The dangers of dynamic pricing

BarcelonaLast summer, fans of the pop band Oasis flocked to their phones and computers to buy tickets for the band's new tour. After hours of virtual queuing, many were surprised to find ticket prices had increased three or four times compared to the initially advertised rates, which caused a scandal in the United Kingdom, the band's country of origin. Why did their prices increase so much when they were advertised as cheaper? Because the company in charge of online sales, Ticketmaster, applied the system known as dynamic pricing.

Dynamic pricing isn't just used in the entertainment world. It's common on ticket or hotel booking websites and involves changing the price of the same product based on a number of variables, from the time or place of purchase to the type of consumer or the time at which the service takes place (a flight between two cities doesn't cost the same in the morning as it does in the evening). It's a widespread practice online—also common in companies like Amazon and Uber—and not just among private companies: Renfe uses it for high-speed train tickets.

And one of the main problems is that the protection currently enjoyed by European and Spanish consumers against these practices—which can reach abusive extremes, as in the case of the Oasis concerts—is very weak, as there is no legal provision directly regulating dynamic pricing beyond current consumer legislation. The Organization of Consumers and Users (OCU) has called for the urgent approval of some type of regulation to limit these prices. In fact, the OCU is demanding that dynamic pricing be expressly prohibited "for basic products and services."

This consumer protection organization has long criticized this method of pricing. It points out that dynamic pricing prevents price comparisons, as they change very quickly. Furthermore, this change is not announced; instead, consumers are left without any information and without knowing whether their personal data (from date of birth to the location of the place of purchase) has an impact on the price change. This practice, the latter of which could in some cases be illegal: "If the user's personal data is taken into account to set prices—that is, to offer personalized prices—we could encounter situations that are lacking in transparency, discriminatory, erroneous, or contrary to data protection law," the OCU warns on its website.

The OCU's main criticism is that "consumers don't know if the online product or service they're looking at is subject to dynamic pricing, nor do they know that their personal information could be used to increase their prices." In other words, in most cases, consumers are at the mercy of the company's good faith and best practices. The law stipulates that "relations between consumers and companies are guided by principles of fairness and transparency, but this doesn't always happen, and even less so when it comes to changing prices," the organization adds in a statement.

In an article on the Esade website, Marco Bertini, a professor at the business school, points out that "the specific system used should be indicated, as well as how the price will vary, whether in relation to the number of tickets available or whether the price may change while waiting." These conditions are nonexistent on many websites, or if they do exist, they can't be easily found.

To avoid price fluctuations, there's little that can be done. The best measure is to eliminate all the cookies in your browser just before purchasing on a website with dynamic pricing, since the information stored in cookies could be used. Likewise, performing several prior searches at different times of the day can also help you discern when prices are cheaper.

In the United States, dynamic pricing is also beginning to make its way into the restaurant industry. This would mean, for example, that the cost of a meal could have different prices depending on the day or time, or depending on the area of the restaurant where the table is reserved, but in Europe it is still far from being a common practice.

Drip pricing

Another common practice on websites for purchasing tickets, tickets or hotel reservations is the so-called drip pricing, or drip pricing, which consists of adding additional fees and surcharges as the online purchase process progresses. A classic example is that many airlines or ticket search engines initially advertise flights with a low initial cost, but then the final price skyrockets because taxes and a series of extras are added for services that are apparently quite basic, such as checking in a suitcase, choosing a seat, or purchasing insurance. According to Bertini, "it's another trick they use to make prices seem lower."

Unlike dynamic pricing, drip pricing It has encountered greater political opposition from the European Commission, which has regulated airline ticket conditions and other airline practices for years. has even imposed significant sanctions on them.