Special Issue: Should Data Drive Private Law

Technology Algorithmic Price Discrimination

Regulation and Consumer Protection
and

A Digital Arms Race?

Mateusz Grochowski*, Agnieszka Jabłonowska**, Francesca
Lagioia *** & Giovanni Sartor****

algorithms, consum- Online market players are gradually gaining the capacity to adapt
ers, discrimination, prices dynamically based on knowledge generated through vast
personalisation, price amounts of data, so that, theoretically, every individual consumer can
be charged the maximum price he or she is willing to pay. This has
downsides for markets and society. European Union law insufficiently
addresses these issues. Consumer-empowering technologies may help
grochowski@[Link]
counter algortihmic price discruimination. We advocate for regulation
[Link]@[Link] to make the arms race between conumers and sellers more balanced
[Link]@[Link] by strengthening the digital tools available to consumer protection
[Link]@[Link] actors and to limit the battlefield by clarifying and refining the applica-
ble rules and defining clearer categories of impermissible behaviours.

1. Introduction rithmic price discrimination, consumers will have to rely on technolo-

gies. We explore the possible solutions to algorithmic price discrim-
Algorithmic price calculation is by far one of the most remarkable
ination that can be provided by consumer-empowering technologies
features of the present-day consumer economy, which to an unprec-
and put forward the idea of a “digital arms race” between the use of
edented extent makes use of data to identify market conditions and
algorithms as market devices and their use as consumer protection
the attitudes of individual consumers. The increasingly sophisticated
tools. We observe that even if, at the current stage in the race, mer-
forms of data-driven pricing have been met with apprehension in
chants/traders are not yet engaging in price discrimination on a large
the public debate and remain highly puzzling from a legal and an
scale, this may change as digital consumer markets grow increasingly
economic perspective. The associated concerns do not stem merely
complex and consumers increasingly find themselves on an uneven
from the novelty of algorithmic pricing. They are also indicative of the
playing field with merchants/traders. Based on these findings, we
new types of economic and social perils that this way of price setting
advance a claim for regulation which pursues two main goals: making
entails (or is likely to entail). Algorithmic price discrimination is one
“the race” more balanced by strengthening the digital tools available
of the most prominent manifestations of data-driven pricing and
to consumer protection actors and limiting the battlefield between
raises challenging legal and policy questions.
consumers’ and vendors’ technologies by clarifying and refining the
In this paper we critically evaluate the applicable EU acquis, arguing applicable rules and clearly specifying impermissible market practice.
that as a consequence of the limited protection it offers against algo-
To this end, we begin with an analysis of the economic premises and
* Mateusz Grochowski is Senior Research Fellow at the Max Planck Insti- ramifications of algorithmic price discrimination (sections 2–3). We
tute for Comparative and International Private Law in Hamburg and an then consider the associated autonomy- and fairness-related con-
Affiliated Fellow at the Information Society Project (Yale Law School).
cerns (section 4). After assessing the development normatively, we
** Agnieszka Jabłonowska is Assistant Professor at the Institute of Law
Studies, Polish Academy of Science in Warsaw and a former Max Weber bring in the existing framework of EU consumer and data protection
Fellow at the European University Institute. law, exploring both the level of protection afforded to consumers and
*** Francesca Lagioia is Senior Assistant Professor at the Law Department of the effects of harmonised norms on the Member States’ lawmaking
the University of Bologna and Part-time Professor at the Law Department
discretion (section 5). Finally, we dig deeper into the present-day
of the European University Institute.
**** Giovanni Sartor is Full Professor at the Law Department of the University dynamic between professionals who apply personalised pricing and
of Bologna and of the European University institute. consumers whose data are harvested and analysed to produce tai-
lor-made valuations. In so doing, we focus on the imminent tension
This work has been supported by the H2020 European Research Council
between regulation and technological developments (section 6).
(ERC) Project “CompuLaw” (F. Lagioia and G. Sartor) under the Europe-
an Union’s Horizon 2020 research and innovation programme (Grant
Agreement n. 833647) and by the Polish National Science Centre Project 2. From Dynamic Pricing to Price Discrimination
“Citizen empowerment through online terms of service review” (grant nr In structuring the discussion of the different approaches to pricing in
2019/35/B/HS5/04444).
the digital economy, it is instructive to distinguish between dynamic
Received 30 Nov 2021, Accepted 13 Dec 2021, Published: 13 Apr 2022. prices and price discrimination.

Mateusz Grochowski, Agnieszka Jabłonowska, Francesca Lagioia & Giovanni Sartor, Algorithmic Price Discrimination and Consumer Protection;
A Digital Arms Race? Technology and Regulation, 2022, 36-47 • [Link] • ISSN: 2666-139X
 37 Algorithmic Price Discrimination and Consumer Protection TechReg 2022

Dynamic pricing refers to the highly flexible and rapid adjustments of First-degree price discrimination consists in providing an individ-
prices in response to market conditions, such as changes in supply ualised price for each consumer on the basis of the consumer’s
and demand or the behaviour of competitors. willingness to pay. In the model case, consumers are asked for their
reservation price, i.e., the maximum price each consumer is willing to
First, algorithms may adjust prices depending on supply and demand,
pay. This presupposes that the seller has complete information about
increasing prices when demand is higher and decreasing them when
each consumer. Even partial knowledge of consumers may enable the
demand is lower. A prominent case in point is so-called surge pricing,
seller to extract a higher price. For example, buyers of plane tickets
deployed by ride-sharing platforms.1 Second, algorithms may change
may be offered different prices for the same flight depending on infor-
prices in response to the prices charged by competing businesses.
mation about their financial situation, profession, travel history, etc.
The latter can also operate through algorithms, such that competitors
continually monitor and adjust to each other’s prices.2 Pricing algo- Second-degree price discrimination consists in offering different
rithms may directly execute human instructions (e.g., the instruction packages, i.e., a combination of price and quantities/qualities, among
to lower/raise prices when the same is done by competitors) or they which consumers select their preferred offer. For instance, different
may determine their pricing strategies independently, such that only software packages may be offered depending on their functionalities
the aim—e.g., profit maximization—is set by humans. The literature (basic, professional, developer, etc.) or on the number of users or on
is taking a growing interest in the consequences of the possible quantities.
interactions between learning algorithms, which are able to discover
Third-degree price discrimination, also known as group price discrim-
profit-enhancing strategies by trial and error and to rapidly respond
ination, consists in charging different prices to different consumer
to each other’s behaviour.3 A recent empirical analysis of algorithmic
groups. This assumes that the seller has information both about a
pricing on the Amazon Marketplace provides several instances where
groups’ relevant features and about which individuals belong to that
an algorithmic seller kept changing prices tens or even hundreds of
group. For instance, different prices can be charged to students, sen-
times a day.4
iors, members of a given community, residents in a certain area, etc.
Dynamic pricing exacerbates the disparity between algorithmic and The more restricted is the target group, the more third-degree price
nonalgorithmic sellers, as it creates a largely winner-takes-all market- discrimination approaches first-degree discrimination.
place where algorithmic sellers receive the vast majority of sales. In
In this paper, we address first- and advanced third-degree price
some cases, algorithms may also push prices to unrealistic heights,5
discrimination in the digital markets, which can also be referred
or they may lead to price-fixing and collusion.6 From the standpoint of
to as price personalisation.10 Understood in these two ways, price
consumers and consumer protection actors (market regulators and
discrimination is not a novel phenomenon in the economic history.11
nongovernmental organisations), dynamic pricing complicates the
Long before the age of big data, different prices could be charged to
observation and analysis of price variations.
individuals based on personal knowledge and face-to-face bargain-
Price discrimination differs from dynamic pricing in that it is based on ing. Group price discrimination could also be applied to an array of
consumer characteristics, rather than on market conditions affecting socially identifiable groups, such as students or business travellers.
all consumers equally. At a general level, price discrimination consists In most legal systems, these well-established price-discrimination
in charging different consumers different prices for the same or practices are generally not called into question. Price setting has long
similar products in order to maximize profits, where such differences been viewed as an important aspect of freedom of enterprise and
are not motivated by different cost structures, e.g., different supply contract, and the limits placed on it are not extensive.12 However, the
costs.7 rise of big data and artificial intelligence (AI) has introduced a new
dimension to price discrimination and poses new regulatory challeng-
On this basis, the economic scholarship, following Pigou’s classical
es.13
concept,8 usually distinguishes three types, or degrees, of price dis-
crimination.9 AI as applied to big data allows for fine-grained distinctions between
customers. The prices charged may thus vary according to data
1 Juan Camilo Castillo, Dan Knoepfle and Glen Weyl, ‘Surge Pricing Solves about consumers’ specific situations, and group discrimination may
the Wild Goose Chase’ [2017] Proceedings of the 2017 ACM Conference on become increasingly fine-tuned. In fact, through machine-learning
Economics and Computation 241; Alice Lu, Peter Frazier and Oren Kislev, approaches, people can be grouped according to any set of features
‘Surge Pricing Moves Uber’s Driver Partners’ [2018] Proceedings of the
2018 ACM Conference on Economics and Computation 3.
that makes them relevantly similar for price-setting purposes (inter-
2 Dana Popescu, ‘Repricing Algorithms in e-Commerce’ available at: ests, available resources, attitudes, etc.). Moreover, the process of
[Link]
3 Ariel Ezrachi and Maurice E Stucke, ‘Artificial Intelligence & Collusion:
When Computers Inhibit Competition’ (2017) 32 University of Illinois Law 10 Similarly: Marc Bourreau and Alexandre de Streel, ‘The Regulation of
Review 1775, 1795; Emilio Calvano and others, ‘Protecting Consumers Personalised Pricing in the Digital Era’ (2018) OECD, DAF/COMP/WD
from Collusive Prices Due to AI’ (2020) 370 Science 1040, 1040–1041. (2018)150, 2; Jean‐Pierre van der Rest and others, ‘A Note on the Future
4 Le Chen, Alan Mislove and Christo Wilson, ‘An Empirical Analysis of of Personalized Pricing: Cause for Concern’ (2020) 19 Journal of Revenue
Algorithmic Pricing on Amazon Marketplace’, [2016] Proceedings of the and Pricing Management 113, 115.
25th International Conference on World Wide Web 1339. 11 Jeffrey Moriarty, ‘Why Online Personalized Pricing Is Unfair’ (2021) 23
5 John D. Sutter, ‘Amazon Seller Lists Book at $23,698,655.93 Plus Ethics and Information Technology 495, 496.
Shipping’ (2011) CNN, available at [Link] 12 Thomas M.J. Möllers, ‘Working with Legal Principles – Demonstrated
web/04/25/[Link]. Using Private Autonomy and Freedom of Contract as Examples’ (2018) 14
6 Calvano and others (n 3). European Review of Contract Law 101, 114.
7 See generally: George Joseph Stigler, The Theory of Price (4th edn, Mac- 13 Ariel Ezrachi and Maurice E. Stucke, ‘The Rise of Behavioural Discrimi-
millan 1966) 209–210. nation’ (2016) 37 European Competition Law Review 485; Oren Bar-Gill,
8 Arthur Cecil Pigou, The Economics of Welfare (4th edn, Macmillan 1932) ‘Algorithmic Price Discrimination: When Demand Is a Function of Both
278–279. Preferences and (Mis) Perceptions’ (2019) 86 The University of Chicago
9 See e.g., Paul Belleflamme and Martin Peitz, Industrial Organization: Law Review 217; Etye Steinberg, ‘Big Data and Personalized Pricing’
Markets and Strategies (Cambridge University Press 2010) 196. (2020) 30 Business Ethics Quarterly 97.
 38 Algorithmic Price Discrimination and Consumer Protection TechReg 2022

