The Federal Trade Commission (FTC) has initiated an investigation into several major companies regarding their use of customer data, algorithms, and artificial intelligence to customize pricing on an individual basis.
The investigation involves eight companies from various sectors, including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros. The FTC has issued orders to these firms seeking insight into how these pricing strategies affect consumer privacy, competition, and protection.
These companies utilize data-driven tools, often referred to as “surveillance pricing” or “dynamic pricing,” which allows them to display different prices for the same products based on consumer traits or behaviors. Factors influencing these price variations can include a buyer’s location, demographics, credit history, and online shopping behavior.
Many of the firms targeted in the investigation provide crucial transaction, sales, and pricing services to some of the largest corporations in the United States and around the world. For instance, Task is the transaction management provider for major hospitality brands like McDonald’s and Starbucks. Revionics is known for its retail price optimization software, used by companies including Home Depot. Pros markets itself as a developer of AI-powered pricing solutions and serves clients such as Nestlé, HP, and United Airlines, while also partnering with Microsoft on technology development.
The FTC aims to uncover the intricacies of what it describes as an “opaque market” that categorizes consumers and applies targeted pricing to goods and services.
FTC Chair Lina Khan emphasized the importance of transparency, 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 FTC’s investigation will focus on four primary aspects: the types of surveillance pricing products and services offered, methods of data collection, details on customer and sales information, and how these surveillance strategies impact the final prices customers pay.