The Federal Trade Commission (FTC) has initiated an investigation into several prominent companies concerning their methods of utilizing customer data, algorithms, and artificial intelligence for personalized pricing strategies.
The regulatory agency has issued orders to eight firms, including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros, seeking information on how these practices affect privacy, competition, and consumer protection.
Companies often employ a technique known as “surveillance pricing,” also referred to as “dynamic pricing,” which allows them to present varying prices for the same products based on individual consumer traits and behaviors. Factors influencing price variation can include a consumer’s location, demographics, credit history, and browsing or shopping history.
Many firms involved in this investigation provide transaction, sales, and pricing services to numerous significant businesses both in the U.S. and internationally. Task Software manages transactions for major hospitality brands like McDonald’s and Starbucks, while Revionics offers retail price optimization software to global chains including Home Depot. Pros, which markets itself as a provider of AI-driven pricing solutions, serves clients like Nestlé, HP, and United Airlines, and collaborates with Microsoft as a technology partner.
The FTC aims to clarify the complexities of this “opaque market,” which categorizes customers to assign 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 has specified its information request in 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 practices on the prices that consumers ultimately pay.