Loyalty can be expensive and for years, platforms have used our personal data to test how much we are willing to spend.
But a crackdown has begun.
From China to New York, new laws are prying open that algorithmic black box.
Enforcing a bold disclosure, this price may vary.
We'll explore whether transparency can actually stop the secret math of personalized pricing.
We're live from Beijing.
This is Roundtable.
I'm Steve.
Thanks very much for being with us today.
And for the show, I'm with Niu Honglin and Yushan.
First up.
Ever get that nagging feeling that being too loyal online is actually costing you money?
Well, that's the feeling when the more you shop, the more you click, and the more you book, the higher that price seems to climb.
We are not imagining it, and we've actually flagged this problem before that for years.
Loyal users of an online platform often pay more than first-timers.
But now it's back in the spotlight because the algorithmic black box is finally being opened.
From China rolling out tough new rules on data-driven price differences to New York passing a landmark law that forces platforms to come clean with an in-your-face disclosure.
Regulators around the world are saying no more secret price testing.
It is annoying, when you become aware of it, Nyonglin and Yushan, that you could be being charged more for a product that your friend is paying less for.
This is kind of the biggest complaint that's been going on for a while.
Yeah, and I can't believe I just read about it, know it as a form of being informed officially, like very recently, despite the fact that this has been online and it's been a heated discussion for years.
You didn't, you didn't know about this.
I sensed it like somehow, if i decide not to pay for a certain product and then a few days later, if i come back to the very same, it might give me a discount or give me a bigger coupon so that i can pay less.
I would like to go back to that example a little bit later sure, but Yes, you're right, Steve.
It's the biggest complaint so far.
And it all boils down to a practice that's often called the big data discrimination, where shopping and ticketing platforms they use your personal data to build a profile for you, especially based on your spending habits.
And they look at everything your device type, your browsing behavior and even how quickly you book a product.
And also they, based on all those details, they decide on your personal price tag that just for you and it could be, it could be higher or lower than your friends and basically the platforms.
They're utilizing these personal data from you as a tool to see just how much they can get away with charging you.
Yeah, this is a kind of an interesting and unexpected twist.
Well, here's why I say that.
Because, you know, if I have a point card to my local coffee shop, for example, and they say, when you buy your 10th cup of coffee, you will get one cup of coffee for free,
You are being rewarded for your loyalty.
Here, it's almost like you are being punished for your spending habits.
Yes, and it's more common than you think.
According to the China Consumers Association, the phenomenon was listed among the top 10 consumer rights hotspots in the first half of 2024.
And a survey released by the Sichuan Provincial Consumers Association found that nearly 40 of consumers with online shopping experience had encountered big data-driven kind of price discrimination, at least according to their understanding of the situation.
And similarly, a joint investigation conducted in November 2024 by consumer associations of Beijing, Tianjin and Hebei showed that over again 40 percent respondents very specifically reported experiencing different big data marketing, like the one that Yushan mentioned.
They believe, the feeling of oh, I came back several days later only to find that oh, the price is different.
Or I checked the exact same product with the phone of a friend of mine or a family member of mine different pricing.
Or I used to have, or currently I have products, the membership of a certain platform, and it turns out that with the membership yes, the price of the item might be a bit lower, but the shipping fee is higher than others.
So a lot of different phenomena, a lot of different examples.
Tricky tricky, by the way.
What type of products are we talking about here?
It's almost everything.
Almost yeah, products and services.
For example, the most complained ones include the hotel memberships like, for example, some golden hotel members.
That's the worst.
Well, yeah, they say they are quoted higher rates than regular users.
And then there are the ride-hailing apps.
Like you book a car online, you are the diamond members of this company, but sometimes you pay even more than brand new users.
And then one that hasn't even tested yet did a test with movie tickets.
He or she used three different accounts.
One is like a brand new newbie account, and then there's a regular account and then the top tier membership.
So the cheapest ticket goes always to the brand new account with the top tier membership pay sometimes more than five yuan extra per ticket than the regular one.
