Consumer watchdog calls for major reforms to customer loyalty programs

ACCC says improvements to customer loyalty programs and broader legislative reforms needed to protect consumers in its final report tabled today

The data practices of loyalty programs must stop automatically linking members’ payment cards to their loyalty scheme profiles and changes are needed consumer and privacy law, according to the Australian Competition and Consumer Commission’s (ACCC) final report into customer loyalty schemes.

“We are calling on companies that offer loyalty schemes to improve both their data practices and how they communicate with consumers, to help consumers understand how these programs operate,” said ACCC chair, Rod Sims, said upon releasing the final report today.

The consumer watchdog said it’s also concerned about consumer profiling based on the data collected by some schemes, including through the sharing of consumer insights with third parties, which could result in consumers receiving increasingly targeted advertising and consumers being offered different prices for an identical product or service.

Sims said consumers have expressed concerns about receiving offers from companies they have not dealt with before and a real risk of consumer harm from being charged inflated prices based on profiling derived from their data.

“If a person’s frequent flyer data or online search history indicates they can only travel on certain dates, or otherwise based on their income, geographic location or other information collected through the loyalty scheme they may be charged extra,” he said.

In the wider context, the ACCC has major concerns about the privacy policies of loyalty programs being very vague and seeking broad consents and discretions from consumers about how they’re going to collect, use and disclose their data.

Sims said consumers would be shocked to find some supermarket schemes collect customers’ data at the checkout even when they do not present their loyalty cards by tracking customers’ credit or debit cards from previous transactions.

“When a customer chooses not to present their loyalty card, we think it is reasonable that they would not expect their data to be collected for that transaction, and we are therefore calling on the relevant schemes to stop this practice,” he stated.

The ACCC commenced its review of customer loyalty schemes in early 2019 after competition and consumer issues arising from these schemes were announced as a 2019 priority. The draft report was issued in September, to which several schemes responded. The ACCC and the various state and territory Australian Consumer Law (ACL) regulators received about 2000 reports about loyalty schemes in the five years to December 2018.

Some loyalty program operators made changes after the ACCC commenced its review and released its draft report. However, the ACCC said it remained concerned about certain practices that a number of loyalty schemes continue to engage in.

Furthermore, the ACCC said its report reinforces recommendations from its Digital Platforms Inquiry Final Report regarding privacy and consumer law, such as prohibiting unfair contract terms and introducing new laws against certain unfair trading practices.

“Our recommendations would protect consumers and help ensure consumer trust in loyalty schemes, in the digital economy and in data-based innovation, which is a benefit for the broader economy,” Sims said.

Follow CMO on Twitter: @CMOAustralia, take part in the CMO conversation on LinkedIn: CMO ANZ, follow our regular updates via CMO Australia's Linkedin company page, or join us on Facebook: https://www.facebook.com/CMOAustralia. 

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.
Show Comments

Blog Posts

Taking performance cues from east Asian markets

As the ‘Asian century’ becomes ever more prevalent and the Fourth Industrial Revolution gathers speed, marketers are having to surf a tidal wave of creative destruction. The choice is stark: Embrace change, or resign yourself to a Darwinian fate.

Dr Chris Baumann

Associate professor, Macquarie University

Searching for social and marketing data

Many marketers, agencies - and everyone in between - get caught up on bubble references and data points. They’ll use Facebook best practice as the only best practice for Facebook executions and only consider metrics and responses of the one channel they’re expected to deliver on.

Isaac Lai

Connections strategy lead, VMLY&R Sydney

Why Australia needs more leaders

A few weeks ago, our Prime Minister, Scott Morrison took it upon himself to tell companies and their CEOs where to go when it came to societal issues. It wasn’t an organisation’s place to get involved. Instead, he said it should be left to governments to solve societies challenges.

Dan Banyard

Managing director, Edentify

Congratulations! So good to see a business turnaround with a good omni channel email lead strategy.Antanthonyidle.com

Anthony Idle

How Total Tools overhauled its omnichannel marketing

Read more

Well, you can always improve your service. Your customers will appreciate your efforts.

Mike Thompson

Report: Australian customer experience good but not great

Read more

Thanks for sharing! Terracotta Jewellery Online Shopping Ethnic Jewellery Online Shopping

Cotton Sarees Online

How data is driving the customers of a lifetime for BaubleBar

Read more

Informative blog. Xero is a well-known revolutionized accounting software, specifically developed to provide best User Experience and mak...

NavkarConsultancyServices

Xero evolves to fit a changing marketplace

Read more

>Writes article about how to show diversity in an authentic way>All featured opinions are from white women

Jennifer Metcalfe

Food for Thought: How can brands show diversity in an authentic way?

Read more

Latest Podcast

More podcasts

Sign in