sorting people into such groups is often done without clear notifica- the company vehemently denied.21 Some evidence of price discrimina-
tion—which means that individuals may remain unaware that they tion is nonetheless presented in the United States in connection with
are being subjected to differential treatment.14 aspects such as technology (e.g., operating systems and browsers),22
geographic location (e.g., the location from which different queries for
Price discrimination is usually based on unsupervised learning
the same product on the same vendor site originate),23 and personal
techniques, that is, on clustering algorithms that segment consumers
information (collected and inferred through a behavioural tracking
according to similarities (as determined by nearness of values for
method).24 The scarcity of the evidence available in Europe may
their features). It is then computed what the probability is that each
be due to the fact that the monitoring of prices offered to different
segment will purchase the good at a given price, and the profit-max-
consumers at a given time remains comparably difficult, in part due
imising price for the segment is determined accordingly. In calculat-
to the prevalence of dynamic pricing. Confirmed cases of algorithmic
ing how an individual in each such segment is willing to pay, recourse
price discrimination around the world nevertheless show that the
is had not only to classical demographic variables deployed but also
discussion is far from hypothetical.
to behavioural ones, such as online browsing and activity on social
networks. For instance, the American insurance company Allstate is The present analysis of algorithmic pricing does not encompass
reported to optimize its prices based on the calculated likelihood that cases in which price differences are owed to different cost structures.
individual users would comparison-shop before purchasing insur- This applies, in particular, to markets where costs and risks borne by
ance.15 As we learn from targeted advertising, it remains of secondary merchants in connection with a transaction vary depending on the
importance to merchants whether differentiated offers in fact reflect profile of the consumers concerned, as in the lending and insurance
the targeted consumers’ interests or, or in this case, their willingness industries. Here, an economic rationale for price differentiation goes
to pay (and whether that willingness is in fact linked to the factors beyond the ability of merchants to maximise their share of the social
considered): what matters is instead that the strategy performs better surplus by identifying consumers’ reservation prices.25 Even in this
at scale compared to the alternatives. domain, however, the differential treatment of consumers raises
significant concerns. Although automated risk assessment may
While the technological potential of algorithmic price discrimina-
reduce human bias in consumer vetting, such practices pose the risk
tion remains unquestioned, the extent to which it is actually being
of discriminatorily classifying or misclassifying consumers and of per-
exploited has been a matter of debate. A recent study covering 160
petuating inequalities and cycles of poverty.26 The possibility of (mis)
e-commerce websites did not find evidence of consistent and system-
using insights about consumers to maximize business gains cannot
atic online personalised pricing in the European Union markets that
be excluded, either.27 A general discussion of biases remains outside
were investigated.16 A similar conclusion emerges from a 2021 study
the scope of the present paper. However, we shall examine some
commissioned by the German Ministry of Justice and Consumer
concerns that are relevant to price discrimination.
Protection.17 This may be due to available behavioural findings, sug-
gesting that merchants may strategically avoid price discrimination 3. Economic Effects of Algorithmic Pricing
if they know that customers may be aware of the practice.18 Indeed,
The emergence of algorithmic price calculation and its potential
over the past years, instances of price discrimination either disclosed
proliferation in some spheres of the online consumer economy has
or speculated about have led to strong consumer backlash.19 In
raised multiple concerns about its negative economic and social
2015, Disneyland Paris came under criticism for charging different
externalities. Such concerns have been voiced from a range of
prices to consumers depending on their country of residence.20 This
perspectives. For the sake of completeness, before addressing the
illustrated how public outrage can be triggered merely by a granular
fairness and autonomy-related concerns, it is important to briefly
differentiation in pricing. Further developments followed shortly. For
summarize the economic effects of algorithmic dynamic pricing and
instance, Uber was suspected of having price-discriminated of the
basis of the battery level on the consumer’s smartphone, something
21 Nicole Martin, ‘Uber Charges More If They Think You’re Willing To Pay
More’ (Forbes, 30 March 2019) available at [Link]
14 Willem H. van Boom and others ‘Consumers Beware: Online Personal- sites/nicolemartin1/2019/03/30/uber-charges-more-if-they-think-youre-
ized Pricing in Action! How the Framing of a Mandated Discriminatory willing-to-pay-more. It is worthy of note, however, that it does process
Pricing Disclosure Influences Intention to Purchase’ (2020) 33 Social user device data. Furthermore, Uber’s terms of services explicitly provide
Justice Research 331, 332. that amounts charged for the same or similar services to particular
15 Ariel Ezrachi and Maurice E Stucke, Virtual Competition: The Promise and consumers may differ due to varied “promotional offers and discounts”.
Perils of the Algorithm-Driven Economy (Harvard University Press 2016) See: Uber, Terms and Conditions, last modified 17.03.2020, and Privacy
90. Notice, last modified 15.10.2020, available at [Link]
16 Ipsos – London Economics – Deloitte consortium, ‘Consumer market legal/en.
study on online market segmentation through personalised pricing/offers 22 For instance, generally, Apple iOS and Safari users pay higher prices as
in the European Union’ (2018) 171, available at [Link] illustrated by Aniko Hannak and others, ‘Measuring Price Discrimination
oNaC. See also: Commission Staff Working Document – Guidance on the and Steering on e-Commerce Web Sites’ [2014] Proceedings of the 2014
Implementation/Application of Directive 2005/29/EC on Unfair Commer- ACM Internet Measurement Conference 305.
cial Practices, SWD (2016) 163 final, 135. 23 For instance, Amazon, Staples and the video-game store Steam were
17 Ibi research and Trinnovative, ‘Empirie zu personalisierten Preisen im found to vary price by geographic location by as much as 166%. See:
E-Commerce’ (2021), available at [Link] Jakub Mikians and others, ‘Detecting Price and Search Discrimination on
publikationen/[Link]. the Internet’ [2012] Proceedings of the 11th ACM Workshop on Hot Topics in
18 Andreas Leibbrandt, ‘Behavioral Constraints on Price Discrimination: Networks 79.
Experimental Evidence on Pricing and Customer Antagonism’ (2020) 121 24 Mikians and others (n 23) 79.
European Economic Review 103303. 25 This being the rationale for price personalisation, as accurately observed
19 For an early example, see: Mark Ward, ‘Amazon’s Old Customers ’Pay by Moriarty (n 11) 501.
More’’ (BBC, 8 Sep 2000) available at [Link] 26 Amy J Schmitz, ‘Secret Consumer Scores and Segmentations: Separating
ness/[Link]. Haves from Have-Nots’ [2014] Michigan State Law Review 1411, 1415.
20 Jim Brunsden and Duncan Robinson, ‘Disneyland Paris Ditches Pricing 27 Tal Zarsky, ‘The Trouble with Algorithmic Decisions: An Analytic Road
Policy’ (Financial Times, 2016), available at [Link] Map to Examine Efficiency and Fairness in Automated and Opaque Deci-
e472eec2-031b-11e6-af1d-c47326021344. sion Making’ (2016) 41 Science, Technology, & Human Values 118, 123.
 39 Algorithmic Price Discrimination and Consumer Protection TechReg 2022