So that's obvious enough.
It's covering everything that we use, we pay for on a daily basis.
The most sneaky case I have ever encountered was that I followed a specific brand on a social media platform.
And when I started purchasing the product from that brand from another platform, which is an e-commerce platform shopping platform, I realized that The price I got was higher than the one that my husband got.
Because he did not sign up.
He didn't follow.
He didn't sign up.
And the two platforms are supposed to be, were supposed to be separate from each other.
That was the catch.
So people feel like this is sneaky.
People feel like this is unfair.
The issue itself is not new, but the regulations in China are new.
Let's go over those if we could.
Yeah, that's when we talk about the new rules announced on January the 7th.
So just earlier this year.
And it's called the Measures for the Supervision and Administration of Online Trading Platform Rules.
And it aims to tighten oversight of just how online platforms draft and enforce their operating policies.
Coming into effect very soon, right?
Very soon, on February the 1st this year.
And they're jointly released by several administrative bodies, including the Market Regulation Committee, state administration for that, and also the cyberspace administration of China.
So they're all here to govern how platforms set, revise and apply internal rulebooks affecting prices and fees, and especially their algorithms.
So what's in the new rulebook?
That's including, first of all, no more invisible price hikes.
So it is now illegal for these platforms to set different prices or fees for the same item if the consumer doesn't know it's happening.
And by that it means that you need to let the user of your platform know exactly what's going on with the price, and even make indicators on that.
If the price is going up, it needs to be indicated to the customer.
If it's being changed, yes.
It is very important because, from academic perspective, the practice of, let's say, price discrimination in economics, manifesting in online consumption as transition condition discrimination or differentiated pricing, which is what we've been describing
But, in theory, differentiated pricing itself is not immoral or illegal.
It is okay to do that.
One we are talking about.
In these new institution economics, the negotiation over information property rights between buyers and sellers are acceptable.
Yet, if the consumers do not know about this, it's not OK.
So having different price is fine, but not knowing that you are treated differently is not OK.
It feels like there is a counter argument here.
Do you want to discuss that now?
If I go to a store and the sale will start tomorrow, right?
If I go to a clothing store and the sales, the sale, the company knows the sale will start on Friday.
Okay.
I go there on Thursday.
Now that company is not obligated to say to me, Hey, don't shop today.
We have a 25% sale starting tomorrow.
But if the customer comes tomorrow, they're going to benefit from that sale.
I'm not being notified that something different is happening.
Are we comparing apples and apples here or apples and oranges?
Do you see what I'm saying?
Yes, but I don't think it's the same situation, because whether or not the company would roll out the discount is only really finalized at the moment they roll out the discount.
If they do not do promotional kind of thing marketing, they cannot really tell you for sure that it's starting.
Okay, that's Finish your thought.
That's one thing.
And the second thing is the reason I said that a different pricing is okay for the same item is because, long before online shopping exists, we encounter this all the time.
When you're in a market, you shop for potato.
If you're really good at bargaining, you get a one yuan discount.
I don't think that's a comparable thing at all.
It definitely is, because you're buying the exact same product, yet you get a lower price because you're good at bargaining with the seller.
That onus is on the customer.
It's on me to negotiate.
And I'm aware that if I want to try to negotiate, I can.
You're putting the responsibility on the customer.
No, I'm just saying the sheer phenomenon of having different price for different product is, if the price difference is not too high, that it's definitely not reasonable.
The phenomenon itself is fine.
I kind of agree, because if someone's handing out a 10 discount coupon on the street for a coffee and I happen to go through the back entrance or something, I don't see the person handing out coupons.
I don't get the 10% discount when the customer who went through the front door did.
That's where the offline and online shopping scenes vary, because on online platforms sure, the Thursday, Friday differentiation on sales for a clothing store offline may just lead you to believe oh, there's a sales tomorrow, but I don't know it.
That's unfair.
But online shopping these days, especially in China.
I'm not sure if they're doing it outside of China too.
But for example, the double 11 is coming.
