Study says consumers not aware: Internet sites offer different prices based on shopping habits

WASHINGTON - Most American consumers don't realize Internetmerchants and even traditional retailers sometimes charge differentprices to different customers for the same products, according to anew survey.

The study, "Open to Exploitation," found nearly two-thirds ofadult Internet users believed incorrectly it was illegal to chargedifferent people different prices, a practice retailers call "pricecustomization." More than two-thirds of people surveyed also saidthey believed online travel sites are required by law to offer thelowest airline prices possible.

The study, expected to be released today by the Annenberg PublicPolicy Center of the University of Pennsylvania, is the latest tocast doubt on the notion of sophisticated consumers in the digitalage.

It said 87 percent of people strongly objected to the practice ofonline stores charging people different prices for the same productsbased on information collected about their shopping habits.

"I don't think people understand this is being done," said WilliStabenau, 23, a musician in New York who participated in the survey.

"We don't let ourselves be tracked that way in any other facet ofour lives. Why would you want that to happen while you're shopping?"

The Internet empowers careful shoppers to conveniently compareprices and features across thousands of stores. But it also enablesbusinesses to quietly collect detailed records about a customer'sbehavior and preferences and set prices accordingly. Changing pricesis generally lawful unless doing so discriminates against aconsumer's race or gender or violates antitrust or price-fixing laws.

Stabenau said he shops online frequently but always remembers:"They're after your money, and you want to spend as little aspossible."

"People are fooling themselves if they believe otherwise,"Stabenau said.

Stores aggressively try to retain loyal customers who generate thehighest sales while discouraging bargain-hunter shoppers who are lessprofitable because they check many sites for the same product at thelowest price. They are known within the industry as "bottom feeders"who don't show any brand or merchant loyalty.

First-time buyers at a retailer could see higher prices than afirm's repeat customers, and retailers may not offer discounts toconsumers who buy the same brands regularly without even looking atalternative products on the same site.

"It's really murky because companies are so loathe to discussthis," said researcher Joseph Turow. "This is a new model of shoppingreality. The question becomes, what do people feel is right? Can'tmore openness be the order of the day?"

The study urged government to require retailers to discloseexactly what information is collected about customers and how thedata is used, and it urged schools to teach students better how toprotect themselves as consumers.

Turow found a retail photography Web site charging differentprices for the same digital cameras and related equipment dependingon whether shoppers had previously visited popular price-comparisonsites.

He said grocery stores increasingly offer personalized discountsand coupons based on a person's shopping behavior.

Amazon.com outraged some customers in September 2000 after onebuyer deleted the electronic tags on his computer that identified himas a regular customer and noticed the price of a DVD changed from$26.24 to $22.74. The company said it was the result of a randomprice test and offered to refund buyers who paid the higher prices.

The Annenberg study was based on results from a telephone surveyfrom Feb. 8 to March 14 of 1,500 adults who said they had used theInternet within the past 30 days. The margin of sampling error wasreported to be plus or minus 2.51 percentage points.