The Federal Trade Commission (FTC) has initiated an investigation involving several major companies to examine their practices in using customer data, algorithms, and artificial intelligence for personalized pricing. The companies targeted include prominent names such as Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros.
The investigation centers on a pricing strategy known as “surveillance pricing” or “dynamic pricing,” where companies utilize data to display varying prices to consumers based on individual characteristics and behaviors. Factors influencing these tailored prices can include location, demographics, credit history, and browsing or shopping patterns.
Many of these firms play significant roles in the transaction, sales, and pricing landscapes, serving some of the largest corporations both in the U.S. and internationally. For instance, Task Software supports major hospitality brands like McDonald’s and Starbucks, while Revionics delivers retail price optimization software to home improvement giant Home Depot. Pros, which promotes AI-driven pricing solutions, has major clients including Nestlé, HP, and United Airlines, and collaborates with Microsoft on technology development.
The FTC aims to clarify this “opaque market” that categorizes consumers and sets targeted prices, emphasizing the need for transparency in how businesses utilize detailed consumer data. FTC Chair Lina Khan stated, “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.” She also highlighted the importance of this investigation for understanding the practices of pricing intermediaries.
The investigation will delve into four main areas: the types of surveillance pricing products and services each firm offers, their data collection methods, customer and sales insights, and the influence these practices have on the prices consumers ultimately pay.
This investigation signifies a positive step towards greater transparency in consumer pricing, aiming to protect consumer rights and promote fair competition. By addressing these issues, the FTC is not only advocating for consumer privacy but also working to ensure a level playing field in the marketplace, which can lead to more informed and equitable pricing strategies.
Overall, while concerns over privacy and data use are growing, such regulatory actions provide hope for consumers that their interests will be safeguarded in an increasingly data-driven marketplace.