The Federal Trade Commission (FTC) has initiated an investigation into several prominent companies regarding their practices in using customer data, algorithms, and artificial intelligence to customize pricing for individuals.
On Tuesday, the FTC issued information requests to eight firms: Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros. The agency seeks to investigate the implications of this pricing strategy on privacy, competition, and consumer protection.
Many companies are employing what is known as “surveillance pricing” or “dynamic pricing,” which allows them to present varying prices for the same products based on individual consumer characteristics or behaviors, such as location, demographics, credit history, and online shopping habits.
The firms contacted by the FTC play significant roles in providing transaction, sales, and pricing services to many major corporations both in the U.S. and internationally. For instance, Task Software manages transactions for major hospitality brands including McDonald’s and Starbucks. Revionics offers pricing optimization software to retailers like Home Depot, while Pros, which specializes in AI-driven pricing solutions, has clients including Nestlé, HP, and United Airlines, and collaborates with Microsoft in technology development.
The FTC aims to uncover details about what it describes as an “opaque market” where consumers are categorized, leading to targeted pricing for products and services.
FTC Chair Lina Khan emphasized the risks to consumer privacy posed by companies that utilize personal data, stating, “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 agency’s investigation will focus on four main areas: the types of surveillance pricing solutions offered by each company, their data collection methods, customer and sales information, and how these practices affect the prices paid by consumers.