price discrimination in the sense mentioned above. 4. Autonomy and Fairness-Related Concerns
A significant body of economic research focuses on the threat of regarding Algorithmic Pricing
algorithmic collusion, i.e., the spontaneous emergence of price coor- In this section we examine the notions of autonomy and fairness in
dination between algorithms deployed by different merchants. Such the consumer market and develop their implications for algorithmic
effects, and the resulting increase in prices above a competitive level, pricing focusing on price discrimination.
have been identified in experimental studies.28 Accordingly, the reser-
vations of the consumers about the growing sophistication of pricing 4.1 Fairness Perceptions
technologies are not unjustified when it comes to collusive pricing in Apart from the competition and welfare-oriented arguments, the
dynamic price-setting scenarios. second key area of scepticism towards algorithmic pricing revolves
around the notions of fairness and autonomy. Quite remarkably, the
Coming to price discrimination, the economic literature indicates that
notion of fairness adopted in this regard merges theoretical accounts
the effects of this practice on the overall welfare are not straightfor-
and common-sense concepts of price fairness.37 In general, an aver-
ward.29 Some findings suggest that price discrimination applied by
age consumer is relatively more sensitive towards fairness in algorith-
monopolists is liable to increase efficiency while reducing consumer
mic price-setting than in classic marketplaces,38 both where prices are
surplus.30 At the same time, the practice is seen as capable of increas-
determined through bargaining and where they are set unilaterally by
ing product affordability and facilitating welfare redistribution among
a retailer.39 The empirical evidence confirms the negative attitude that
different consumer groups.31 On the other hand, because consumers
consumers take to algorithms setting differential prices.40 This atti-
may attempt to mitigate the effects of price discrimination—e.g.,
tude may be driven by a general aversion to differential treatment and
by hiding their identity—those who are better placed to manage the
anxiety about being profiled by an unfathomable “black box”, which
complexity of online environments may ultimately fare better.32
makes judgments based on personal information.41
With respect to oligopoly markets, it has been suggested that compe-
As mentioned, the social perception of fairness in price-calculating
tition may in fact be intensified owing to price discrimination, making
algorithms may have a regulatory effect. Consumer backlash may dis-
consumers better off.33 This view has been challenged in some recent
suade firms from using algorithms, or from using them opportunisti-
studies. It has been observed, for instance, that consumer harm and
cally, as a way of rent-seeking in the marketplace. According to some
efficiency losses can concur where price discrimination goes hand in
authors, this more moderate price discrimination may in fact be
hand with commercial practices fuelling consumer misperceptions.34
ethically superior to unitary pricing.42 However, as noted, a potential
Another study looked at the interplay between price discrimination
regulatory effect under market conditions depends on the likelihood
and targeted advertising, concluding that merchants can leverage
of consumers becoming aware of price discrimination. Moreover, a
both factors to sustain higher prices.35 All in all, while the overall
favourable valuation of algorithmic pricing from the perspective just
welfare effects of algorithmic price discrimination remain ambiguous,
outlined assumes that price discrimination is built on a general and
the prospect of consumer surplus being reduced is real.36
measurable criterion (willingness to pay), which, as we argue below,
does not necessarily hold true in the market reality. Finally, even when
the consumer’s willingness to pay is in fact established, both the
reasons why such willingness is higher for particular individuals and
the ways in which information about consumers’ reservation prices
is obtained may be raised as objections to the price discrimination
28 Emilio Calvano and others, ‘Artificial Intelligence, Algorithmic Pricing
regime,43 which is likely to be reflected in the fairness perceptions.
and Collusion’ (2020) 110 American Economic Review 3267; Calvano and
others (n 3) 1041.
29 Damien Geradin and Nicolas Petit, ‘Price Discrimination Under EC Com- 4.2 Contractual Fairness and (Digital) Autonomy
petition Law: Another Antitrust Doctrine in Search of Limiting Principles?’ The common-sense notion of fairness can be indicative, but not yet
(2006) 2 Journal of Competition Law and Economics 479, 485; Christopher
determinative, of the legal notion of price fairness. To establish such
Townley, Eric Morrison and Karen Yeung, ‘Big Data and Personalized
Price Discrimination in EU Competition Law’ (2017) 36 Yearbook of a legally relevant notion in the context of algorithmic pricing, we need
European Law 683, 702-703; Marco Botta and Klaus Wiedemann, ‘To Dis- to pay attention, in the first place, to the possible distortions of the
criminate or Not to Discriminate? Personalised Pricing in Online Markets parties’ autonomy and, in the second place, to the general notion of
as Exploitative Abuse of Dominance’ (2020) 50 European Journal of Law
and Economics 381, 386-388.
30 Mark Armstrong, ‘Recent Developments in the Economics of Price Dis- 37 Lan Xia, Kent B Monroe and Jennifer L Cox, ‘The Price Is Unfair! A Con-
crimination’ in Richard Blundell, Whitney K Newey and Persson Torsten ceptual Framework of Price Fairness Perceptions’ (2004) 68 Journal of
(eds), Advances in Economics and Econometrics: Theory and Applications, Marketing 1.
Ninth World Congress (Cambridge University Press 2006) 100–102. 38 Martin Fassnacht and Sebastian Unterhuber, ‘Consumer Response to
31 Botta and Wiedemann (n 29) 386. Online/Offline Price Differentiation’ (2016) 28 Journal of Retailing and
32 Townley, Morrison and Yeung (n 29) 701; Paul Belleflamme and Wouter Consumer Services 137.
Vergote, ‘Monopoly Price Discrimination and Privacy: The Hidden Cost 39 Timothy J Richards, Jura Liaukonyte and Nadia A Streletskaya, ‘Personal-
of Hiding’ (2016) 149 Economics Letters 141, 144. ized Pricing and Price Fairness’ (2016) 44 International Journal of Industri-
33 Drew Fudenberg and J. Miguel Villas-Boas, ‘Price Discrimination in the al Organization 138; Kelly L Haws and William Bearden, ‘Dynamic Pricing
Digital Economy’ in Martin Peitz and Joel Waldfogel (eds), The Oxford and Consumer Fairness Perceptions’ (2006) 33 Journal of Consumer
Handbook of the Digital Economy (Oxford University Press 2012). Research 304.
34 Bar-Gill (n 13) 237. 40 Frederik Zuiderveen Borgesius and Joost Poort, ‘Online Price Discrimina-
35 Rosa-Branca Esteves and Joana Resende, ‘Personalized Pricing and tion and EU Data Privacy Law’ (2017) 40 Journal of Consumer Policy 347,
Advertising: Who Are the Winners?’ (2019) 63 International Journal of 355-356.
Industrial Organization 239. 41 Cf. Townley, Morrison and Yeung (n 29) 706–707, distinguishing be-
36 van der Rest and others (n 10) 114; Natali Helberger and others, ‘EU tween substantive and procedural aspects in price fairness perceptions.
Consumer Protection 2.0: Structural Asymmetries in Digital Consumer 42 Jerod Coker and Jean‐Manuel Izaret, ‘Progressive Pricing: The Ethical
Markets’ (2021) 113–114, available at: [Link] Case for Price Personalization’ (2021) 173 Journal of Business Ethics 387.
beuc-x-2021-018_eu_consumer_protection.0_0.pdf. 43 Coker and Izaret (n 42) 8–10.
 40 Algorithmic Price Discrimination and Consumer Protection TechReg 2022

