One game, two different prices. Personalization is a legal trap that has its limits

At the beginning of November, the gaming community was electrified by the rumor that Sony may be using controversial pricing practices in its console store. Two users saw different prices for the same product, which immediately raised questions about the legality of such action. We have taken a closer look at the issue of dynamic and personalized pricing, so let's check whether and what is legally allowed on digital platforms.

A post by one of the Reddit users aroused considerable emotion in the gaming community. The Internet user pointed out that when purchasing a game in the PS Store, the presented price, after the discount, was higher for him than for his wife.

Was excited to finally purchase until I realized the price was lower on my wife's account
byu/DarXIV inplaystation

Both people they use the same device, live in the same place and pay with the same currencythe question arose about the reasons for such a price discrepancy. Other users questioned the legality of this practice, calling it price discrimination, but some pointed out that it could be an example of a personalized offer based on player behavior and console usage patterns. The author of the post admitted that his wife plays less than he does, which could have justified giving her a larger price reduction, but the phenomenon is disturbing due to the lack of transparency and clear rules. So let's take a look at whether a user pricing strategy is legal.

Dynamic or personalized pricing?

On the occasion of the above story, two terms appeared on gaming websites: dynamic and personalized pricing. Although both approaches are based on advanced algorithms, they work quite differently.

• dynamic prices – are based on market and external factors and demand for a given product or service. In this strategy, prices can change several times a day, controlled by algorithms that examine customer interest, website traffic, time of day, etc. It is important, however, that the offers for all customers are the same.
• personalized prices – tailored to the user's profile. Algorithms analyze the customer's behavior, his purchase history and the method of making them, in order to then offer him a price, which, however, does not have to be the same as for other users. Profiling may even include elements such as abandoning a shopping cart or frequently browsing specific products, as well as the device from which we use the website.

From tourism and hotels to digital platforms

Dynamic prices are known primarily from the tourism and aviation industriesbut also concert. On tour and plane ticket websites, offers can change from hour to hour, as they depend strictly on customer interest and the advance notice with which they book a flight or holiday trip. In the case of websites selling tickets for concerts or cultural events, algorithms can also change prices, increasing them depending on demand, and this is a quite well-known practice.

How can “targeted” prices, i.e. tailored to a specific person, work? For example:

• price differentiation between logged in and non-logged in users – the former are profiled in terms of their purchasing behavior and thus their willingness to pay a higher amount for the same product (loyalty to the store).
• introduction of different discounts for the same product based on purchasing behavior – players purchasing content on the PS Store reported seeing different prices for the same game in the same location (although Sony has never confirmed such practices – editor's note), which could be justified by different user preferences (frequency of purchases, games, titles on the wish list).
• discounts for loyalty program participants – offers are often specially prepared for this group of customers who can count on, for example, discounts or preferential delivery.

Omnibus, GDPR and Office of Competition and Consumer Protection

Profiled pricing is not prohibited as long as service providers apply it transparently and adequately inform customers. The most important regulations are in the EU Omnibus Directivewhich was implemented in Polish law in the Consumer Rights Act. According to it if the price was determined on the basis of profiling and automated decision-making, the trader must clearly inform the customer about thisso that he can consciously exercise his right to object under the GDPR. If it is announced that the price has been reduced (e.g. during a sale), the seller must provide the lowest price of this product from the last 30 days before the reduction, which makes it easier to recognize apparent promotions involving earlier price increases and subsequent price reductions.

Price personalization itself is based directly on profiling, i.e. automated processing of personal data to assess preferences and inclinations. In accordance with the General Data Protection Regulation (GDPR) legal customer profiling for marketing or pricing purposes must have a solid legal basiswhich is most often the express consent of the consumer or the legitimate interest of the administrator. The consumer has an absolute right to object to profiling for direct marketing purposes (which often includes personalized price offers) and if he exercises this right, the system should stop offering him personalized prices.

In Poland, the main body responsible for monitoring the correct marking of prices by entrepreneurs and tracking down unfair market practices is the Office of Competition and Consumer Protection. The Office conducts proceedings to check whether entrepreneurs using price personalization meet the information obligation in accordance with consumer rights and whether they have a legal basis for profiling (GDPR). The consequences for violating consumer regulations are severe. The Office of Competition and Consumer Protection has the right to impose a financial penalty on an entrepreneur of up to 10% of its turnover from the previous year, which constitutes a real risk for large digital platforms.

Prices must be transparent

Personalized pricing rightly arouses a lot of emotion, as no one wants to pay more for the same product, although the practice is permitted by law under certain conditions. Firstly, if a digital platform uses such a mechanism, it must clearly inform the customer about it, so when the presented price results from profiling, an appropriate annotation should be included with it. The same applies to special offers for loyalty program participants – the law does not prohibit the use of special discounts or coupons for this group of customers, but the practice must be justified, e.g. by the service regulations, so that the rules are transparent for all customers. Secondly, the user must consent to personalized offers based on his shopping profile and be aware of the service provider's use of such mechanisms. Hidden differentiation of customers, e.g. due to their method of using the website, without prior information and obtaining their consent is not allowed.

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