FTC Investigates Big Tech’s “Surveillance Pricing” Practices

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The Federal Trade Commission (FTC) has initiated an investigation into several major companies regarding their use of customer data, algorithms, and artificial intelligence to customize pricing for individual consumers.

This move comes as McDonald’s faces its first lawsuit stemming from an E. coli outbreak linked to its Quarter Pounder. Eight companies, including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros, have been issued orders by the FTC seeking detailed information about the implications of these pricing strategies on privacy, competition, and consumer protection.

These companies utilize data tools in a practice referred to as “surveillance pricing” or “dynamic pricing,” which allows them to present different prices to different consumers based on a variety of factors, such as location, demographics, credit history, and browsing or shopping behaviors.

Many of the firms under scrutiny provide transaction, sales, and pricing solutions to prominent businesses in the U.S. and internationally. Task Software is known for its transaction management services for major hospitality brands like McDonald’s and Starbucks. Revionics offers retail pricing optimization software and analytics to leading global retailers, including Home Depot. Pros, which positions itself as a provider of AI-driven pricing solutions, counts Nestlé, HP, and United Airlines among its clients and collaborates with Microsoft for technology development.

The FTC aims to unravel the complexities of this “opaque market,” which categorizes consumers to set targeted pricing for products and services. FTC Chair Lina Khan emphasized the potential risks involved, stating that companies processing Americans’ personal data could be compromising privacy and potentially exploiting this information for price discrimination. She noted that Americans have the right to understand if their data is being misused to implement surveillance pricing and that the FTC’s investigation will illuminate this intricate network of pricing strategies employed by various companies.

The commission is specifically looking for insights in four main areas: the types of surveillance pricing products and services offered, methods of data collection, customer and sales information, and the ways in which these pricing practices affect the costs that consumers ultimately face.

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