The Federal Trade Commission (FTC) has initiated an investigation into several prominent companies regarding their use of customer data, algorithms, and artificial intelligence in implementing personalized pricing strategies.
On Tuesday, the FTC issued orders to eight companies, including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros, seeking information on how these pricing practices affect consumer privacy, competition, and protection.
These companies utilize data-driven tools, often referred to as “surveillance pricing” or “dynamic pricing,” which enables them to present different prices for the same product based on various customer characteristics, such as location, demographics, credit history, and online behavior.
Many firms referenced in the investigation play a significant role in providing transaction, sales, and pricing services to major corporations both in the U.S. and internationally. For example, Task provides transaction management services for well-known hospitality brands like McDonald’s and Starbucks. Revionics specializes in retail price optimization software utilized by various global retail chains, including Home Depot. Meanwhile, Pros offers AI-enhanced solutions for pricing and counts Nestlé, HP, and United Airlines as clients, while also collaborating with Microsoft on technology development.
The FTC aims to uncover the intricacies of this “opaque market,” where shoppers are categorized and targeted with specific pricing. FTC Chair Lina Khan emphasized that the use of American consumers’ data poses privacy risks and may lead to inflated prices for individuals. She stated, “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 areas: the types of surveillance pricing products and services available from each company; mechanisms of data collection; customer and sales data; and the impact of these surveillance practices on the pricing ultimately faced by consumers.