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Coles and Woolworths under fire over privacy concerns

A recent phenomenon in the retail industry has been the rise and rise of customer loyalty programs. Sure, there is nothing new about loyalty schemes – in fact I’d say they’ve been around for almost as long as shops have.

But in recent years, it’s gotten to the point where seemingly every single shop has some kind of ‘customer club’ – whether it’s Adairs Ltd (ASX: ADH)’s Linen Lovers or Amazon’s Prime subscriptions.

But according to reporting from the Australian Financial Review (AFR), Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) may have been taking things a bit too far.

The AFR reports that the ACCC (Australia’s consumer watchdog) has called on Coles and Woolies to put a stop to the practice of linking customers’ rewards accounts to the use of debit or credit cards.

Coles and Woolworths have what are probably 2 of the most popular rewards programs in the country. Woolworths has its eponymous ‘Woolworths Rewards’ system, whilst Coles utilises the Flybuys platform that its former parent company Wesfarmers Ltd (ASX: WES) backs.

According to the AFR, these platforms enable Coles or Woolworths to track previously used payment cards even if the consumer doesn’t swipe their rewards card every shop.

“Consumers would be shocked to find that some supermarket schemes … collect their customers’ data at the checkout even when they do not present their loyalty cards,” ACCC chairman Rod Sims is quoted as saying. “They do this by tracking customers’ credit or debit cards from previous transactions.”

Other popular consumer loyalty schemes that are reportedly in the firing line for a thorough ACCC check-up are the uber-popular Qantas Airways Ltd (ASX: QAN)’s Frequent Flyers and arch-rival Virgin Australia Holdings Ltd (ASX: VAH)’s Velocity Points.

Foolish takeaway

I think this revelation is a much-needed reminder that nothing free comes without strings attached these days. Data is a valuable commodity, so keep that in mind when you’re giving it out on your next shopping trip!

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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