"Price 'Test' Triggers Outrage On Internet" Term Paper

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"Price 'test' triggers outrage on Internet"

Will dynamic pricing become the next trend in e-commerce? Maybe, to unsuspecting consumers, it already is. The Internet provides consumers with many shopping advantages including the ease and availability of shopping from home, and the benefit of easily comparing merchandise and prices at various online retail locations. Dynamic pricing is a process where retailers (in this case, online) adjust their pricing according to information directly related to the purchasing consumer, or the conditions around them. An example of dynamic pricing in the physical world might be the local coffee shop charging more for hot coffee in the wintertime. This seems rather harmless, does it not? In e-commerce this kind of price fi is worrisome because of the type of information a web site developer can retrieve from, or add to a visitor's computer using a variety of programming tools. There are few laws or regulations governing the use of the Internet, or protecting consumers' privacy. This creates a wide open door for online marketing schemes that take advantage of, or deceive the consumer.

David Sheffield, or the Washington Post, writes that Amazon.com, one of the leading online retailers, has been implementing a questionable pricing test. Using advanced technology, Amazon was able to place an electronic tag into the computer systems of all their web site visitors. When a consumer visited their web site, it would look for that tag on the visitors system to see if the visitor is a new or existing customer. By knowing this, the site would know what prices to display. Though one would think the repeat customer would benefit from this by getting price breaks, it was actually just the opposite. Amazon.com was charging higher prices for returning customers!

Bill Curry, spokesman for Amazon.com, is quoted as saying the price test "was done to determine consumers' responses to different discount levels." However, in an email exchange with a DVDTalk member, an Amazon customer service representative stated "I would first like to send along my most sincere apology for any confusion or frustration caused by our dynamic price test". Whether it was dynamic pricing, or not, the deeper issue of consumers' online privacy still remains.

Amazon.com was able to perform this "price test" because of a lack of laws regulating e-commerce, and consumer privacy. There are only a few laws now pertaining directly to Internet related issues, and most of these are state laws, not national. (1) On April 13, 2000, a bill was introduced to the Senate (referred to as S.2448, or `Internet Integrity and Critical Infrastructure Protection Act of 2000'). Designed "to enhance the protections of the Internet and the critical infrastructure of the United States, and for other purposes," it addresses issues such as cyberhacking, anti-fraud protection, national security, and computer crime enforcement. Title III of this bill addresses privacy and confidentiality protection, which would provide a great deal of protection to online consumers. There are two sections of this title that might have protected consumers from Amazon.com's "price test" had the bill been in place today:

"Sec. 304. Fraud in online collection and dissemination of personally identifiable information."

"Sec. 306. Fraudulent access to personally identifiable information."

In my opinion, Amazon's price test was not a good idea. It was easily caught by a knowledgeable consumer who noticed a significant difference in a price for a book after he stripped his computer of the electronic tags that identified him as a repeat customer.

Although Amazon has a right to adjust their prices, should they be collecting information from us (even as minute as whether are a repeat customer) by placing an electronic key into our systems without notifying us? Furthermore, should they have the right to access that information from our personal computers every time we visit their site?

Until laws such as this bill are in place, preventing web sites from using electronic tags or any other form of consumer information gathering, companies like Amazon.com will continue to try unethical marketing schemes that take advantage of consumers. Although Amazon.com halted this price testing as soon as it was exposed, they may still learn a valuable lesson. I am sure there are many Amazonians that no longer feel they are getting the best deal.


1. USACM, S.2448.txt [book on-line] (Washington, DC: ACM U.S. Public Policy Office, 1995, accessed 03 October, 2000); available from http://www.acm.org/usacm/S.2448_text.htm; Internet.

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