Punish price discrimination the way Shenzhen is planning to

Shenzhen recently solicited public opinion on a draft data regulation, which, if approved, will impose on companies up to 50 million yuan ($7.8 million) or less than 5 percent of the previous year’s turnover as penalty for discriminatory pricing using big data — the highest such penalty in the world.

Big data-based price discrimination is the use of big data to study consumer behavior through artificial intelligence, personalized display and consumption capacity prediction, to implement differential pricing.

Important conditions should be imposed on differential pricing. A platform should first have the provision for data collection and analysis, including its own data and the data from other platforms obtained by means of open program interfaces. Based on data analysis, artificial intelligence carries out differentiated marketing through consumption prediction and classification of consumer goods’ prices. Consumer information can be obtained through user behavior data, consumption records, financial status and other identity information.

Under the Civil Code, however, internet users have the right to make their own decisions on what constitutes personal information. Also, the use of consumption data by platforms and other information processors should conform to the basic principles of legality, legitimacy and necessity; they should not go beyond the normal scope of data collection, analysis and use.

The second draft of the Personal Information Protection Law also makes clear the legal obligations for personal information data exchanges on open platforms and stipulates that the acquisition of user data will be subject to both commercial ethics and legal constraints.

Price discrimination based on big data amounts to infringement of consumers’ right to know, right to choose independently and right to fair trade.

Shenzhen’s regulation is expected to put an end to big data-based price discrimination, in that it not only safeguards the rights of users and market competition order, but also cracks down on basic service platforms abusing their monopoly to make higher profits, and penalizes the abuse of data or data monopolistic behaviors. It must be pointed out that no matter how high the penalty, it does not affect the rights of consumers to file a civil lawsuit in accordance with the Consumer Protection Law, the E-commerce Law and the Civil Code if they are subjected to price discrimination. If Shenzhen’s regulation is implemented, price discrimination will attract multi-layered punishment. Hopefully Shenzhen’s draft regulation is approved and more regions follow suit.