Earlier this month, just a day before the annual “Double Eleven” Nov. 11 shopping extravaganza, China’s State Administration for Market Supervision quietly dropped a bombshell on the country’s e-commerce industry. The draft “New Anti-Monopoly Guidelines for the Platform Economy,” not only confirms the applicability of basic anti-monopoly systems and analytical frameworks to e-commerce and digital platforms, it also takes aim at certain business practices that have raised regulator and consumer hackles — including the much-maligned phenomenon known as “big data backstabbing.”
“Big data backstabbing” — dashuju shashu — refers to the increasingly common practice of using big data to compile user profiles, then leveraging that information to market the same product at various prices to different users, usually in the form of charging higher prices to older users. This behavior is hardly new or unique to China: As early as 2000, Amazon was offering DVDs at a lower price to new users more than older ones; in 2012, office supply store Staples came under fire for offering consumers different prices based on their unique IP addresses.
But as big data technology has matured, China’s internet platforms have become increasingly cutthroat, trying to maximize their profit on every transaction. Unsurprisingly, consumers tend to be particularly sensitive to these practices. In March 2019, a survey published by the Beijing Consumer Association found that 88% of respondents thought big data backstabbing was widespread or common, while 57% said they had personally been “backstabbed.” Online, netizens joke that, “Old users are treated worse than dogs” and, “It’s the people who know you best who hurt you the most.”
Despite its high-tech trappings, big data backstabbing really isn’t all that different from simple price discrimination or personalized pricing, whereby companies charge differing prices to different users for identical goods or services within the same time frame. In his classic work from 1920, “The Economics of Welfare,” British economist Arthur Pigou divided price discrimination into three degrees of severity, charging different consumers various prices for the same products was classified as the most serious type. Yet economists long agreed it was also the most difficult form to carry out, in part due to the need for detailed information on what different consumers might be willing to pay.