Will Customer Data Be Used to Determine Level of Service?

By Jonathan Zittrain

PAGE 3

How long before brick-and-mortar stores start using their frequent-shopper cards and accounts to determine whom to rush to on the sales floor and whom to politely ignore? This happens often enough, when the well-dressed shopper is distinguished from the scruffier one, and many are not offended at the merchant’s behavior. But at some point a difference in degree can become a difference in kind, and we will find ourselves in a world in which we are instantly and pervasively graded, and treated in accordance with our finely grained economic rank. A Home Depot, online or off, can become as picky as the bouncer outside a Beverly Hills nightclub where velvet ropes lift and fall like a round of London Bridge.

Economists debate whether price discrimination, and its companion, service discrimination, are good things. Airline executives can make a persuasive case that without it there would be far fewer people who could avail themselves of a flight as prices converged to some sort of average.

To be sure, the ability to click comparatively from one site to another on the Web might keep prices down for everyone. Jumping from Amazon.com to Barnesandnoble.com is easier than clipping a coupon. But some customers really are worse than others; they return products more frequently or buy only the underpriced "loss leader" items, failing to return for the other goods in the store for which the loss leaders were intended as bait. This is a long-acknowledged drawback for business, but rarely has it been punished, until now. Anecdotal accounts?derived from the transactions of a student research assistant who is as frugal as he is sharp?suggest that at least one popular Web merchant has begun to refuse to deal with people deemed unprofitable. Their order requests are denied, even when accompanied with a valid credit card number.

As we hurtle toward a caste system in which each of us stands to be judged and treated in accordance with our tabulated station, we should consider: Is it the mere existence of a grocery store’s long line that annoys us, or the fact that another line moves faster than ours? Should we tolerate the kind of thing that is already happening to us in the air as we sort ourselves among economy, business and first?

The solution may lie in a new sort of public accommodation doctrine, through which consumers could expect roughly equal treatment when purchasing the same products or services. Alternatively, a set of full disclosure rules could require companies to disclose the range of prices for which a given product or service is offered and why, not unlike the requirement by which food manufacturers must list the ingredients on packages. At the very least, attempts to build architectures that allow ready price comparison?like Bidder’s Edge or Pricescan.com?should not be precluded through legal maneuvers.


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