(price) fairness in private law, competition law, and anti-discrimina- if they are set significantly above the benchmark value. Unlike the
tion law. While the former issue is relevant to the consumer’s posi- first dimension of price unfairness previously discussed, this iustum
tion in the digital economy more broadly, the latter gains additional pretium concept is directly underpinned by distributional concerns. It
relevance in relation to price discrimination. carves parties’ freedom to choose a price for a contract in a way that
guarantees a balance between the price and value of a good. In this
To begin with, the classic approach to fairness in private law builds
way, it preassigns a specific threshold of “fairness” to each good on
on the assumption that price-control mechanisms should be applied
the market—thereby assuming from the outset that there are certain
as a way of safeguarding autonomy, which is contingent on a
decisions which the parties are not free to make when it comes to
rudimentary degree of reciprocity and nonexploitation. Contractual
allocating their resources.
fairness may address either the way of forming contractual relations
(such as nondiscrimination in entering a contract) or the content Applied to algorithmic price calculation, the concept of a just price
of such relations. On this view, fairness is by and large considered may be attributed to another general criterion, i.e., a consumer’s
a commutative benchmark for a contract as the product of inter- willingness to pay.49 Further, it posits an idea of “algorithmic fair-
personal links between parties—a benchmark providing minimal ness” where everyone will pay a price consistent with their economic
standard of parity in exercising private autonomy. Limits can further conditions. On this approach, these advantages could counterweigh
be set on the design of conditions for accessing goods and services, the perils of algorithmic pricing for party autonomy, welfare, and
and here distributive concerns begin to enter the picture, next to fairness. As the next section illustrates, however, the real world is far
the relational aspects.44 This is reflected in anti-discrimination law, from this ideal.
providing that protected characteristics, like gender or racial origin,
are not acceptable grounds for differentiating conditions of access to 4.3 Autonomy, Fairness, and the Reality of Algo-
goods and services.45 rithmic Price Discrimination
The idea of a “digital arms race” discussed in this paper originates
Second, algorithmic fairness is underpinned by a concept of auton-
from our sense that EU law is ill-equipped to address the concerns
omy that goes beyond the idea of “freedom to choose”, i.e., the free-
raised by algorithmic pricing: these concerns, as we saw, are not only
dom to make decisions about one’s own contractual relations without
economic but also relate to the fairness of transactions based on such
constraints. This “thicker” concept of autonomy also includes sov-
pricing and to the autonomy of the parties involved. Thus, before
ereignty over individual privacy and data. Thus, it encompasses not
we look at existing EU law, we need to consider how the concepts
only the parties’ freedom to decide to enter a contract and determine
of autonomy and fairness can be shaped into practical instruments
its content (including prices), but also their ability to exercise control
enabling consumers to make meaningful choices about entering a
over personal information and on the consequences this information
contract and hence accepting an algorithmically set price. This makes
may entail when it falls into the hands of market actors.46
it possible to better recognize both the drawbacks of price discrim-
Third, a separate set of concerns relates to price points as assessed ination in the market reality and the shortcomings of the applicable
against a particular legally relevant benchmark. This assumes that for legal provisions as discussed in the next section. In operationalizing
every contract it is possible to identify a hypothetical price point that autonomy and fairness into instruments that can actually work to the
is commensurate with the value of the goods on offer—and so is not benefit of consumers, we need to think on a few different levels.
excessive (unfair). This idea builds on the classical concept of iustum
First off, if consumers are to have their autonomy appropriately
pretium (whose remnants are still present in modern law).47 It rests
safeguarded, they need to be able to enjoy a real opportunity to refuse
on the assumption that for each product it is possible to identify an
to be personalised. In reality, however, the algorithmic calculation
objective criterion against which to compare the prices actually set
of prices is usually offered on a take-it-or-leave-it basis, along with
by sellers or suppliers,48 such that prices can be considered excessive
the entire contract. The possibility to refuse personalisation without
refusing the contract itself should, on the contrary, be viewed as
44 Cf. Rona Dinur, ‘Relational and Distributive Discrimination’, unpublished
manuscript, June 2021.
one of the tenets of freedom of contract, grounded in contractual
45 Cf. especially Council Directive 2004/113/EC of 13 December 2004 imple- autonomy. In other words, regardless of the fairness of the process or
menting the principle of equal treatment between men and women in the outcome of personalisation, each individual, by virtue of the market
access to and supply of goods and services [2004] OJ L 373/37, as well as sovereignty accorded to all, should be able to decide whether to be
Article 21 of the Charter of Fundamental Rights of the European Union
[2012] OJ C 326/391. For a recent analysis in the context of algorithmic
subject to personalisation.
discrimination, see: Janneke Gerards and Raphaële Xenidis ‘Algorithmic Second, the use of algorithms to establish the content of individual
Discrimination in Europe: Challenges and Opportunities for Gender
Equality and Non-discrimination Law’ (2020) 53–62, available at https:// contracts is questionable since it may lead to substantial objectifica-
[Link]/s/pkli. tion of individuals, who are considered as mere “entries” in a data-
46 Cf. Mateusz Grochowski, ‘European Consumer Law after the New Deal: base, rather than as autonomous beings endowed with dignity.50 As
A Tryptich’ (2020) 39 Yearbook of European Law 387, 402–404 along with Paul Krugman observed a New York Times op-ed of 2000, personal-
further references.
47 See e.g., Arthur T. von Mehren, ‘The Comparative Study of Law’ (1991– ised price setting “uses a potential buyer’s electronic fingerprint—his
1992) 6/7 Tulane Civil Law Forum 43, 49–51; Alphonse M. Squillante, ‘The record of previous purchases, his address, maybe the other sites he
Doctrine of Just Price – Its Origin and Development’ (1969) 74 Compara- has visited—to size up how likely he is to balk if the price is high. If
tive Law Journal 334-335.
48 An illustrative instance of this approach was provided in the PE Digital
judgment of the Court of Justice. While discussing the proportionate Digital, ECLI:EU:C:2020:808, para. 36).
reimbursement of the price paid following the exercise of the consumer’s 49 Generally, on consumer’s willingness to pay as the key point of reference
right to withdraw, the Court of Justice found that all the circumstances of personalized pricing see Bourreau and de Streel (n 10) 3; Fabrizio
relating to the market value of the service provided, including the price Esposito, ‘Making Personalized Prices Pro-Competitive and Pro-Consum-
charged to other consumers and the price of an equivalent service pro- ers’ (2020) 2 Cahiers du CeDIE Working Papers 1, 5.
vided by other traders, are relevant for assessing whether the total price 50 Julie E Cohen, ‘Turning Privacy Inside Out’ (2019) 20 Theoretical Inquiries
is excessive (judgment of the Court of 8 October 2020, C-641/19, PE in Law 1, 11.
 41 Algorithmic Price Discrimination and Consumer Protection TechReg 2022

the customer looks price-sensitive, he gets a bargain; if he doesn’t, individuals with these characteristics. In this way, the personalisa-
he pays a premium.” Therefore, it is “undeniably unfair: some people tion mechanism may not just harm individuals’ privacy but can also
pay more just because of who they are.”51 This general attitude is also further entrench discriminatory schemes and stereotypes that are
reflected in the clear aversion to being personalised, an aversion that, already at work in society.58 In fact, those who have already experi-
as the empirical evidence illustrates, is widely shared by consumers.52 enced unfavourable treatment in social and market relations, may
This distaste for personalisation may be understood as an overall be offered even higher algorithmic prices in view of their position of
uneasiness about being profiled and segregated on the basis of need and their lack of knowledge of alternative offers available in the
details accrued from one’s personal life. The essence of this concern market. Moreover, new patterns of discrimination may emerge.59 As
reaches beyond the simple privacy issue and goes to the much more mentioned, being subjected to mechanisms that are prone to biases
profound issue of overlapping domains of privacy and individual and misconceptions can be viewed as problematic because of how
dignity. The rise of the data economy unavoidably has shifted the consumer autonomy stands affected, among other reasons. In this
previously existing division between the market sphere and the pri- respect too, then, there is scope for regulatory action.
vate sphere of a consumer’s life and has significantly augmented the
Finally, there are further shortcomings of algorithmic pricing that
former by commodifying information about individuals’ intimacy and
involve economic externalities. As explained, personalised prices may
making predictions about personal behaviour. Thus, data and privacy
be skewed by the market structure, and especially by the presence of
issues also fall under the broad label of ethical concerns about algo-
monopolies and oligopolies. Where price discrimination accompanies
rithmic price calculation, once again calling for instruments ensuring
data-driven advertising, consumer surplus is likely to diminish.60 This
that consumers can refuse to be personalised on the basis of their
risk could further increase if patterns of collusion emerge in offering
personal data.53
individualised prices to selected groups of consumers.
Third, by definition, setting different prices for different consumers
on the basis of their individual features creates a substantial diver- 5. A Regulatory Race: Existing and Emerging
sity that cannot be fit into any objective frame of reference, other Strategies for Algorithmic Pricing in EU Law
than possibly the willingness of consumers to pay.54 The estimated and Policy
willingness to pay, however, is not computed in relation to each As we have seen, algorithmic price discrimination raises serious
individual consumer, but rather in relation to his or her digital ‘alter concerns about the welfare and autonomy of consumers and about
ego’.55 Moreover, as was previously indicated, even when willingness the fairness of the consumer marketplace. Hence, it requires specific
to pay is in fact established, the reasons why this willingness is higher responses that could provide consumers with a real and meaning-
for some individuals than for others can still be grounds for objecting ful choice between entering a contract with a personalised price or
to price discrimination.56 Finally, organisational and technological choosing a price that has been set for all consumers61 (or has been
factors, such as the self-development of learning algorithms, turn the individually bargained for with a professional). This warrants the
entire process into a “black box”, where the explicit premises that question: considering the commitment that EU law has made to
go into setting a certain price for a certain consumer are indecipher- strong consumer protections,62 to what extent has it been able to
able. Thus, failing verifiable information about the processes used supply such consumer protection tools?
for personalisation, even the vision of algorithmic prices as prices
Until quite recently, the issue of algorithmic pricing has been escap-
that optimally reflect consumers’ willingness to pay may prove to be
ing the attention of EU legislation and policy. In legal scholarship, the
debatable in practice. Due to the negative perception of price discrim-
practice has been analysed mostly from the standpoint of competi-
ination, as well as a general propensity of algorithmic merchants to
tion law, with a focus on the practice where different market actors
optimize profitability at scale, market incentives for disclosing such
coordinate algorithmic pricing, as well as with insights into exploit-
data voluntarily are currently very low.
ative practices of dominant firms.63 A number of potential hurdles
Fourth, algorithmic designs often “cannot escape the influence of to successful claims against personalised pricing under antitrust
discriminatory rubrics that are deeply embedded in the data because law have been identified, beginning with the finding of dominant
they are deeply embedded in our society.”57 Accordingly, the use of positions in cases involving unilateral business conduct.64 Moreover,
algorithmic pricing poses an inherent risk that prices may be based
on details (such as gender or ethnicity) that do not form an ethically
58 See e.g. Betsy Anne Williams, Catherine F. Brooks and Yotam Shmargad,
valid ground for market valuations, and even worse, the practice ‘How Algorithms Discriminate Based on Data They Lack: Challenges,
poses the risk that algorithms may systematically discriminate against Solutions, and Policy Implications’ (2018) 8 Journal of Information Policy
78; Anna Lauren Hofmann, ‘Where Fairness Fails: Data, Algorithms,
and the Limits of Antidiscrimination Discourse’ (2019) 22 Information,
51 Paul Krugman, ‘What Price Fairness?’ (New York Times, 4 Oct 2000) Communication & Society 900; Aylin Caliskan, Joanna J. Bryson, Arvind
available at [Link] Narayzanan, ‘Semantics Derived Automatically from Language Corpora
[Link]. Contain Human-like Biases’ (2017) 356 Science 183.
52 Frederik Zuiderveen Borgesius and Joost Poort, ‘Does Everyone Have a 59 Monique Mann and Tobias Matzner, ‘Challenging Algorithmic Profiling:
Price? Understanding People’s Attitude Towards Online and Offline Price The Limits of Data Protection and Anti-Discrimination in Responding to
Discrimination’ (2019) 8 Internet Policy Review 1, 6–15. Emergent Discrimination’ (2019) Big Data & Society 1, 5.
53 Zarsky (n 27) 129-130. 60 Esteves and Resende (n 35) 264-268.
54 Further on the individual price preference (willingness to pay) as the 61 See also: Frederik Zuiderveen Borgesius and Joost Poort, ‘Personalised
ultimate – yet slightly utopian goal – of price personalization see Akiva A Pricing: The Demise of the Fixed Price?’ in Uta Kohl and Jacob Eisler
Miller, ‘What Do We Worry about When We Worry about Price Discrim- (eds), Data-Driven Personalisation in Markets, Politics and Law (Cambridge
ination – the Law and Ethics of Using Personal Information for Pricing’ University Press 2021) 174.
(2014) 19 Journal of Technology Law & Policy 43, 57-58. 62 Article 38 of the Charter of Fundamental Rights of the European Union;
55 Natali Helberger and others (n 36) 103–104. Articles 12, 114(3) and 169(1) of the Treaty on the Functioning of the Euro-
56 Cf. Coker and Izaret (n 42) 8–9, who acknowledge this as a “side con- pean Union (Consolidated version) [2012] OJ C 326/47.
straint” to the proposed regime of progressive pricing. 63 See e.g., Geradin and Petit (n 29); Botta and Wiedemann (n 29).
57 Cohen (n 50). 64 van der Rest and others (n 10) 114.
 42 Algorithmic Price Discrimination and Consumer Protection TechReg 2022