And then before the double 11 comes, I bought something.
But when the shopping season arrives, the price drops.
Then you have a very good reason to argue with the very company of that product you purchased to say that oh, within this very short and limited period of time, the price has been dropped to a much lower level than how much I paid.
Then I should be refunded in some way, and they have policies for that too.
They'll give you the compensation.
It's a price preservation or something.
It's a fair argument, that's for sure.
Here's another thing in the new rules.
They cannot play with your shopping history like before.
So platforms?
They are now strictly prohibited from using data profiling to change different prices or charge different prices for the same product.
So essentially they can't look at your spending history.
So if they can't look at your spending history, then they can't decide if you are more willing to pay or not than a new user.
That's a big change.
Yeah.
And rather they can't see your spending history at all.
It's like it's not a rule to ban the platform from gaining any access of your personal shopping history or data.
It's just that they can't manipulate it, but they can manipulate you with it as a tool.
They can't use that as a leverage to decide how much you're willing to pay.
And also back in 2021, we had this personal information protection law, which kind of goes against it.
Like it specified very clearly how much a platform can utilize the platform user's personal data.
But still, people who build those platforms can bake in unfair algorithm writings that's very hard to determine just how much they truly have access of our personal data.
So that's something that this new rule is trying to protect us from.
Another one being addressed is the fine print rule.
If you will.
So this is another big one.
Default consent is no longer allowed.
You can't just or they can't just make you auto agree to some types of rules.
And we all auto agree because it's just too long, too complicated.
But now at least they need to specify the important articles as rules. bold text.
And also when they make major changes about your membership or about the membership that you're about to continue, they need to let you know.
And also during the time of your membership.
They cannot really change articles secretly and sneaking into your benefit and take them away from you.
They cannot do that anymore.
This is quite good.
Now, they will not be able to change things halfway through, if you will, for membership purchases.
And that means that they cannot charge you more or, like you said, quietly take away your benefits.
And this will be important because if you're going to be renewing a membership to something, then the platform has to clearly tell you if anything has changed.
These are all significant changes.
Because of these changes, the companies are thinking hmm, all right well, we have to comply with these, but there are certain loopholes that we can take advantage of, and one of those is the coupon loophole.
Because for different consumers they can argue that you have well for, to be honest, this one is legal and it is allowed.
I'm talking about based on your level of membership in this platform.
They can still give you differentiated price because it shows your loyalty.
They can make the price lower for those uh level or for those, those members who have higher level on the platform.
That is still okay.
And, for example, students coupon.
That's still okay because students can enjoy a certain discount and sometimes teachers can as well.
So that is still okay.
But for this coupon one.
This is a little personal, feels a little personal, because sometimes you can maybe you and your friend see the same 100 yuan price, but your friend could get a 30 yuan coupon and you get a 15 yuan one and you cannot really argue or prove that the shop owner is setting the price against your benefit.
Yeah, and that's also why many people nowadays they believe that this is to be a plan b for many platforms out there and now that we have rules to ban them from using our personal data to to draw profiles on us.
So it's not like the new rules allow this or ban this, but rather it's convenient for these platforms to repackage the game, especially for new consumers.
And when questioned, the platforms can usually just have ready-made explanations like oh, prices vary by time.
You know that.
And also by location too.
And new users get special deals.
That's always the case.
That's another way of personalized price.
Yeah.
They'll also still be allowed to recommend the algorithms, I mean will still be allowed to recommend products that they think that you will like, based on your price tolerance or financial pain tolerance, if you will, as long as they aren't directly manipulating the price for the exact same item.
I guess this has become more and more and more of an issue here in China.
And there was actually a landmark court ruling back in 2021.
That's very closely related to exactly what we're talking about today.
What was that?
Yes, we are talking about a consumer surnamed Hu in a lawsuit against online travel giant Trip.com.
And he had booked a really nice Lakeview room at a Hilton hotel through Trip.com in July 2020.
For nearly 2900 yuan, that is, over 415 us dollars.
