ACCC puts companies on notice over loyalty schemes

Liz Main

Sep 5, 2019

AFR

The competition regulator has put big business on notice over loyalty programs that misled consumers about how easy it is to earn and redeem points and include unfair terms including about how their data is sold.

ACCC chairman Rod Sims has warned customers may be shocked to learn how their data is used. Eamon Gallagher

Almost nine out of 10 people are members of a customer loyalty program, and the average person carrying between four and six loyalty cards in their wallet when they hit the shops.

The Australian Competition and Consumer Commission has significant concerns that businesses are not being forthright with customers about how their information is sold to third parties.

“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,” ACCC chairman Rod Sims said in a statement releasing a draft report on Thursday.

“Selling insights and access to loyalty scheme members are becoming increasing sources of revenue.”

Some businesses have cashed in up to $370 million in earnings through their customer loyalty programs, according to the Australian Competition and Consumer Commission.

The ACCC and other regulators have received about 2000 complaints from consumers about customer loyalty programs over the past five years to December 2018.

Loyalty schemes are offered by customer-facing businesses such as supermarkets and other retailers, frequent flyer programs and credit card companies.

The ACCC released a draft report on Thursday morning which called on businesses offering loyalty schemes to ensure they are not misleading customers.

The report has raised concerns that some businesses have failed to adequately disclose how consumer data is used and shared, including selling consumer data to third parties without the customer’s knowledge.

“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,” Mr Sims said.

The ACCC also raised concerns over consumers not receiving the perks advertised by loyalty programs, poor communication about how the schemes work, and changing the terms and conditions of the programs.

The ACCC will accept comments on the draft report until October 3. It plans to release a final report late this year.