The Federal Trade Commission (FTC) has commenced an investigation into several prominent companies regarding their use of customer data, algorithms, and artificial intelligence for personalized pricing strategies.
In a move that affects eight firms across various sectors, including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros, the FTC issued orders on Tuesday requesting information on the implications of these pricing strategies on privacy, competition, and consumer protection.
Companies utilize data-driven tools, such as artificial intelligence, to implement a practice known as “surveillance pricing” or “dynamic pricing,” which involves displaying different prices for identical products based on individual consumer characteristics or behaviors. These factors can include location, demographics, credit history, and browsing or shopping history.
Many of the firms under FTC scrutiny provide transaction, sales, and pricing services to major corporations both in the U.S. and internationally. Task Software is the transaction management provider for several leading hospitality brands, including McDonald’s and Starbucks. Revionics offers retail price optimization software and pricing analytics to notable chains, such as Home Depot. Pros is highlighted for its AI-enabled pricing solutions and counts Nestlé, HP, and United Airlines among its clients. Additionally, Pros collaborates with Microsoft as a technology development partner.
The FTC aims to clarify the complexities of this “opaque market” that sorts consumers and establishes targeted pricing for products and services.
“Companies that collect Americans’ personal data may jeopardize individuals’ privacy. There is a possibility that these companies are using extensive personal information to impose higher prices,” stated FTC Chair Lina Khan. “Americans should be informed about whether businesses are leveraging detailed consumer data to practice surveillance pricing, and the FTC’s investigation will bring transparency to this murky pricing network.”
The FTC’s inquiry is focused on four main areas: the types of surveillance pricing products and services provided by each company, data collection methods, sales and customer information, and how these surveillance practices affect the prices customers ultimately pay.