White House Urges Scrutiny of Big Data Practices

Companies could use big data for personalized pricing that is discriminatory, says the Council of Economic Advisers.
Matthew HellerFebruary 6, 2015
White House Urges Scrutiny of Big Data Practices

The White House has urged ongoing scrutiny of commercial uses of “big data,” citing concerns that, among other things, companies will use the information they collect to more effectively charge different prices to different customers.

The White House Council of Economic Advisers reviewed what is known as discriminatory or differential pricing in response to a May 2014 report by President Barack Obama’s big data and privacy working group that found new technologies and tools can enable new forms of discrimination.

Most definitions of big data reflect the growing technological ability to capture, aggregate, and process an ever-greater volume, velocity, and variety of data.

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In its report released Thursday, the CEA said commercial applications of big data “deserve ongoing scrutiny given the speed at which both the technology and business practices are evolving.” One of the many questions raised by big data, it noted, is whether companies will use the information for discriminatory pricing, potentially leaving some consumers worse off.

“When prices are not transparent, differential pricing could be conducive to fraud or scams that take advantage of unwary consumers,” the council warned.

The report found that many companies already use big data for targeted marketing, and some are experimenting with personalized pricing, but examples of personalized pricing remain fairly limited.

According to the report, the relative scarcity of personalized pricing suggests that companies “are moving slowly or remaining quiet, perhaps due to fears that consumers will respond negatively, but also because the methods are still being developed.”

Companies appear to be “concerned with the reliability of statistical models and the potential reputational impact of their pricing practices,” the report adds.

“While substantive concerns about differential pricing in the age of big data remain, many of them can be addressed by enforcing existing antidiscrimination, privacy,and consumer protection laws,” the CEA concluded. “In addition, providing consumers with increased transparency into how companies use and trade their data would promote more competition and better informed consumer choice.”