The Federal Trade Commission (FTC) has initiated an investigation into several prominent companies regarding their utilization of customer data, algorithms, and artificial intelligence to implement personalized pricing strategies.
On Tuesday, the FTC issued orders to eight companies—Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros—requesting information on how these practices may affect privacy, competition, and consumer protection.
These companies engage in what is known as “surveillance pricing,” also referred to as “dynamic pricing,” which allows them to display varying prices for the same products to different consumers based on individual characteristics or behaviors. Factors taken into account may include a customer’s location, demographic information, credit history, as well as browsing or shopping history.
Many of the firms targeted by the FTC are instrumental in providing transaction, sales, and pricing solutions to some of the largest businesses in the United States and worldwide. Task Software serves as the transaction management provider for major hospitality brands such as McDonald’s and Starbucks. Revionics offers retail price optimization and pricing analytics for global chains, including Home Depot. Pros, which specializes in AI-powered pricing solutions, lists Nestlé, HP, and United Airlines as its clients and is a technology development partner with Microsoft.
The FTC aims to investigate this “opaque market” that sorts consumers and establishes targeted pricing for products and services. FTC Chair Lina Khan highlighted the potential risks to consumer privacy posed by companies that collect personal data to possibly exploit this information for setting higher prices. Khan stated that Americans have the right to understand whether their detailed consumer data is being used to enact surveillance pricing and emphasized that the inquiry will provide transparency into this complex pricing environment.
The FTC is seeking information on four main aspects: the types of surveillance pricing products and services offered by each company; methods of data collection; customer and sales data; and the influence of these practices on the prices customers ultimately pay.