The Federal Trade Commission (FTC) has initiated an investigation into several prominent companies regarding their use of customer data, algorithms, and artificial intelligence to customize pricing strategies.
On Tuesday, the FTC issued information requests to eight firms, including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros. The agency is probing how these practices may affect privacy, competition, and consumer protection.
Utilizing data tools such as AI, companies adopt a model referred to as “surveillance pricing” or “dynamic pricing,” which displays varied prices for the same products based on individual consumer characteristics and behavior. Factors influencing price variations may include the consumer’s location, demographics, credit history, as well as their browsing and shopping activities.
The companies targeted by the FTC are significant players in providing transaction, sales, and pricing services to both major U.S. and international firms. For instance, Task Software manages transactions for notable hospitality brands like McDonald’s and Starbucks. Revionics offers retail pricing optimization and analytics to major retail chains, including Home Depot. Pros claims to provide AI-driven pricing solutions and counts Nestlé, HP, and United Airlines among its customers, while also collaborating with Microsoft for technology development.
The FTC aims to investigate this “opaque market” that profiles shoppers and determines targeted prices for goods and services.
“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 agency is seeking information in four specific areas: the range of surveillance pricing products and services each company offers, their data collection methods, customer and sales information, and the influence of these surveillance practices on consumer pricing.