The ACCC has identified significant problems with Australia’s customer loyalty schemes, which include frequent flyer, supermarket and credit card operators, in a new report released today.

One of the areas the consumer watchdog is probing is the poor disclosure about how consumer data is used and shared, including selling insights from consumer data to other parties without consumer knowledge and the sharing of consumer data with unknown third parties.

The ACCC also flagged issues including unilateral changes by loyalty schemes to their terms and conditions, and poor communication about how their schemes work, and whether or not consumers are receiving the advertised benefits of loyalty schemes.

The Customer Loyalty Schemes draft report shows almost nine in ten adults are members of a loyalty scheme, with the average Australian carrying between four to six loyalty cards. Some of the most popular Australian loyalty schemes report having more than 10 million members.

The draft report raises concerns about the opaque terms and conditions of loyalty schemes preventing consumers from making informed choices that align with their privacy preferences.

Consumers also have limited control over how their personal information and other data could be used by loyalty schemes and with whom it could be shared.

“The privacy policies of these schemes are frequently very vague and don’t tell consumers who their data is being shared with or how it is being used, shared or monetised,” ACCC Chair Rod Sims said.

“The data that loyalty schemes collect can be used to profile consumers and produce insights about their purchasing behaviour. These insights about consumers may then be shared with or sold to third parties.”

“Consumers may also be shocked to find that some schemes collect their data even when they don’t scan their loyalty cards, or that they combine it with data from other sources that they might not even be aware of.”

According to the ACCC, loyalty schemes can be extremely lucrative, contributing to a significant proportion of a company’s profits. Some loyalty schemes generate $110 million to $370 million in earnings each year.

“Most people think they are being rewarded for their loyalty with discounts or points, but in reality some schemes are building up detailed profiles about consumers and selling those insights to other businesses. Selling insights and access to loyalty scheme members are becoming increasing sources of revenue,” Sims said.

Sims said the draft report into loyalty schemes reinforces the recommendation made in its Digital Platform Inquiry strengthening the Privacy Act 1988 and broader reform of the Australian privacy regime.

The ACCC is seeking comments on the draft report by 3 October 2019. The ACCC expects to release a final report in late 2019.