The Federal Trade Commission (FTC) has initiated an investigation into several prominent companies regarding their use of customer data, algorithms, and artificial intelligence for personalized pricing strategies.
The investigation affects eight companies from various sectors, including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros. The FTC issued requests for information on Tuesday to examine how these pricing practices may affect privacy, competition, and consumer protection.
Companies utilize data tools, including artificial intelligence, to implement a strategy known as “surveillance pricing,” or “dynamic pricing,” which allows them to present different prices for the same products based on specific customer attributes or behaviors. Factors influencing pricing can include a customer’s location, demographics, credit history, as well as their browsing and shopping habits.
Many of the companies under scrutiny by the FTC offer transaction, sales, and pricing services to some of the largest businesses in the U.S. and around the world. For example, Task Software manages transactions for major hospitality brands like McDonald’s and Starbucks, while Revionics supplies retail price optimization software and analytics to major chains, including Home Depot. Pros, which specializes in AI-powered pricing solutions, has notable clients like Nestlé, HP, and United Airlines, and partners with Microsoft for technology development.
The FTC aims to clarify the workings of this “opaque market,” which categorizes consumers and assigns targeted prices based on their profiles.
“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 is seeking information on four main aspects: the types of surveillance pricing products and services offered by each company, their data collection methods, customer and sales information, and the impact of these practices on the prices that consumers ultimately pay.