The Federal Trade Commission (FTC) has initiated an investigation into several prominent companies regarding their use of customer data, algorithms, and artificial intelligence for personalized pricing strategies.
On Tuesday, the FTC issued requests for information to eight firms, including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros. The regulatory body aims to understand the implications of these pricing practices on privacy, competition, and consumer protection.
Companies utilize data-driven tools, such as AI, to implement a technique known as “surveillance pricing” or “dynamic pricing,” which adjusts prices for the same product based on individual consumer characteristics or behaviors. Factors influencing these tailored prices can include location, demographics, credit history, and online activity.
Many of the firms under scrutiny provide transaction, sales, and pricing solutions to major corporations both in the U.S. and internationally. Task Software manages transactions for notable hospitality brands like McDonald’s and Starbucks. Revionics offers retail pricing optimization and analytics services to global retailers, including Home Depot. Pros, which specializes in AI-powered pricing solutions, counts major companies like Nestlé, HP, and United Airlines among its clients and collaborates with Microsoft in technology development.
The FTC seeks to clarify the workings of this “opaque market,” where companies categorize shoppers and establish targeted pricing for goods and services.
“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,” FTC Chair Lina Khan stated. “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 and services each company offers, data collection methods, sales and customer information, and how these practices affect pricing for consumers.