The Federal Trade Commission (FTC) has initiated an investigation into several prominent companies regarding their practices surrounding customer data usage, algorithms, and artificial intelligence for personalized pricing strategies.
A turbulent week for Nvidia stock has drawn attention as the FTC has issued orders to eight firms, including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros, seeking insights into how these pricing techniques affect privacy, competition, and consumer protection.
These companies utilize data-driven tools, often referred to as “surveillance pricing” or “dynamic pricing,” which enable them to present varying prices for the same products based on individual consumer attributes or behaviors, such as location, demographics, credit history, and online shopping habits.
The firms involved in the inquiry predominantly offer transaction, sales, and pricing services to major enterprises both in the U.S. and internationally. For example, Task Software plays a crucial role in transaction management for prominent hospitality brands like McDonald’s and Starbucks. Revionics specializes in retail price optimization software and analytics, serving well-known retail chains including Home Depot. Pros, which markets itself as an AI-driven pricing solutions provider, has a clientele that features Nestlé, HP, and United Airlines and collaborates with Microsoft on technology development.
The FTC aims to investigate the complexities of this “opaque market” that profiles consumers and applies targeted pricing models.
FTC Chair Lina Khan emphasized the potential risks to consumer privacy, stating, “Companies that exploit Americans’ personal data may be compromising their privacy. Now, these companies may be leveraging a wealth of personal information to charge users higher prices. Americans have the right to know if businesses are deploying surveillance pricing based on detailed consumer data, and this inquiry will illuminate the hidden dynamics of pricing intermediaries.”
The FTC is particularly focused on four main areas, including the types of surveillance pricing solutions each company provides, their data collection methods, sales and customer insights, and the effects of these surveillance practices on end pricing for consumers.