cab rates increase according to local demand, manufacturers bundle goods for lower prices than the sum of the parts, electricity costs may

The General Data Protection Regulation and the Digital Single Market: interface and paper outline

One of the first steps in the establishment of a Digital Single Market, a priority of the current Juncker Commission, was the swift conclusion of the lingering negotiations on common European data protection rules.³⁷ On 14 April 2016, the European Parliament at last adopted the ‘Regulation of the European Parliament and of the Council on the protection of individuals with regard to the processing

Applicability of the Regulation to price discrimination

First, we evaluate to what extent online price discrimination may come under the scope of the Regulation. At the outset, it must be observed that the wording of various key concepts in the GDPR is largely identical to the 1995 Directive. This allows for past ‘Opinions’, issued by the Article 29 Data Protection Working Party Party (henceforth “the Working Party” and “A29WP” in the references), to remain relevant for the interpretation of the GDPR.⁵¹

Lawfulness of online price discrimination in a GDPR context

Data processing is only lawful in an exhaustive¹⁰⁷

Principle of transparency, right to access and data portability

As stated by Hildebrandt, “price discrimination may be a good thing in a free market economy, but the fairness […] depends on consumers' awareness of the way they are categorised”.¹⁷⁹ This is all the more valid for online price discrimination,

Right to rectify data on which price discrimination is based

Online discriminatory pricing, and profiling in general, bears the risk of generating ‘false positives’ (i.e. data subjects not fitting a certain profile but nevertheless categorised in it) and ‘false negatives’¹⁹⁶ (i.e. data subjects fitting a certain profile but not categorised in it).¹⁹⁷

Main principle, criteria

Article 22 GDPR, a somewhat atypical provision as it does not refer to data processing as such but to the decision made on the basis of the processing, gives data subjects the right not to be subject to (i) a decision (ii) based solely on automated processing (iii) which either produces legal effects concerning them or similarly significantly affects them.²⁰⁸ Decisions based on automated processing include the construction of profiles²⁰⁹

Concluding remarks

Firms increasingly invest in pricing technology, expand behavioural data portfolios, and rely on third-party data for discriminatory pricing.²³⁴ The resulting consumer objectification disrupts traditional (e-)commerce, with broadened information on

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