Upon checkout, she discovered the room is listed price on her invoice.
Well, the listed price was under 100 1 400 yuan.
That showed that she had paid for more than double.
Yeah, so that is the problem she encountered, that is, when she was shopping on the online platform.
She got discriminated pricely because of her personal situation and she was mad.
She was mad but as a result, the court ordered tripcom to refund the price difference and pay her a total of nearly four thousand and eight hundred yuan.
So the ruling was cited as the first case here in china and, like steve has said, it's back in 2020 and gradually, over the course of time, we are observing more and more different types of cases, some with just tiny price difference that are not worth the time and energy of the consumer to file a complaint, yet the phenomenon is getting more and more common.
And that is why now we're trying to at least make a stance of how much we care about protecting the rights of consumers.
Speaking of which, there are even online groups, social media groups, that give tips and tricks on how to circumvent These price differences.
Yeah, they are the Momo army.
I'm not sure if you've heard about it.
But especially on platforms like Xiaohongshu or Retno, there's groups of users with identical profile picture of a cute little pink cartoon dinosaur.
And their username is always Momo.
So that's why they're referred to as Momo Army.
And that could mean that the user behind that avatar of a pink dinosaur is of all gender, of all age groups, but following the same habit of regularly clearing their cookies, especially in browsing incognito mode, or sometimes reduce app usage even to escape constant profiling from the app,
Dark mode.
Yeah, they're like going under the disguise of Momo so that they all look the same from the surface and they clear their data constantly.
And people are commenting that oh, at first we don't understand, why is everybody suddenly becoming Momo overnight?
The slang goes, see Momo, question Momo, understand Momo, and eventually become Momo.
And they can take it to extreme.
Not only are they switching devices or browsers, using anonymous and private browsing modes, posting misleading comments like I cannot buy this.
I can only afford one yuan ticket, airline ticket.
Commenting and continue talking to your phone as if there's someone listening out there.
It's almost ridiculous, isn't it?
Almost ridiculous.
And also an effective way, well, somehow, is to re-registering.
So that when you re-register, you can appear as a new user of the platform.
So there are extreme ways.
But again, I have to say, I don't think all of these ways are that effective.
Well, let's talk about that then.
How much is the game expected to change, if at all?
Well, to start with, platforms are now required to make their rulebooks public in a way transparent and easy to find on their home pages so that they need to ask for feedback before major changes happen to any of their policies, especially for the service providers like the shops or salons or membership providers. whenever they have policy changes, like we discussed earlier, like for gyms, sometimes they offer you a 24 seven service at the very beginning, but it changed to, I don't know, nine to 10, nine in the morning to 10 in the PM, but you've already paid for the membership.
So what can you do?
You just give all those hours and, or what you sue them.
It's not worth it.
So that's what matters to us.
Normal consumers to Moses that we can see now.
And if, there's a change to be made, we need to know prior to that happens.
So it really gives people time to adjust, plus clearer ways to appeal if merchants or consumers are affected.
Yeah, also clearer ways for dispute resolution, because oftentimes you don't know where to go right.
Let's say that you did sign up for a gym that you thought was 24-7.
Turns out it's not.
OK, I'm not happy about this, but what do I do now?
And this is one of the new the new deals is that complaints won't just disappear into a black hole.
You'll know where to go and what to do for conflict resolution.
Yes.
And, at the same time, when we stress the importance of making sure the misuse of information of the history, shopping history or other information that can jointly allow or jointly make up a portfolio of you.
We would know that there are many.
To be honest, I think it's more than just shopping prices.
When this kind of things or this kind of misuse of information or of your private data happens, a lot of problems would emerge.
And that is not to say that this one regulation can overnight solve the problem.
I think previously we talked about or at least I worded as the country is making it clear that they are making an effort in protecting the rights of the consumers.
Because, if you really think about it here, you have to, if you want to.
To start with, if you want to sue the company, sue the platform, you need to collect all the data, all the information and all the evidence.
And at the core, you need to prove that the shop owner has set a discriminative price because of who you are, not because of their promotional strategy, not because of the people group you belong.
