The Federal Trade Commission (FTC) has initiated an investigation into several major companies regarding their utilization of customer data, algorithms, and artificial intelligence to implement personalized pricing strategies.
Eight companies, including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros, received inquiries from the FTC aimed at understanding the implications of these pricing methods on privacy, competition, and consumer protection.
These firms engage in a pricing technique often referred to as “surveillance pricing” or “dynamic pricing,” where consumers are presented with varying prices for the same products based on their individual characteristics or behaviors. Variables considered may include a consumer’s location, demographics, credit score, and browsing or shopping history.
Many of the contacted companies offer transaction, sales, and pricing services to some of the largest firms in the United States and globally. Notably, Task provides transaction management solutions for prominent hospitality brands, including McDonald’s and Starbucks. Revionics specializes in retail price optimization tools and pricing analytics for major chains like Home Depot. Pros, which claims to deliver AI-driven pricing solutions, services clients like Nestlé, HP, and United Airlines, and collaborates with Microsoft on technology development.
The FTC aims to clarify the workings of this “opaque market,” which distinguishes and categorizes shoppers to establish targeted pricing for various 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 each company, their methods of data collection, customer and sales information, and the influence of these surveillance practices on consumer pricing.