The Federal Trade Commission (FTC) has initiated an investigation into several prominent companies regarding their use of customer data, algorithms, and artificial intelligence to create personalized pricing strategies.
Among those being investigated, McDonald’s is also dealing with its first lawsuit stemming from the E. coli outbreak linked to its Quarter Pounder. The FTC has sent orders to eight companies including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros, requesting information on how these pricing strategies affect privacy, competition, and consumer protection.
These companies utilize advanced data tools and practices termed “surveillance pricing,” or “dynamic pricing,” which allow them to present different prices to consumers for identical products based on various criteria such as location, demographics, credit history, and browsing behaviors.
Many of the firms approached by the FTC offer transaction, sales, and pricing services to major companies both in the United States and worldwide. Task is known for its transaction management services for major hospitality brands like McDonald’s and Starbucks, while Revionics specializes in retail price optimization software used by retailers like Home Depot. Pros, which promotes itself as a provider of AI-driven pricing solutions, serves clients including Nestlé, HP, and United Airlines and collaborates with Microsoft on technology development.
The FTC aims to clarify the issues surrounding this “opaque market” that classifies consumers and implements targeted pricing strategies. FTC Chair Lina Khan emphasized the risks to privacy tied to firms collecting personal data, stating, “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 inquiry focuses on four main areas: the types of surveillance pricing products and services offered by each company, their data collection methods, customer and sales information, and how these surveillance practices affect the prices customers ultimately pay.