The Federal Trade Commission (FTC) has initiated an investigation into several major corporations regarding their use of customer data, algorithms, and artificial intelligence to customize pricing strategies.
This development comes as McDonald’s faces its first lawsuit linked to an E. coli outbreak associated with its Quarter Pounder. Eight companies, including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros, have been ordered by the FTC to provide insights into how their pricing practices affect privacy, competition, and consumer protection.
These companies utilize data-driven approaches, known as “surveillance pricing” or “dynamic pricing,” which allows them to present varied prices for identical products based on individual consumer traits and behaviors. Factors such as location, demographics, credit history, and browsing or shopping activities can influence these price variations.
Many of the entities under scrutiny by the FTC offer transaction, sales, and pricing services to some of the largest companies in the U.S. and around the globe. Task Software manages transactions for major hospitality brands, including McDonald’s and Starbucks, while Revionics delivers retail price optimization software to various international retailers, including Home Depot. Pros, which provides AI-powered pricing solutions, counts major brands like Nestlé, HP, and United Airlines among its clientele and is a technology development partner of Microsoft.
The FTC’s inquiry aims to clarify the unclear practices in this pricing landscape, which often enables companies to categorize shoppers and set specific prices for goods and services.
FTC Chair Lina Khan emphasized the need for transparency, 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 investigation focuses on four main areas: the types of surveillance pricing products each company offers, their data collection methods, customer and sales data, and the impact of these surveillance practices on customer pricing.