The Federal Trade Commission (FTC) has initiated an investigation into several prominent companies regarding their practices of utilizing customer data, algorithms, and artificial intelligence to implement personalized pricing strategies.
On Tuesday, the FTC issued orders to eight firms from various sectors, including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros, seeking insights into how these pricing tactics affect privacy, competition, and consumer protection.
These companies employ advanced data tools, including AI, to engage in what is referred to as “surveillance pricing” or dynamic pricing. This method allows businesses to present different prices for identical products based on consumer-specific factors such as location, demographics, credit history, and shopping behavior.
Many of the companies under scrutiny offer transaction, sales, and pricing services to major players in the U.S. and around the globe. Task Software is known for its transaction management services to leading hospitality brands, including McDonald’s and Starbucks. Revionics specializes in retail price optimization software and serves major chains like Home Depot. Pros, which claims to provide AI-driven pricing solutions, has a clientele that includes Nestlé, HP, and United Airlines, and partners with Microsoft on technology development.
The FTC aims to investigate this “opaque market” that profiles consumers and implements targeted pricing strategies.
“Companies that collect personal data from Americans pose a risk to individual privacy. They might also be leveraging this extensive data to impose higher prices,” stated FTC Chair Lina Khan. “Consumers deserve transparency regarding whether businesses are utilizing detailed data for surveillance pricing, and the FTC’s inquiry will clarify this obscure pricing system.”
The FTC has outlined four primary areas of focus for its investigation: 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 surveillance practices on the prices consumers pay.