And that is hard.
But with this new regulation we know that the price or the cost of protecting your rights is lowering, so that when you want to make that decision, it's easier.
And that is also a warning sign to the companies.
You said you're not sure if this is happening in other parts of the world.
It absolutely is.
In November of last year, New York's Algorithmic Pricing Disclosure Act, which was a first of its kind statute, took effect, and it specifies this
If a company uses an algorithm to set or adjust prices based on your personal data, things like your shopping history, location or past behavior they have to tell you clearly right at the moment.
You see the price.
It's a warning label requirement.
So any company doing business in New York that uses an algorithm and your personal data to set your price, they have to be crystal clear about it.
So this is what they are required to do now.
They have to display a notice on the page on your phone that says very clearly this price was set by an algorithm using your personal data.
That has to be in your face so that you are aware of it.
And if you fail to comply companies then they could face a fine of up to 1000 for each violation.
That sounds useful.
Unless every company does that.
Yeah yeah, right.
If every, yes.
If everything you look at as you scroll down says this has been set based on your data, this has been set based on your date yeah right, then it loses its impact for sure.
And if they don't, i believe consumers can even report that they're not doing what's required.
Right, there's a mechanism they're building now.
Do you care about this?
By the way?
I mean, is this big for you?
Were you personally insulted before?
You knew algorithms were setting a price based on.
Well, Yushan didn't know until about 24 hours ago.
Many people know and are aware that their prices are being set specifically for them.
Do you have an issue with this or do you not?
That's the problem.
I think when we are up against a huge machine in certain kind of beautiful data centers running the numbers, we are kind of frustrating because there's not a lot that we can do.
And the loss is not a massive until it becomes massive.
And that's the problem.
You don't really want to argue with a drinking shop because they charged you 05 yuan more than your friend, until you bought your 10000 cup and realize that the loss is huge.
And that is partly also why I believe that this regulation is significant.
That is because, to start with, we're making it clear that the country cares and we are doing things to address it.
And also I think the New York regulation is also significant, at least a good temptation to make sure that at least consumers are aware of it.
But I don't think a sheer regulation can really just solve all the problems 100%.
My hope is on another algorithm run by the regulators.
The regulators algorithm or big data, LM or AI, whatever they can monitor and check whether or not the algorithm used by the companies are doing something wrong.
So i am relying on technology advancement to solve the problems created because of technological advancement.
Yeah, and as a consumer, i i wouldn't say that this is a great, massive change of all of our lives, because people will still go online and shop.
That's unquestionable.
It's just now the narrative is shifting.
It's not that all of the power lies in the platform's hand.
It's about shifting that also to the consumers, to the regulators.
We miss the part where the online shops that's built upon those platforms are also under protections.
Now, thanks to that rules.
So it's a shared responsibility and it's no longer just one power controlling how I'm going to use your data against you for my higher profit anymore.
And that's something positive we see.
Yeah, I think transparency is necessary.
It's a little bit tricky in that I don't have a problem with offering a first-time customer a cheaper price.
You hear that transparently.
I hear it on podcasts when things are being advertised.
First-time customers get a 15% discount.
There's nothing wrong with that.
The businesses are trying to drum up new business.
That's not the issue.
The issue becomes when they're using your history and they're profiling who you are, and they know who you are.
And you're not a first-time customer.
It's just, huh, will he buy this or will he not?
I'm going to put a price difference because I think he will.
Now, if you compare that to offline shopping, if Niu Honglin and I walk into a shoe store okay, and I'm wearing my typical T-shirt and blue jeans
And she's wearing her typical faux fur.
She's got her diamond neck.
She's all dripped out, right?
She's all swagged up.
Usual practice for women.
And they say to me, Steve, those shoes are 100 yuan.
And then they look at her and they say, oh no, for you, those are 500 yuan.
Well, that's messed up.
So why can that happen online?
It can't happen online.
It shouldn't.
And that's why these new regulations are being put in place.