the individual dimensions of fairness and autonomy are conceptually described may indirectly diminish certain forms of price discrimina-
and politically independent of competition issues, even though com- tion, especially those linked to a single, easily identifiable characteris-
petition mechanism may mitigate the negative effects set out above tic (e.g., country of residence),73 the same does not necessarily hold
(while algorithmic collusion may, on the contrary, exacerbate these true for the more sophisticated forms of price discrimination. Recent
effects). Accordingly, concerns discussed in the present paper are amendments to the CRD have partly responded to this challenge by
more directly linked to the realm of the consumer law. requiring merchants to disclose, where applicable, that they have
personalised prices on the basis of automated decision-making.74 The
In general, in approaching the issue of price fairness, EU consumer
new obligation, however, does not also require merchants to disclose
law has traditionally focused on the transparent communication
the parameters they use, much less any benchmark prices, as in the
of prices rather than on the price-setting as such. The importance
case of the [Link]
attached to price communication is well illustrated in the provisions
of Directive 2000/31/EC on electronic commerce (ECD),65 which Crucially, both the UCPD and the CRD are based on the principle of
requires Member States to ensure that, where information society full harmonisation, which means that consumer protections must be
services refer to prices, these are to be indicated clearly and unambig- uniform across Europe, with no Member State introducing or enforc-
uously.66 The same is true for Directive 98/6/EC on the indication of ing protections any stronger or weaker than in any other Member
the prices of products offered to consumers (PID), 67 which provides State. In respect of the UCPD, annexed to the Directive is a list of
that both the selling price and the unit price (e.g., per litre or kilo- practices that are prohibited under all circumstances, and the Court
gramme) must be indicated in an unambiguous, easily identifiable, of Justice has consistently held that national consumer protection
and clearly legible manner.68 It is worth noting, however, that the PID provisions prohibiting practices not included in that list are incompat-
was recently amended to include additional provisions on communi- ible with the UCPD.75 Nowhere in the UCPD is price personalisation
cating price reductions.69 Accordingly, merchants who announce price expressly mentioned, and the Commission’s guidelines in this regard
reductions are required to indicate the lowest price applied over a are inconclusive.76 Consequently, it remains unsettled whether under
period of time, in principle not shorter than 30 days, prior to the time the UCPD, merchants applying price discrimination are required to
the price reduction is applied. Since the new provisions have yet to be disclose any additional information apart from the price itself and,
transposed by the Member States, it remains to be seen whether, and following the amendments to the CRD, the fact that they are engaging
if so how, they affect the prevalence and disclosure of personalised in personalisation.77
discounts in consumer markets.
While the principle of full harmonisation in the UCPD and the CRD
A similar approach to indicating prices can be found in Directive limits the scope of independent Member State action in the areas
2011/83/EU on consumer rights (CRD),70 as well as in Directive covered by the two directives, further-reaching duties to inform may
2005/29/EC concerning unfair business-to-consumer commercial still be imposed in other EU acts. Indeed, at Article 29, the draft Dig-
practices in the internal market (UCPD).71 The information that ital Services Act (DSA) proposed by the Commission78 places upon
merchants are required to list under the CRD includes “the total “very large platforms that use recommender systems” an obligation
price of the goods or services inclusive of taxes, or where the nature to “set out in their terms and conditions, in a clear, accessible and
of the goods or services is such that the price cannot reasonably easily comprehensible manner, the main parameters used.” The pro-
be calculated in advance, the manner in which the price is to be posal, moreover, indirectly equips consumers with a right not to be
calculated.”72 Accordingly, the manner of price calculation becomes subject to recommender systems which rely on profiling. As such, it
relevant only to the extent that the selling price cannot be established not only provides consumers with more extensive information about
otherwise. While it is true that price transparency in the sense just the algorithmic system applied to them, but also enables them to
take meaningful actions on the basis of such information (switch the
65 Directive 2000/31/EC of the European Parliament and of the Council parameters).79 In relation to personalised prices, however, instru-
of 8 June 2000 on certain legal aspects of information society services, ments supporting consumer decision-making do not seem to offer
in particular electronic commerce, in the Internal Market (’Directive on
electronic commerce’) [2000] OJ L 178/1. much of anything that is more robust than general disclosure.
66 Directive 2000/31/EC, Article 5(2).
As far as consumer law is concerned the only instrument that could
67 Directive 98/6/EC of the European Parliament and of the Council of 16
February 1998 on consumer protection in the indication of the prices of indirectly enhance consumer choice in relation to varying price
products offered to consumers [1998] OJ L 80/27. conditions is the right to withdraw from a contract, a right set forth
68 Directive 98/6/EC, Articles 3 and 4.
69 Directive (EU) 2019/2161 of the European Parliament and of the Council
of 27 November 2019 amending Council Directive 93/13/EEC and Direc- 73 Janja Hojnik, ‘Tell Me Where You Come from and I Will Tell You the
tives 98/6/EC, 2005/29/EC and 2011/83/EU of the European Parliament Price: Ambiguous Expansion of Prohibited Geographical Price Discrimi-
and of the Council as regards the better enforcement and modernisation nation in the EU’ (2019) 56 Common Market Law Review 23, 38.
of Union consumer protection rules [2019] OJ L 328/7, Article 2. Hereaf- 74 Article 6(1)(ae) of the Modernisation Directive.
ter: Modernisation Directive. 75 See e.g., Order of the Court of 7 March 2013, C-343/12, Euronics Belgium,
70 Directive 2011/83/EU of the European Parliament and of the Council of 25 ECLI:EU:C:2013:154, operative part.
October 2011 on consumer rights, amending Council Directive 93/13/EEC 76 Commission Staff Working Document – Guidance on the Implementa-
and Directive 1999/44/EC of the European Parliament and of the Council tion/Application of Directive 2005/29/EC on Unfair Commercial Practic-
and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the es, 133–134.
European Parliament and of the Council [2011] OJ L 304/64. 77 Cf. Article 7(5) UCPD.
71 Directive 2005/29/EC of the European Parliament and of the Council 78 Proposal for a Regulation of the European Parliament and of the Council
of 11 May 2005 concerning unfair business-to-consumer commercial on a Single Market For Digital Services (Digital Services Act) and amend-
practices in the internal market and amending Council Directive 84/450/ ing Directive 2000/31/EC, COM (2020) 825 final. Hereafter: proposed
EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European DSA.
Parliament and of the Council and Regulation (EC) No 2006/2004 of the 79 On the importance of such options for the exercise of autonomy, see:
European Parliament and of the Council (‘Unfair Commercial Practices Marijn Sax, Natali Helberger and Nadine Bol, ‘Health as a Means
Directive’) [2005] OJ L 149/22. Towards Profitable Ends: mHealth Apps, User Autonomy, and Unfair
72 Article 6(1)(e) CRD. Commercial Practices’ (2018) 41 Journal of Consumer Policy 103, 109.
 43 Algorithmic Price Discrimination and Consumer Protection TechReg 2022

