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.
On Tuesday, the FTC issued information requests to eight companies, including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros, to explore the implications of these practices on privacy, competition, and consumer protection.
These companies utilize data tools such as AI for a pricing technique known as “surveillance pricing,” or “dynamic pricing,” where different prices for the same products may be presented to consumers based on various factors, including location, demographics, credit history, and online behavior.
Many of the firms questioned by the FTC offer transaction, sales, and pricing services to major corporations both in the U.S. and internationally. For instance, Task is the transaction management firm used by several well-known hospitality brands, including McDonald’s and Starbucks. Revionics specializes in retail price optimization software for global retailers, such as Home Depot, while Pros provides AI-driven pricing solutions to clients including Nestlé, HP, and United Airlines. Pros partnering with Microsoft further emphasizes its technological capabilities.
The FTC aims to clarify the intricacies of this “opaque market,” where consumers are categorized, and targeted pricing is employed for goods and services.
According to FTC Chair Lina Khan, “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 delve into four critical aspects: the types of surveillance pricing products and services offered by these companies, the methods of data collection, customer and sales data, and the effects of these surveillance practices on the final prices consumers pay.