The Federal Trade Commission (FTC) has initiated an investigation into several prominent companies regarding their use of customer data, algorithms, and artificial intelligence to implement individualized pricing strategies.
On Tuesday, the FTC issued orders to eight companies — Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros — seeking insights into the effects of these pricing methods on privacy, competition, and consumer protection.
These companies utilize data tools, including AI, to engage in what is known as “surveillance pricing” or “dynamic pricing.” This practice involves presenting different prices to consumers for identical products based on various factors such as location, demographics, credit history, and browsing or shopping histories.
Many of the firms targeted by the FTC offer transaction, sales, and pricing services to some of the largest businesses both in the U.S. and internationally. For example, Task is the transaction management provider for several leading hospitality brands, including McDonald’s and Starbucks. Revionics specializes in retail price optimization software and pricing analytics for major chains like Home Depot. Pros, which positions itself as a provider of AI-driven pricing solutions, serves notable clients such as Nestlé, HP, and United Airlines, and works as a technology partner for Microsoft.
The FTC aims to clarify the complexities of this “opaque market,” where shoppers are categorized and targeted with specific pricing arrangements.
“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 FTC is seeking information in four major areas: the types of surveillance pricing products and services offered, data collection methods, customer and sales information, and the impact of these surveillance practices on prices consumers are charged.