in the CRD.80 The instrument gives consumers 14 days to change from respective pricing decisions, while conditions for valid consent
their mind about a contract concluded at a distance. Accordingly, a are subject to interpretation and, for now, have not prevented traders
consumer who later finds out about the same product being offered from resorting to manipulative interface design.88
at a lower price may decide to conclude a new contract and cancel the
Moreover, a question can be asked whether additional safeguards can
original transaction. Moreover, Article 14(3) CRD explicitly refers to an
be derived from Article 22(1) GDPR. This provision protects a data
“excessive price” in a situation where a consumer exercises the right
subject only in cases where a decision is “based solely on automated
of withdrawal in service contracts and claims a partial reimburse-
processing, including profiling, which produces legal effects concern-
ment. Specifically, under Article 14(3), if the total price is excessive
ing him or her or similarly significantly affects him or her.” It prohibits
the proportionate amount which consumers can be charged for their
such decisions unless based on the data subject’s explicit consent, or
use of services during withdrawal period is to be calculated on the
unless they are necessary for entering into or performing a contract,
basis of the market value of what has been provided. In PE Digital,
or unless they are authorized under Union or Member State law.89
a case involving a consumer who had found out about a lower price
In cases covered by Article 22(1) and (4) GDPR, the controller must
offered to other consumers, the Court of Justice stated that among
further disclose meaningful information about the logic involved, as
the criteria that need to be taken into account in assessing whether
well as the significance and envisaged consequences of automated
a price is excessive is “the price charged by the trader concerned to
processing for the data subject.90 It may appropriately be asked
other consumers under the same conditions”.81 In practice, however,
what decisions to price-discriminate will affect consumers in ways
consumers who are “locked” into their profiles may be unable to
significant enough to engage Article 22.91 The Belgian Data Protection
make such determinations, especially within the short window of time
Authority suggests that an advertisement that includes “a reduction
for exercising their withdrawal right.
and therefore a price offer” has a legal effect.92 From this perspective,
Aside from the consumer law stricto sensu, safeguards designed to it seems that according to the Authority, a price offer constitutes an
enable consumers to meaningfully exercise autonomy in a context invitation to enter an agreement, thereby giving rise to legal effects
of price discrimination could derive from Regulation 2016/679 on and making Article 22 applicable to a personalised price. However,
the protection of natural persons with regard to the processing of the Guidelines of Article 29 Working Party, endorsed by the European
personal data (GDPR).82 Indeed, the GDPR is broadly deemed to hold Data Protection Board, use a more specific example of automated
significant potential for complementing the EU consumer rules in the differential pricing resulting in “prohibitively high prices”.93 It thus
digital economy.83 Several recent studies assess the practice of price remains unclear in what cases explicit consent by the data subject
discrimination focusing specifically on the GDPR.84 Since algorithmic would be required and what the corresponding information duty
price discrimination rests upon the processing of personal data, would involve.
it must be supported by a sufficient legal basis, e.g., contractual
Direct reference to Article 22 GDPR is made in the preamble of
necessity, legitimate interests, or consent. Most authors agree that
Directive 2019/2161, through which the CRD came to include the
the type of processing at issue is unlikely to be considered necessary
previously mentioned duty to disclose price personalisation. What
for performing a contract and that the data subject’s interests can
this direct reference could suggest is that the EU legislature considers
override legitimate interests pursued by the controller.85 Accordingly,
the GDPR’s provisions on automated decision-making to be applica-
the data subject’s consent emerges as the least contentious basis
ble at least to some scenarios at issue.94 A definitive interpretation,
for lawful processing. Notably, for consent to be validly constituted,
however, is yet to be provided.
a number of conditions must be met. In particular, consent must
be freely given, specific, informed, and unambiguous and it cannot Finally, business conduct can be subject to a further control under
be pre-checked by default.86 Moreover, regardless of the legal basis rules prohibiting contractual exploitation and discrimination. As
for the processing, the data subject must be informed specifying, for the former, pricing conditions proposed to consumers could be
among other things, the purposes of processing and the existence deemed non-individually negotiated terms and could accordingly fall
of automated decision-making, including profiling.87 Consequently, within the purview of Directive 93/13/EEC on unfair contract terms
where personal data is processed with a view to personalising prices, (UCTD).95 However, the Directive explicitly excludes from the unfair-
the data subject should at a minimum be informed about the pur- ness test the definition of the main subject matter of the contract and
poses of processing and of its automated nature. Still, the relevant the adequacy of the price and remuneration as long as these terms
information and consent requests may remain contextually detached are stated in plain, intelligible language.96 The scope and nature of the
associated transparency requirements in the context of personalised
pricing have not been clarified in the scholarship or in the case law.
80 Article 9(1) CRD.
81 Judgment of the Court of 8 October 2020, C-641/19, PE Digital, paras. 16
and 36. 88 Natali Helberger and others (n 36) 30-40, 108-111.
82 Regulation (EU) 2016/679 of the European Parliament and of the Council 89 Article 22(2) GDPR.
of 27 April 2016 on the protection of natural persons with regard to the 90 Articles 13(2)(f) and 14(2)(g) GDPR.
processing of personal data and on the free movement of such data and 91 Alexandre de Streel and Florian Jacques, ‘Personalised Pricing and EU
repealing Directive 95/46/EC (General Data Protection Regulation) [2016] Law’ available at [Link] 13-14; Borgesius
OJ L 119/1. and Poort (n 40) 361-362.
83 See generally: Natali Helberger and Agustin Reyna, ‘The Perfect Match? 92 Commission for the Protection of Privacy Belgium, Opinion no. 35/2012,
A Closer Look at the Relationship Between EU Consumer Law and Data para. 80, available at [Link]
Protection Law’ (2017) 54 Common Market Law Review 1427. tions/[Link].
84 Richard Steppe, ‘Online Price Discrimination and Personal Data: A 93 Article 29 Working Party, ‘Guidelines on Automated individual deci-
General Data Protection Regulation Perspective’ (2017) 33 Computer Law sion-making and Profiling for the purposes of Regulation 2016/679’, as
& Security Review 768); Borgesius and Poort (n 40). last revised and adopted on 6 February 2018, 22.
85 Borgesius and Poort (n 40) 360; Steppe (n 84) 778–781. 94 Recital 45 of the Modernisation Directive.
86 Recital 32 and Articles 4(11) and 7 GDPR. See also: judgment of the Court 95 Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer
of 1 October 2019, C-673/17, Planet49, ECLI:EU:C:2019:801, para. 65. contracts [1993] OJ L 95/29.
87 Articles 13(1)(c) and 13(2)(f) GDPR. 96 Article 4(2) UCTD.
 44 Algorithmic Price Discrimination and Consumer Protection TechReg 2022

