These Schemes Ain’t Loyal says ACCC Draft Report on Customer Loyalty Schemes

The Australian Competition & Consumer Commission (ACCC) recently released its draft report on customer loyalty schemes, which has raised concerns about the actual benefit to consumers of such schemes and the use (or rather misuse) of consumers’ data.

Preliminary Findings and Concerns

At a high level, the ACCC’s main concerns (as set out in the report) focus on the following key areas:

  • whether consumers actually receive the benefits advertised by customer loyalty schemes;
  • unilateral changes to loyalty scheme terms and conditions – such as reduction of ‘earn rates’ and ‘redemption values’;
  • poor communication of how the respective schemes work – such as around point ‘expiry periods’ and restrictive redemption opportunities;
  • poor disclosure and transparency around use and sharing of consumer data, including the sale of insights from consumer data to third parties without the consumer’s knowledge and the sharing of consumer data with unknown third parties;
  • lack of control by consumers over their data and how it is used and shared once collected; and
  • the impact that consumer loyalty schemes have on competing businesses, particularly with respect to new entrants.

More detail on the report’s findings can be found at this link.

The attention given to data usage has received praise from privacy action groups, who have welcomed the ACCC’s findings. Given the support for these preliminary findings, legislative reform and enforcement action appears imminent.  So what can businesses do to ensure they are not stung in the future?

Practical Tips

To avoid unwanted attention from the ACCC, businesses that run loyalty schemes should:

  1. ensure scheme members are aware of the critical components of their loyalty scheme, including;
    • the need to remain ‘active’ by earning or redeeming points;
    • restricted availability of redemption opportunities, and whether there are restrictions on when and how points can be used; and
    • whether any changes have been made to the governing terms and conditions;
  1. ensure their schemes do not contain any terms or conditions that would be considered an unfair contract term under the Australian Consumer Law;
  2. ensure that any unilateral changes which reduce the effectiveness of the benefits are clearly communicated and properly justified;
  3. avoid or minimise imposing extra charges or administration fees when members use their points;
  4. comply with requirements under the Australian privacy and spam laws, including:
    • adequately informing members about how their data is being collected and used, at the point they are signed up for the scheme;
    • implementing and maintaining a privacy policy and appropriate internal procedures for the handling of personal information;
    • allowing members easy access to an opt-out function in respect of direct marketing; and
    • ensuring that data is not shared with third parties without the prior consent of the individual concerned.

The ACCC is expected to release its final report and indicate whether it intends to take enforcement action against problematic customer loyalty schemes by the end of the year.  Relevant stakeholders have been invited to make submissions in response to the draft report by 3 October 2019 (see this link).

This blog post was co-authored by Tom Williams (Trainee Solicitor), Valiant Warzecha, Claire Kermond, Jessie Buchan and Nicholas Boyle (Partner).