The Federal Trade Commission (FTC) has initiated an investigation into several major companies regarding their use of customer data, algorithms, and artificial intelligence to create customized pricing.
The firms under scrutiny include Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros. On Tuesday, the FTC issued orders for information concerning how these pricing strategies affect privacy, competition, and consumer protection.
These companies utilize data tools, including AI, to implement practices known as “surveillance pricing” or “dynamic pricing,” where they display varying prices for the same products based on consumer characteristics or behaviors, such as location, demographics, credit history, and shopping habits.
Many of these firms offer transaction, sales, and pricing services to major corporations in the U.S. and around the globe. Task Software manages transactions for well-known hospitality chains like McDonald’s and Starbucks. Revionics delivers retail price optimization software and analytics to several large retailers, including Home Depot. Pros, which promotes itself as an AI-driven pricing solutions provider, counts Nestlé, HP, and United Airlines among its clients and collaborates with Microsoft as a technology partner.
The FTC aims to investigate the “opaque market” that classifies shoppers and determines targeted pricing strategies for various products and services.
FTC Chair Lina Khan expressed her concerns, stating, “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. 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 agency is seeking information on four main areas: the types of surveillance pricing products and services offered by each company, the methods of data collection, customer and sales data, and the impact of these surveillance techniques on consumer pricing.