The Federal Trade Commission (FTC) has initiated an investigation into several major companies to assess their practices regarding customer data, algorithms, and the use of artificial intelligence for personalized pricing strategies.
Mars, the maker of M&M candies, is set to acquire Kellanova, known for its Pop-Tarts, in a significant acquisition deal.
On Tuesday, the FTC issued orders to eight firms across various industries, including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros. The agency is seeking information about how these pricing strategies impact privacy, competition, and consumer protection.
These companies are utilizing data analysis tools like AI to implement what is referred to as “surveillance pricing,” or “dynamic pricing,” which allows them to display different prices for the same products to different consumers based on specific characteristics and behaviors. Factors such as location, demographics, credit history, and shopping habits can influence these pricing differences.
Many of the companies involved in the investigation provide transaction and pricing services to major U.S. and global businesses. Task Software specifically manages transactions for prominent hospitality brands including McDonald’s and Starbucks. Revionics supplies retail price optimization tools to various international retail chains, such as Home Depot. Additionally, Pros offers AI-driven pricing solutions and serves clients like Nestlé, HP, and United Airlines, and collaborates with Microsoft on technology development.
The FTC aims to clarify the complexities of this “opaque market,” where consumers are categorized and subjected to personalized pricing for products and services.
“Firms that harvest Americans’ personal data can put people’s privacy at risk. Now firms could be exploiting this vast trove of personal information to charge people higher prices,” stated FTC Chair Lina Khan. “Americans deserve to know whether businesses are using detailed consumer data to deploy surveillance pricing, and the FTC’s inquiry will shed light on this shadowy ecosystem of pricing middlemen.”
The FTC’s investigation will focus on four main areas: the types of surveillance pricing products and services offered by the companies, methods of data collection, customer and sales information, and the effect of these practices on the prices consumers ultimately pay.