Loyalty glossary · 11. Legal and compliance (15)
Price Discrimination
Price discrimination is the practice of charging different members different effective prices for the same loyalty reward, usually through tiered accrual rates, member specific pricing, or qualification thresholds.
Price discrimination is not an accident. It is built into accrual rates, redemption pricing, and qualification thresholds. A programme that claims all members earn points equally is either not looking or not telling the truth.
The three levers are accrual, active member rate, and activity based qualification. An active member rate lowers the effective price only for members who meet a spend or visit threshold. Activity based qualification does the same by raising the bar for the better rate. Accrual differences across tiers are the clearest version: the same dollar buys more points for one member than another.
The trap is calling this a benefit instead of a price. A cash discount of 50 percent for top customers would be visible and comparable. A 2 point per dollar rate instead of 1 point per dollar is the same discount but hidden inside points arithmetic. Members rarely convert points back to price per unit.
Price discrimination is lawful when based on cost differences, volume, or loyalty. It becomes unlawful when it treats protected classes differently, and loyalty programmes rarely test whether their tier thresholds correlate with age, gender, or location. The legal question is not whether members get different prices, but whether the rule that gives them different prices can be justified by something other than the protected characteristic.
Work the arithmetic, because the argument only lands with numbers. A base member earns 1 point per dollar. An elite member earns 2 points per dollar. To reach a 10,000 point reward, the base member must spend 10,000 dollars, the elite member only 5,000 dollars. The elite member pays 50 percent less for the same reward.
The programme that cannot show why a 50 percent gap exists for one member and not another is running an illegal price discrimination scheme without calling it one. Compliance means documenting the cost basis or loyalty rationale for every tiered rate, not just publishing it.