Customer Loyalty Schemes - have you earned the right to your customers' data?
A draft report posted on the ACCC's website earlier this month highlights a number of issues around customer loyalty schemes including concerns that companies touting these schemes are using them primarily as a portal to gain consumer data and insights as opposed to rewarding their consumers' allegiance.
The draft report released by the ACCC on 5 September 2019, available here, follows a review of customer loyalty schemes available in Australia – schemes which are particularly prevalent in the airline, supermarket, credit card, hotel and rental car industries.
Key concerns highlighted in the report include:
- doubts as to whether consumers are actually receiving the benefits advertised by these schemes;
- reports that such schemes are misleading consumers;
- evidence that there is poor disclosure and transparency around the use and sharing of consumer data and a general lack of control by consumers over how their data is used and shared once it is collected; and
- the potential impact of consumer loyalty on competing businesses, particularly for new entrants.
Membership of loyalty schemes is voluntary and generally free of charge to consumers, but it appears that it is often companies rather than consumers that are reaping the rewards.
So now that they are on notice, what can businesses that run loyalty schemes do to reduce the possibility of being subject to enforcement action down the line?
The ACCC has suggested a range of draft recommendations, some of which would require legislative reform in order to be implemented. Steps businesses can implement to enhance the credibility of their loyalty schemes in the meantime include:
- Enhancing how they communicate the scheme's terms and conditions to customers (including any changes to those terms and conditions);
- Prohibiting the inclusion of anything that could be classified as an unfair contract term and avoiding unfair trading practices; and
- Providing consumers with information about how their data is handled and giving them meaningful control over that data (including, for example, disclosure of third party advertising sources and providing the flexibility to opt out of such advertising).
Relevant stakeholders have been invited to make submissions in response to the draft report by 3 October 2019 with a view to releasing a final report before the end of 2019. Further details on how to make such submissions can be found here. The team at Bird & Bird in Sydney are well equipped to assist retailers with preparing submissions you may wish to make.
