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

Latest Videos

Conversations over a cuppa with CMO: ABC's Leisa Bacon

In this episode of Conversations over a Cuppa with CMO, ABC's director of audiences, Leisa Bacon, shares how she's navigated the COVID-19 crisis, the milestones and adaptability it's ushered in, and what sustained lessons there are for marketers as we start to recover.

More Videos

Remote working has gained a lot of attention in the past few months. And the key driver to the smooth workflow of remote working is obvio...

varun

How to manage social media during Covid-19

Read more

Hi everyone! Hope you are doing well. I just came across your website and I have to say that your work is really appreciative. Your conte...

Rochie Grey

Will 3D printing be good for retail?

Read more

Zero proof spiritsUsa since 2011 www.arkaybeverages.com🤪🤟

Sylvie

How this alcohol-free spirits brand rode the health and wellness wave

Read more

okay this a good newsmaybe i gonna try it

kenzopoker1

CMO's top 8 martech stories for the week - 9 July 2020

Read more

Very insightful. Executive leaders can let middle managers decide on the best course of action for the business and once these plans are ...

Abi TCA

CMOs: Let middle managers lead radical innovation

Read more

Blog Posts

Why CMOs need a clear voice strategy to connect with their customers

Now more than ever, voice presents a clear opportunity to add value to an organisation in many ways. Where operational efficiencies are scrutinised, budgets are tighter and discretionary consumer spend at a low, engaging with an audience is difficult.

Guy Munro

Head of innovation and technology, Paper + Spark

MYOD Dataset: Building a DAM

In my first article in this MYOD [Make Your Organisation Data-Driven] series, I articulated a one-line approach to successfully injecting data into your organisation’s DNA: Using a Dataset -> Skillset -> Mindset framework. This will take your people and processes on a journey to data actualisation.

Kshira Saagar

Group director of data science, Global Fashion Group

Business quiet? Now is the time to review your owned assets

For businesses and advertiser categories currently experiencing a slowdown in consumer activity, now is the optimal time to get started on projects that have been of high importance, but low urgency.

Olia Krivtchoun

CX discipline leader, Spark Foundry

Sign in