INTHEBLACK June/July 2024 - Magazine - Page 38
F E AT U R E
“Customers will react badly if they think you are not
being fair. If you are trying to maximise the value
of airline seats in short supply, it is fine. It is less fine if
there is a pandemic, and you price your toilet paper
outrageously high. That is seen as price gouging.”
RUTH CALLAGHAN, CANNINGS PURPLE
When Hurricane Sandy hit the east coast
of the US in 2012, the ride-share platform
faced heavy criticism for not turning off its
surge pricing feature as people scrambled
to get to safety.
Two years later, this time in Australia,
the company faced a similar backlash from
consumers due to delays in turning off surge
pricing during a hostage situation at a cafe
in Sydney’s central business district, which
saw users charged four times the usual price,
for which Uber ultimately apologised.
“We are OK with paying a higher price
to get home on New Year’s Eve, but surge
pricing when everyone is trying to get out
of the centre of Sydney because there is
a dangerous situation unfolding is a really
bad call,” Callaghan says.
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38 INTHEBLACK June/July 2024
WHO’S WATCHING?
While businesses are prohibited from
misleading consumers under The Australian
Consumer Law, there is little regulation
of dynamic pricing. Under discrimination
law in Australia, a retailer cannot set
higher prices for people due to gender,
disability, race, age or other protected
characteristics, but it can charge people
different prices for the same product
or service.
“Dynamic pricing is not illegal, but
businesses must be clear about the price
consumers will pay,” says a spokesperson
from the Australian Competition and
Consumer Commission.
“Whether or not a business’s use of
dynamic pricing may be misleading will
depend on the circumstances involved in
each case, including what representations
a business may have made to consumers
about their pricing.”
Dr Jeannie Paterson, consumer law
professor and co-director of the Centre
for AI and Digital Ethics at the University
of Melbourne says it is important for
businesses to understand how any approach
to dynamic pricing works. “Make sure that
it is not actually pricing based on unfair
or irrelevant considerations, as opposed
to dynamic pricing based on genuine
market demand or risk assessments.
“There is little law on this, and there is
a lot of concern that dynamic pricing can
in fact be discriminatory pricing, which
targets people who are not aware of what
the market standard is, or it puts higher
burdens on some clients without a justified
reason for doing that.”
However, so many data points are now
used to set a price that it has become difficult
to know what the basis for the price is, and
this makes it hard to determine if something
is fair or not, Paterson argues.
Concerns arise regarding profiling when
algorithms, drawing from factors like social
media use, location, or demographics, begin
influencing higher prices for specific groups.
The justification for these elevated prices may
be linked to perceived risk, with one cohort
considered more susceptible to opportunistic
pricing, while another may be perceived
as more willing to pay higher amounts.
“The more factors we use to set the prices,
the opaquer and more problematic it
becomes. If we used the ‘pub test’,
we would not think it is fair for some
people to be charged more on the basis
of undefined, unexplained assumptions
made about them.
“Transparency means also thinking about
whether your explanation of why you are
doing surge pricing has social licence,”
Paterson says.
“There are risks to businesses from
customers who do not understand it,
or why it is being used, who then perhaps
later ask why they were charged more than
someone else.”
