The Federal Trade Commission (FTC) has initiated an investigation into several major corporations concerning their use of customer data, algorithms, and artificial intelligence to customize pricing strategies. This week has proven particularly tumultuous for Nvidia’s stock as it faces significant fluctuations.
On Tuesday, the FTC issued orders to eight companies, including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros. The agency is seeking insights into how these pricing practices affect consumer privacy, competition, and overall consumer protection.
Companies are employing a method known as “surveillance pricing,” often referred to as “dynamic pricing,” which allows them to present varying prices for identical products based on consumer characteristics and behaviors. Factors influencing these price differences may include a customer’s location, demographics, credit history, and online shopping habits.
Many of the firms under investigation provide transaction, sales, and pricing services to prominent businesses both in the United States and internationally. For instance, Task Software manages transactions for major hospitality enterprises such as McDonald’s and Starbucks. Revionics specializes in retail price optimization and pricing analytics used by global chains like Home Depot. Pros, which claims to deliver AI-driven pricing solutions, serves clients including Nestlé, HP, and United Airlines, and is a technology partner for Microsoft.
The FTC aims to explore the complexities of what it describes as an “opaque market” where consumer data is categorized, allowing companies to set specific prices for products and services.
FTC Chair Lina Khan emphasized the potential risks to consumer privacy, 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 primary areas: the variety of surveillance pricing products and services offered by each firm, the methods of data collection, customer and sales data, and the impact of these pricing strategies on the prices consumers ultimately pay.