You hear from a friend about a flight ticket priced at $200; you quickly visit the retailer’s website and find the same ticket at $235. How is that possible? A study published in 2015 by Northeastern University reveals that more than 50% of the major online retailers are charging customers personalized prices based on their online profiles.
While retailers call this a “personalization,” researchers and customers commonly refer to it as price discrimination. If based on the customer’s nationality or country of residence, this discrimination is illegal in the European Union.
The practice benefits from online databases that collect shoppers’ profiles. By using personal details and behavior, retailers can offer different prices to different users. Information used includes location and shopping history and is retained through user IPs and cookies.
In most countries, price personalization is illegal when based on a systematic pattern of discrimination towards specific demographics. Major companies in the EU have already been probed when suspected of overcharging customers from certain countries. Carried through a random selection system, however, it is not considered to be a criminal offense.
Though it’s hard to understand the algorithm of such discrimination, it has been widely acknowledged that this strategy is part of online retail’s current reality. “Many companies already use big data for targeted marketing, and some are experimenting with personalized pricing,” declared the White House in a report published last year.
Several hi-tech companies have started fighting this trend to democratize the online shopping experience. The aim of these “anti-discrimination” services is to give the original price to all users, no matter of their location or shopping history; so they rely on proxy networks to access the websites of the retailers in total anonymity. But is it really working? The answer depends on which proxy they use.
Anti-discrimination services can access retailers’ sites through a traditional proxy network, which operates through IPs located in data centers, and gain anonymity to attain the untouched price of an item. However, due to the use of data centers, these networks are relatively easy to identify; therefore, we still cannot be sure that the price has not been modified. In other words, traditional proxy networks are not exempted from the risk of price discrimination.
The ideal way to unmask discrimination would be to appear exactly as a real customer who is checking prices. Thus, anti-discrimination services should be checking prices through actual residential computers (IPs). The Luminati network is a global peer-to-peer proxy network and is helping anti-discrimination companies to get the real pricing information from these online commerce websites by providing access from residential IPs. Through Luminati, these companies can route their requests through millions of residential IPs of the Luminati network, and ultimately get the untouched prices.
In just a few clicks, the online retail market may be “democratic” again, offering every shopper the same deals and prices.