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‘Risk of real consumer harm’: ACCC sends warning on loyalty schemes

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Mr Sims said that somebody could be charged extra based on their income or where they live, for example, or if their frequent flyer data or online search history indicates they can only travel on certain dates.

Australia’s biggest loyalty schemes are Qantas Frequent Flyer (13 million members) and Woolworths Rewards (12 million), which have a points-sharing tie-up, followed by Virgin Australia’s Velocity (10 million) and the Coles and Wesfarmers’ owned flybuys (8.5 million) which have their own tie-up.

The ACCC’s report said that loyalty schemes had the potential to “lock up” customers and introduce “switching costs” that increase barriers to entry for other companies, particularly smaller or newer rivals trying to break into a market.

Mr Sims said that some consumers would be “shocked” to learn that Coles’ flybuys and Woolworths’ Rewards scheme automatically link their loyalty accounts with their bank’s cards, and can track their spending even when they do not present their loyalty card at the checkout.

“When a customer chooses not to present their loyalty card, we think it is reasonable that they would not expect their data to be collected. We are therefore calling on the relevant schemes to stop this practice,” he said.

The ACCC also called on loyalty schemes to improve the way they communicate with members, for unfair contract terms and practices should be prohibited from the schemes, and for privacy laws to be strengthened.

The country’s biggest loyalty schemes said they were considering policy changes in response to the ACCC’s draft report, including making terms and conditions more transparent.

A Qantas spokesman said its scheme delivered “real” benefits for members, and that it did not sell their personal data to third parties. Woolworths said it was continually reviewing its privacy policies and data collection practises, and would consider the ACCC’s recommendations. Virgin meanwhile said it had already taken many of the ACCC’s draft recommendations on board.

More to come 

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