From: Pamela Kellet <pck2104@columbia.edu>
  To  : <cpc@emoglen.law.columbia.edu>
  Date: Thu, 23 Mar 2006 12:58:24 -0500

[CPC] Paper2: Letting Go of the Rogue Box of Cheerios

Paper 2: Letting Go of the Rogue Box of Cheerios

"Can you help me discover more music that I'll like?" [1] This is the 
question that Pandora.com wants to answer for you. The website wants to 
have "a conversation" with you. You put in the name of your favorite song 
or artist and the website creates a radio station that will play more music 
like it. The more feedback you give the site about each song - it uses a 
thumbs-up/thumbs-down system - the more personalized the radio station.

This kind of personalization is now commonplace on the web. It seems like 
every website we access can be customized. Nowhere is this more commonplace 
than in the online world of retail. Sellers track customer preferences 
continuously. This surveillance is a powerful tool for retailers online, 
allowing them to maximize profits. In exchange, customers receive 
convenient updates and suggestions.

Apparently, the vast majority of internet users are comfortable with this 
trade-off. They will gladly hand over their personal information including 
name, email address, and zip code to NetFlix  and its affiliates [2] - as 
well as to anyone to whom NetFlix sells its customer lists - so that the 
movie site can recommend the new Will Ferrell movie when it is released.

Would these same users find data collection more discomforting if it meant 
that retailers were able to charge different web-shoppers different prices 
for the same item? This process, known as "dynamic" pricing [3], is 
valuable to retailers because it allows them to identify the subjective 
value of an item at a customer specific level. The more targeted the 
retailer can be, the more product it can sell.

Price discrimination is not a product of the information age. Flea markets 
and garage sales have always involved flexible valuations. If a buyer 
haggled well they paid less. Almost every supermarket has a shopper's club 
which gives its members special price breaks in the store or sends special 
coupons to their homes. The practice has been around for a long time and is 
not illegal.

Yet a study conducted by the Annenberg Public Policy Center of the 
University of Pennsylvania found that 87% of adults objected to the idea 
that online retailers could charge different prices to different people 
[4]. What is it that makes price discrimination in cyberspace more 
distasteful to customers than price discrimination at the grocery store?

Perhaps what makes people uncomfortable is that dynamic pricing - like so 
many of the issues we have discussed in this course - is surreptitious. The 
customer has no idea that it is taking place and has no ability to manage 
it. In the grocery store the customer can see on the displays that those 
with frequent shopper cards will pay $0.50 less for their Diet Coke. 
Online, the shopper has no idea that when she signs in to her favorite 
travel website the database working in the background has produced a price 
point for her particular transaction that reflects her ability and 
willingness to pay. She is unaware that someone else signed into the same 
website at the same time may receive a different quote.

Though the majority of people seem to find these techniques unethical or 
otherwise objectionable, it seems that invisible tracking technologies are 
much more successful than more up front surveillance systems. An example of 
this phenomenon is the contrast in Albertson's and Wal-Mart's use of 
technology.

Wal-Mart owes its success, at least in part, to its ability to integrate 
new technologies into its inventory tracking systems. Wal-Mart is able to 
track how well items sell when placed in different areas within the store. 
It knows exactly how many items are on the road and when exactly they will 
be delivered. This efficiency in delivering the product to the consumer has 
allowed Wal-Mart to keep its prices low and maximize its product turnover. 


The next step for Wal-Mart includes RFID tags in its products [5]. These 
RFID tags will allow Wal-Mart to continuously track its products. "No 
Cheerios on the shelf? That's because someone picked up a box and put it 
back down in aisle 4 ma'am. Why don't you have a look there?" Given the 
efficiency that the tags provide the store and consequently the savings 
that will be passed on to the customer, it will be difficult to remind the 
majority of people that the tags may continue to transmit their tracking 
signal even after they have left the store i.e. from your home.

Unlike Wal-Mart, Albertson's does not want to hide its technological 
innovations from its customers [6]. Albertson's envisions a highly 
interactive and highly technological shopping experience. Shoppers will 
carry personal scanning devises and scan all of the products that they want 
to add to their cart. The scanner will tally up the prices and provide the 
customer with their total before they get to the checkout. There will even 
be personal shopping assistants to suggest new products that match up to 
the individual's shopping history. Moreover, checking out will entail 
walking out the door where radio transmitters will pick up the signals from 
the selected items and immediately charge the shopper's credit card.

Of these two strategies, it seems that Wal-Mart's approach will prevail. 
Just as choose your own adventure movies did not become the wave of the 
future, Albertson's overtly intrusive use of technology will likely fade 
with time. Shoppers, especially busy parents who do not have hours to spend 
in the store, will likely not warm to the idea of carrying around a device 
that is constantly interrupting them to "suggest" new products. Wal-Mart's 
strategy does not involve any changes to the customer's experience.

In rejecting the interactive approach, consumers are actually demanding the 
surreptitious activity that they oppose in the abstract. Until people 
overcome this schizophrenic relationship with their data, a comprehensive 
approach to data protection is impossible. At the moment, people value the 
convenience that online databases and offline tracking devices provide. 
Until we can learn to let that rogue box of Cheerios go, we will continue 
to convince ourselves that because the technology is hidden, it must be 
less intrusive.

[1] www.pandora.com
[2] http://www.netflix.com/Register
[3] Weiss, Robert M. and Ajay K. Mehrotra, Online Dynamic Pricing: 
Efficiency, Equity and the Future of E-Commerce, 6 Va. J.L. & Tech. 11 
(2001), available at http://www.vjolt.net/vol6/issue2/v6i2-a11-Weiss.html.
[4] Turow, Joseph, Lauren Feldman & Kimberly Meltzer, Open to Exploitation: 
American Shoppers Online and Offline, A Report for the Annenberg Public 
Policy Center of the University of Pennsylvania (June 2005), available at 
http://www.annenbergpublicpolicycenter.org/04_info_society/Turow_APPC_Report_WEB_FINAL.pdf
[5] McCullagh, Declan, RFID Tags: Big Brother in Smaller Packages, C|Net 
News.com, January 13, 2003, available at 
http://news.com.com/2010-1069-980325.html
[6] Bacheldor, Beth, Albertson's Technology Brings Handhelds to Customers, 
InformationWeek.com, April 8, 2004, available at 
http://www.informationweek.com/news/showArticle.jhtml?articleID=18900714


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