Australia’s consumer watchdog has called for supermarkets, airlines and hotel operators to end the practice of automatically linking credit cards with customer loyalty schemes.
The Australian Competition and Consumer Commission’s (ACCC) final report into loyalty programs, released on Tuesday, found that data collected from loyalty schemes could be used to target customers with inflated prices.
The report also found members in some loyalty schemes have had their points cancelled without warning and that consumers often have very little control over how their personal data is collected or shared with third parties.
“We are calling on companies that offer loyalty schemes to improve their data practises and how they communicate with consumers, to help consumers understand how these programs operate,” ACCC Chair Rod Sims said.
“Many consumers are increasingly concerned about receiving targeted advertising, in some cases from companies they have never dealt with before.
“There is also an emerging risk of real consumer harm if individual consumers were to be charged inflated prices based on profiling derived from their data.”
Mr Sims said someone could be charged extra based on their income or where they live, or if their frequent flyer data shows they can only travel on certain dates.
Mr Sims said people would be “shocked” if they knew Coles, Flybuys and Woolworths Group automatically link customers’ loyalty accounts with their bank cards, and tracked their spending even when they don’t use their loyalty card.
“Many consumers would be shocked to find that some supermarket schemes continue to collect their customers’ data at the checkout even when they do not present their loyalty cards. They do this by tracking customers’ credit or debit cards from previous transactions,” Mr Sims said.
“When a customer chooses not to present their loyalty card, we think it is reasonable that they would not expect their data to be collected for that transaction, and we are therefore calling on the relevant schemes to stop this practice.”
The report also found loyalty schemes could “lock-up” customers and introduce switching costs that would increase barriers to entry and expansion for rival firms trying to enter the market.
“If barriers are enduring and induce exit or deter entry, consumers are likely to be worse off,” the report said.
The ACCC focused much of its attention on some of Australia’s biggest customer loyalty programs like Qantas’ frequent flyer scheme, Woolworths Rewards, and the Velocity frequent flyer scheme.
Around 90% of Australians are estimated to be a member of at least one customer loyalty scheme, and the average adult is a member of 4.3, according to the ACCC report.
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