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.
On Tuesday, the FTC issued orders to eight companies — Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros — seeking information on the implications of these pricing methods in relation to privacy, competition, and consumer protection.
These companies are employing data-driven methods known as “surveillance pricing” or “dynamic pricing,” which allow them to present varying prices to consumers for identical products based on factors like location, demographics, credit history, and online shopping behavior.
Many businesses targeted by the FTC play a significant role in providing transaction, sales, and pricing services to some of the largest firms both in the U.S. and internationally. Task Software manages transactions for major hospitality chains such as McDonald’s and Starbucks, while Revionics offers pricing optimization software to renowned retailers like Home Depot. Pros, which claims to deliver AI-enhanced pricing solutions, serves clients including Nestlé, HP, and United Airlines and collaborates with Microsoft on technology development.
The FTC aims to investigate the “opaque market” that enables the categorization of consumers and the setting of targeted pricing.
“Firms that harvest Americans’ personal data can put people’s privacy at risk,” stated FTC Chair Lina Khan. “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 is focusing its inquiry on four main areas: the types of surveillance pricing products and services offered by each company, data collection methods, customer and sales information, and the impact of these surveillance practices on the prices charged to consumers.