The ACCC has released for comment its draft report into customer loyalty schemes, which has highlighted a number of concerns from the competition regulator.
The regulator said that customer loyalty schemes, including frequent flyer, supermarket and credit card operators, must ensure they are not misleading consumers.
The ACCC’s Customer Loyalty Schemes draft report highlights a number of concerns:
- whether consumers receive the benefits advertised by loyalty schemes
- unilateral changes by loyalty schemes to their terms and conditions, and poor communication about how their schemes work
- poor disclosure about how consumer data is used and shared, including selling insights from consumer data to other parties without consumer knowledge and
- the sharing of consumer data with unknown third parties.
The draft report shows almost nine in ten adults are members of a loyalty scheme, with the average Australian carrying between four to six loyalty cards. Some of the most popular Australian loyalty schemes report having more than 10 million members.
“The privacy policies of these schemes are frequently very vague and don’t tell consumers who their data is being shared with or how it is being used, shared or monetised,” ACCC Chair Rod Sims said.
“The data that loyalty schemes collect can be used to profile consumers and produce insights about their purchasing behaviour. These insights about consumers may then be shared with or sold to third parties.”
“Consumers may also be shocked to find that some schemes collect their data even when they don’t scan their loyalty cards, or that they combine it with data from other sources that they might not even be aware of.”
Loyalty schemes can contribute to a significant proportion of a company’s profits. Some loyalty schemes generate $110 million – $370 million in earnings each year.
“Most people think they are being rewarded for their loyalty with discounts or points, but in reality some schemes are building up detailed profiles about consumers and selling those insights to other businesses. Selling insights and access to loyalty scheme members are becoming increasing sources of revenue,” Sims said.
He added: “Loyalty scheme operators must ensure they comply with the Australian Consumer Law, including by avoiding statements that are incorrect or likely to create a false impression, and avoiding unfair contract terms.”
“Loyalty schemes also need to review the way they explain to customers how their schemes work, and how they notify their consumers of any reductions to the benefits offered.”
“Having put loyalty operators on notice, we call on consumers to contact the ACCC to report concerns. The ACCC will consider these concerns in deciding whether enforcement action will be required to effect broader change.”
Anyone wishing to comment on the draft report can head to the ACCC website.