The Federal Trade Commission (FTC) has initiated an investigation into several major companies regarding their practices in utilizing customer data, algorithms, and artificial intelligence to implement personalized pricing strategies.
As part of this inquiry, eight notable firms, including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros, received requests from the FTC on Tuesday for information related to the effects of their pricing practices on privacy, competition, and consumer safety.
Companies utilize data tools, specifically through a mechanism known as “surveillance pricing” or “dynamic pricing,” to present different prices to consumers for identical products based on individual characteristics or behaviors. These characteristics can include factors such as location, demographics, credit history, and browsing or shopping activity.
Many of the firms being investigated are known for providing transaction, sales, and pricing services to some of the largest corporations in the U.S. and around the world. For instance, Task Software manages transactions for several major hospitality businesses, including McDonald’s and Starbucks. Revionics specializes in retail price optimization software and pricing analytics for major chains like Home Depot. Pros, which markets itself as a provider of AI-driven pricing solutions, serves clients such as Nestlé, HP, and United Airlines, and collaborates with Microsoft as a technology partner.
The FTC aims to elucidate the complexities of this “opaque market,” which involves classifying consumers and determining targeted prices for goods and services.
FTC Chair Lina Khan commented, “Companies that exploit Americans’ personal data may jeopardize individuals’ privacy. There is a concern that they might be taking advantage of extensive personal information to impose higher prices. Americans deserve transparency regarding whether businesses are employing detailed consumer data to apply surveillance pricing, and our inquiry will illuminate this obscure realm of pricing intermediaries.”
The FTC is seeking information on four main aspects: the types of surveillance pricing products and services each company provides; their methods of data collection; customer and sales data; and the effect of these surveillance practices on the retail prices that consumers pay.