At the same time, it is worth noting that in the Ahorros case the Court vendors and consumers, in which consumers are likely to be on the
confirmed that the UCTD, as a minimum harmonisation directive, losing side. We suggest some possible countermeasures meant
does not rule out national legislation authorising judicial review as on the one hand to make the race more balanced by supporting
to the unfairness of contractual terms which relate to core terms, consumer empowering technologies and on the other hand to limit
even if they are drafted in plain, intelligible language.97 It follows that the battlefield through clearer and more effective constraints over
Member States are not precluded from providing for a substantive vendors’ practices.
fairness review of prices on an individual basis, but they cannot
introduce additional disclosure duties or per se prohibitions on unfair 6.1 Technological Countermeasures and a Digital
commercial practices that would supplement the CRD and the UCPD. Arms Race
The EU acts in question also leave unaffected other well-established As discussed, EU consumer law does not provide consumers with
doctrines of national contract law, such as unfair exploitation, yet it a sufficient protection in the context of algorithmic price discrimi-
is doubtful whether these provisions alone could provide a high level nation, while restricting the Member States’ scope of independent
of consumer protection across the EU. We nonetheless concede that action. Direct prohibitions of certain market practices in EU law are
there still remains scope for further research in this domain. rather limited, rarely relate to price-setting, and the UCPD pre-empts
further national bans. Other instruments of EU law largely rely on the
As regards the latter, a broad consensus exists that (algorithmic)
information paradigm, sometimes coupled with more robust instru-
discrimination on the basis of protected characteristics needs to be
ments enhancing consumer decision-making. The latter, however,
countered98 and that, for the time being, the EU legal framework fails
do not stem from consumer law stricto sensu as far as algorithmic
to adequately tackle the problem of discrimination via price-setting
price discrimination is concerned, but potentially can be derived from
algorithms.99 The corresponding legal scholarship appears to be
the GDPR, whose interpretation is not entirely settled. Accordingly,
maturing, and several “pathways to resilience” have been identified.100
consumer protection against the expansion of algorithmic pricing
Some of the questions that need to be addressed concern the iden-
may rely, in practice, on consumer-empowering technologies and
tification of socially salient groups (including complex problems of
initiatives.104
intersectionality and emergent discrimination), methods for effective
detection of disparate impact in online markets, and pro-active meas- Over the past several years, various online tools and initiatives have
ures to be taken at the programming stage to prevent discriminatory been developed on a bottom-up approach to protect consumers in
outcomes.101 However, a recent proposal for an Artificial Intelligence digital markets. It has been observed105 that consumer-empowering
Act addresses these problems only marginally, treating algorithmic technologies, relying particularly on AI, can protect consumers from
bias as an aspect of data governance and linking the envisaged obli- different technological threats, such as information overload, manipu-
gations only to high-risk systems.102 lation through multimedia messages and interfaces, the opacity of
unlawful practices, and discrimination. In the following we examine
As seen from above, market practices seem to substantially outstrip
some of these threats and outline some possible technologies which
the EU’s governing capabilities, which visibly struggles to develop
may be used to counter them.
a well-fitting regulatory toolbox. Moreover, at least in several fields,
Members States are hindered from acting independently, while in Information overload prevents consumers from making reasoned
others they are likely to provide incoherent responses.103 The lack of choices and makes them easily exploitable through targeted mes-
regulatory capacity to keep up with market practices fuels another sages. A technological answer to this threat consists in the use of
type of race: between the use of algorithms as market devices and natural language processing methods to isolate and understand
their use as instruments of consumer protection. relevant parts of online documents—such as product specifications,
terms of service, and privacy policies—and act upon them. Thanks
6. The Way Forward: A Digital Arms Race? to state-of-the-art techniques consumers can gain access to relevant
In this section we argue that in the absence of adequate regulatory information through information extraction, document classification,
and policy responses a technological arm race will emerge between and question answering. 106 In this way, consumers could benefit from
the wealth of information within their reach, just as many Internet
97 Judgment of the Court of 3 June 2010, C-484/08, Caja de Ahorros y Monte companies do.107
de Piedad de Madrid, ECLI:EU:C:2010:309, operative part.
98 See generally: Philipp Hacker, ‘Teaching Fairness to Artificial Intelligence: Manipulation through multimedia messages and interfaces is used to
Existing and Novel Strategies Against Algorithmic Discrimination Under capture consumers’ attention and to target them with stimuli capable
EU Law’ (2018) 55 Common Market Law Review 1143. of influencing their behaviour, as through micro-targeted advertis-
99 Raphaële Xenidis and Linda Senden, ‘EU Non-Discrimination Law in
the Era of Artificial Intelligence: Mapping the Challenges of Algorithmic ing.108 A technological response to this threat consists in the use of ad
Discrimination’ in Ulf Bernitz and others (eds), General Principles of EU
law and the EU Digital Order (Kluwer Law International 2020) 170. 104 See also Gal M and Elkin-Koren N, ‘Algorithmic Consumers’ (2017) 30
100 Raphaële Xenidis, ‘Tuning EU Equality Law to Algorithmic Discrimi- Harvard Journal of Law & Technology 309, 329, 331.
nation: Three Pathways to Resilience’ (2020) 27 Maastricht Journal of 105 Marco Lippi and others, ‘The Force Awakens: Artificial Intelligence for
European and Comparative Law 736. Consumer Law’ (2020) 67 Journal of Artificial Intelligence Research 169.
101 Solon Barocas and Andrew Selbst, ‘Big Data’s Disparate Impact’ (2016) 106 Consider, for instance, the Privacy Policy Project, available at [Link]-
104 California Law Review 671; Jon Kleinberg and others, ‘Discrimination [Link], the Polisis framework as reported in Hamza Harkous and
in the Age of Algorithms’ (2018) 10 Journal of Legal Analysis 113. others, ‘Polisis: Automated Analysis and Presentation of Privacy Policies
102 Proposal for a Regulation of the European Parliament and of the Council Using Deep Learning’ [2018] SEC’18: Proceedings of the 27th USENIX
Laying Down Harmonised Rules on Artificial Intelligence (Artificial Intel- Conference on Security Symposium 531.
ligence Act) and Amending Certain Union Legislative Acts, COM (2021) 107 Maartje Elshout and others ‘Study on Consumers’ Attitudes Towards
206 final. See, in particular, Article 10 of the proposal. Terms Conditions (T&Cs) Final Report’ (2016), available at [Link]
103 Consider, for example, the objection of Poland to the EU Presidency con- [Link]/s/pkuF.
clusions ‘The Charter of Fundamental Rights in the context of Artificial 108 Jack M. Balkin, ‘Fixing Social Media’s Grand Bargain’ (2018) Hoover
Intelligence and Digital Change’ (11481/20) due to the use of the term Working Group on National Security, Technology, and Law, Aegis Series
“gender equality”. Paper 1814; Shoshana Zuboff, ‘Big Other: Surveillance Capitalism and the
 45 Algorithmic Price Discrimination and Consumer Protection TechReg 2022

blockers and antitracking technologies. Thanks to AI, more powerful signalling such aggressive commercial practices to the consumers
and selective consumer-friendly tools could be developed. Consumer concerned. Manipulation is also prevented to the extent that anti-
devices could extract relevant elements from the ads a particular tracking tools can disable the collection of consumers’ data, thereby
consumer is shown, such as images, videos, or audio signals, like preventing this information from being used to price-discriminate.
the voice of personal assistants making product recommendations. Such tools, however, may bump up against tracking walls put up by
These elements could then be further processed through techniques providers, requiring users to accept data collection as a condition for
such as image classification or object detection to understand accessing services and platforms.
whether certain strategies are aggressive, misleading, or discrimina-
Opacity in contracts including individualised price offers can be
tory. On this basis, unwanted, unlawful, or inappropriate messages
addressed by using comparison tools in combination with systems
can be blocked and filtered out.
for detecting unfair clauses and data processing practices. Automated
The opacity of unlawful practices makes it difficult for individuals to bots could be built that engage with the same or different vendors,
be aware of and consequently react to such practices. This threat can hiding user data, or even acting under fake identities, to determine
be countered by examining texts produced by vendors and platforms whether vendors provide differentiated prices based on different
(e.g., terms of service and privacy policies) as well as data flows. users’ characteristics. The law might encourage this practice pro-
Through natural language processing technologies, texts can be ana- viding immunity to researchers, activists, governmental authorities,
lysed to detect unlawful or unfair content.109 Similarly, data flows can and possibly also to the general public.113 To be effective, such tools
be analysed by comparing normative standards with real practices, should have the ability to examine vendors’ pricing policies, or at
as by comparing the information regarding the data actually collected least to make queries to the vendors’ websites using multiple fake
and shared with the information extracted from the privacy policies identities. Discrimination in prices can also be countered by “watch-
using natural language processing.110 dog” systems to detect instances where similar products are differen-
tially priced across different groups of people.114
Discriminatory practices can undermine the welfare and social stand-
ing of groups of consumers. This threat can be detected by tools that These developments on the consumers’ side can be countered—and
visit multiple services, using different identities, collect results, and will be countered to a greater extent in the future—by technologi-
examine them using statistical and other methods to detect differen- cal tools available to vendors. The latter have already shown much
tial treatment.111 The methods just described can be used to detect inventiveness and legal and technological skill in developing methods
instances of price discrimination and to prevent or react to it. and tools for enticing consumers. Indeed, consumers are subject to
intensive data collection which they are led to accept through mis-
For instance, information overload concerning prices can be coun-
leading interfaces, what are known as “dark patterns”.115 Consumers
tered through price comparison tools enabling consumers to search
are targeted by personalised persuasive messages often leading them
for better offers when receiving a personalised price. Online tools
to make choices against their best judgement. Such messages are
monitoring price trends already exist today and can certainly be of
designed and selected using the most advanced machine-learning
added value to consumers. Better tools can be built that provide
methods. Vendors’ systems are protected by both intellectual prop-
consumers with benchmark prices for their decision-making, and
erty law and software barriers preventing any inspection. The com-
possibly guide them towards available responses (e.g., withdrawing
plexity of the online information environment, and protection against
consent to the processing of personal data, objecting to automated
the use of fake identities, makes it difficult to engage in comparative
decision-making, withdrawing from a contract). Pricing information
analysis to detect discrimination and unfairness. A further evolution
extracted from multiple websites could be analysed through AI to
of markets towards more prevalent personalisation of prices is also
determine a fair market value, considering as well as the trustwor-
supported by the growing role of voice-operated personal assistants,
thiness of vendors.112 To enable consumers to trust such tools, their
which enable a pervasive collection of data, in context in which con-
functioning needs to be monitored with regard to the transparency
sumers can exercise little control.116
and impartiality of the information being provided.
The trend just presented can be described as a “digital arms race”
Manipulation inducing consumers to accept an individualised price
between the use of algorithms as market devices and as consumer
(e.g., through multiple limited-time offers) can be countered by
protection tools: consumers and vendors are pushed toward increas-
ingly performing technologies in order to resist their counterpart.
Prospects of an Information Civilization’ (2015) 30 Journal of Information However, it is unlikely that this trend will develop in such a way to
Technology 1; Sofia Grafanaki, ‘Autonomy Challenges in the Age of Big
reduce the current imbalance between the two parties, given the com-
Data’ (2016) 27 Fordham Intellectual Property, Media & Entertainment Law
Journal 803. mercial side’s greater financial and technological power.
109 Marco Lippi and others, ‘CLAUDETTE: An Automated Detector of
Potentially Unfair Clauses in Online Terms of Service’ (2019) 27 Artificial
In the next two sections we argue that to ensure a more balanced
Intelligence and Law 117; Federico Ruggeri and others, ‘Detecting and Ex- outcome, a new regulatory approach is needed pursuing two comple-
plaining Unfairness in Consumer Contracts Through Memory Networks’ mentary goals: to make the “digital arms race” more balanced and
(2021) Artificial Intelligence and Law, available at [Link]
s10506-021-09288-2.
110 See Lisa M. Austin and others, ‘Towards Dynamic Transparency: The 113 For a similar approach relating to copyright, see Maayan Perel and Niva
AppTrans (Transparency for Android Applications) Project’ (2018), Elkin-Koren, ‘Black Box Tinkering: Beyond Disclosure in Algorithmic
available at [Link] Peter Story and others, Enforcement’ (2017) 69 Florida Law Review 181.
‘Natural Language Processing for Mobile App Privacy Compliance’ [2019] 114 Kleinberg (n 101) 113–174.
AAAI Spring Symposium on Privacy-Enhancing Artificial Intelligence and 115 Natali Helberger and others (n 36) 108-111; Jamie Luguri and Lior Jacob
Language Technologies. Strahilevitz, ‘Shining a Light on Dark Patterns’ (2021) 13 Journal of Legal
111 Hannak and others (n 22) 305; Mikians and others (n 23) 79–84. Analysis 43.
112 Derek Robert Haake, ‘Method for Aggregating Pricing Information and 116 See generally: Maurice E Stucke and Ariel Ezrachi, ‘How Digital As-
Assigning a Fair Market Value to Goods Sold in a Peer-to-Peer E-Com- sistants Can Harm Our Economy, Privacy, and Democracy’ (2017) 32
merce Transaction’ US Patent App. 13/537,012. Berkeley Technology Law Journal 1239.
 46 Algorithmic Price Discrimination and Consumer Protection TechReg 2022

