We've all heard the adage: The easiest way to start a fight on a plane is to ask the person next to you how much they paid for their ticket. We're so used to airlines charging passengers different amounts for essentially the same seats that we don't even discuss it.
Dynamic pricing, known also as price discrimination, is the practice of charging different prices for identical products. So is it legal for airlines and other companies to engage in price discrimination?
Illegal Price Discrimination
Price discrimination is illegal if it is based on impermissible factors like race, gender, religion, or nationality. So stores can't charge men and women different prices for the same product.
Dynamic pricing can also be illegal if it violates antitrust laws. The Robinson-Patman Act is the federal antitrust statute concerned with price discrimination, which covers:
- Sales (meaning there has to be more than one sale to different customers)
- In commerce (meaning interstate commerce where the goods have crossed state lines)
- Of commodities (meaning tangible goods)
- Of similar quality (meaning the products sold are reasonably interchangeable).
In order to prove an antitrust violation, a consumer also has to demonstrate that the price discrimination injured his or her ability to compete for fair prices. So the Act rarely applies in the modern, online marketplace.
Legal Forms of Price Discrimination
It's perfectly legal to charge different customers different prices in most instances. Websites can even track their customers' habits and change their prices accordingly. For instance, while repeat customers can be offered discounts for loyalty, some companies will charge more based on how many times you've visited the site (like airlines upping the price if you've previously searched for the same flights). All of this is perfectly legal, so long as it's not based on “suspect categories” like race.
Before implementing your own dynamic pricing model, you may want to consult with an experienced business attorney to make sure your form of price discrimination is legal.