to limit the battlefield. The former can be achieved by strengthening Even though information about such main parameters may often
the digital tools available to consumer-protection actors; the latter, by seem superfluous, in the context of algorithmic pricing such details
clarifying and refining the applicable rules and defining clear catego- could actually prove valuable to consumers. Alternatively, consum-
ries of impermissible behaviour. ers’ autonomous decision-making could be enhanced by explicitly
requiring traders to disclose a reference price, e.g., the “impersonal
6.2 Making the Race More Balanced price”.119 Should the disclosure duty about personalised prices be
Looking at the broad landscape of algorithmic pricing, it becomes revisited, we suggest that violations of it should carry not only to
apparent that one party—the consumer—is the one with particularly possible consequences under the UCPD,120 but should also entitle
scarce information. Merchants making use of dynamic prices benefit consumers to an extended withdrawal period.121
from a knowledge of the prices charged by competitors and of other
Recent proposals on recommender systems made as part of the
market conditions. In particular, algorithmic price discrimination is
Digital Services Act deliver further food for thought as to how the
supported by wide-scale (personal) data gathering and knowledge
information paradigm can be combined with more robust tools for
generation. Consumers, by contrast, do not have access to equivalent
escaping personalised outcomes. In the context of price discrimina-
information about their commercial counterpart, and may not even
tion, a similar role could be played by Article 22 GDPR, which as we
be aware of the fact that they are being treated to personalised offers.
saw only covers automated decisions having a legal effect on data
However, much can be done to address this digital asymmetry, not
subjects or similarly significantly affecting them. It is thus necessary
just through more regulation but also by promoting technology. As
to clarify the extent to which that provision can be brought to bear
noted, consumers and consumer-protection actors could gradually
on price-setting. As seen from the previous analysis, interpretation of
arm themselves with digital tools with which to counter the position
this aspect of the GDPR—along with the question of the legal basis
of power held by producers and intermediaries.117
available for corresponding data processing and the right to withdraw
To make the digital arms race more balanced, the development of from a contract—is central to the consumer’s ability to act on the
consumer-protection technologies must be accelerated, with the information about a merchant’s recourse to price discrimination.
support of the law- and policy-makers. The unexploited potential of
Finally, categories of impermissible behaviours, and their respective
such technologies, including the especially advanced ones relying on
consequences, could be more clearly set out.122 This includes, for
AI, remains significant.
example, price discrimination that negatively affects consumers on
Possible initiatives include fostering collaboration between research- the basis of their identified vulnerabilities or of protected characteris-
ers and practitioners, creating novel funding schemes and, more tics, or that does not rely upon valid consent. Further, it is also worth
broadly, changing the way we as a society think of AI’s relation to con- considering innovative regulation in the form of personalised price
sumers. There is a need to develop measures by which to incentivize caps,123 among other examples.
partnerships between research centres and administrations, as by
As the EU framework on personalised prices becomes increasingly
launching new funding programmes specifically designed to support
settled, questions about viable approaches to compliance moni-
projects providing consumer-empowerment technologies to be used
toring will grow in prominence. The proposed Digital Services Act
not only by consumers but also by consumer organizations and by
lays the groundwork for this development, particularly with respect
public sector bodies. We believe that active empowerment needs
to very large online platforms.124 Fostering “innovative e-tools” for
strategic policies in order to become a reality. For example, a much-
online investigations also forms part of the New Consumer Agenda,
needed policy intervention could consist in incentivizing start-ups to
announced by the Commission in late 2020.125 In this respect, a
work on consumer-empowering AI.
distinction will need to be made between detecting objectionable
6.3 Limiting the Battlefield decisions, on the one hand, and identifying nondisclosure, on the
other. As for the former, counteracting discrimination on the basis of
The second goal that, we believe, ought to be pursued by the EU reg-
protected characteristics remains a challenge to be tackled in connec-
ulators relates to the battlefield itself. The first step towards this goal
tion with algorithmic prices and beyond. In both respects, attention
consists in clarifying the rules that are currently in force. As we have
need to be paid to the potentially new distributive effects that may
seen, this is especially the case for different duties to inform and for
emerge as technology, regulation, and markets evolve. When relying
requirements restricting the processing of personal data. Interpreta-
on disclosure and consumer empowerment, regulators should
tion of these two types of measures with respect to algorithmic price
remain mindful of parties who are vulnerable due, for example, to
discrimination should be elaborated upon in order to strengthen con-
limited digital competences associated with age or lower socioeco-
sumer protection de lege lata and lay the groundwork for a possible
nomic status.
legislative reform.
As noted in Section 5, the Modernisation Directive has amended the
CRD by introducing a duty to inform consumers when prices are per- ulation (EU) 2019/1150 of the European Parliament and of the Council of
sonalised based on automated decision-making. However, contrary 20 June 2019 on promoting fairness and transparency for business users
to the proposal from the European Parliament, the EU legislature has of online intermediation services [2019] OJ L 186/57; Article 29 of the
proposed DSA.
decided not to introduce any additional requirement for merchants 119 Esposito (n 49).
to disclose the main parameters underlying their pricing decisions. 120 See: Article 7(5) UCPD.
This remains at odds with a regulatory tendency that can otherwise 121 This consistently with existing rules on the omission of information
be observed where numerous duties are being introduced requiring about withdrawal right (Article 10 CRD).
122 Similarly: Natali Helberger and others (n 36) 79.
information to be provided about the main parameters used in auto- 123 Bar-Gill (n 13) 243–244.
mated decision-making (e.g., ranking of offers or search results).118 124 Section 4 of the proposed DSA.
125 Communication from the Commission to the European Parliament and
117 See generally: Lippi and others (n 105) 169. the Council: New Consumer Agenda Strengthening consumer resilience
118 Articles 3(4)(b) and 4(5) of the Modernisation Directive; Article 5 of Reg- for sustainable recovery, COM (2020) 696 final, 15.
 47 Algorithmic Price Discrimination and Consumer Protection TechReg 2022

7. Conclusions Copyright (c) 2022 Mateusz Grochowski, Agnieszka Jabłonowska,

Francesca Lagioia & Giovanni Sartor
Algorithmic price calculation challenges the classic ideas of market
and transactional fairness: an individual price is no longer based on
market valuations, nor does it necessarily settle at the point where
Creative Commons License
supply meets demand. The price is rather determined by the way a
machine correlates the characteristics of individuals with their will-
ingness to pay. Moreover, individuals may be offered prices that build
This work is licensed under a Creative Commons Attribu-
on biases embedded in the collection of data or in the design of the
tion-Non-Commercial-NoDerivatives 4.0 International License.
algorithm.
On top of these problems, algorithmic price determination also raises
a fundamental question about private autonomy in online contract- Technology and Regulation (TechReg) is an open access journal
ing. The current development of algorithms seems to validate the which means that all content is freely available without charge to the
claim that the notion of autonomy is increasingly crossing categorial user or his or her institution. Users are permitted to read, download,
boundaries. It encapsulates richer concepts of fairness and self-deter- copy, distribute, print, search, or link to the full texts of the articles,
mination and relates them to a broader set of ethical premises than or to use them for any other lawful purpose, without asking prior
the classic accounts of contractual fairness. At the same time, nowa- per-mission from the publisher or the author. Submissions are pub-
days it seems rather clear that algorithmic pricing cannot ensure fair lished under a Creative Commons BY-NC-ND license.
and bias-free valuations of goods and services on the consumer mar-
ket. In particular, the practice of price discrimination raises two basic
concerns. First, it may decrease consumer welfare, setting prices at
a higher median point than in fixed-price commerce. Second, it may
build on discriminatory premises, negatively affecting consumers in a
situation of need and lack of knowledge. For all these reasons, algo-
rithms may exacerbate pre-existing inequality and injustice.
As shown above, the current framework of EU consumer law does
not adequately address algorithmic pricing, and in many domains it
may in fact restrict the Member States’ scope of independent action.
Moreover, the vastly inferior financial and technological resources
available to consumers make it difficult for them and for consumer
organisations to effectively respond to the power exerted on the
market side. The ensuing “digital arms race” between consumers
(supported by regulators and civil society) and suppliers (supported
by platforms and marketers) therefore remains unbalanced.
This calls for a two-pronged regulatory response by which to level the
playing field. And to this end, in the effort to achieve a satisfactory
equilibrium, it will be necessary to enact policies pursuing two main
goals: to make the “digital arms race” more balanced and to limit the
battlefield. The former can be achieved by strengthening the digital
tools available to consumer protection organizations and authorities;
the latter, by clarifying and refining the applicable rules and defining
categories of impermissible behaviour.