The Federal Trade Commission (FTC) has initiated an investigation into several major companies regarding their practices of using customer data, algorithms, and artificial intelligence to customize pricing for individuals.
The FTC has issued orders to eight firms, including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros, seeking information about how these pricing strategies affect privacy, competition, and consumer protection.
These companies utilize data-driven techniques, referred to as “surveillance pricing” or “dynamic pricing,” which enable them to display varying prices for the same products based on consumers’ characteristics or behaviors. Factors such as location, demographics, credit history, and online activity contribute to this pricing model.
Many of the firms contacted by the FTC play a crucial role in providing transaction, sales, and pricing services to some of the largest companies in the U.S. and internationally. Task Software is known for its transaction management services used by prominent hospitality chains like McDonald’s and Starbucks. Revionics offers retail price optimization software to major retailers including Home Depot. Similarly, Pros, which promotes itself as a provider of AI-driven pricing solutions, serves clients such as Nestlé, HP, and United Airlines, and collaborates with Microsoft on technology development.
The FTC aims to clarify the intricacies of this “opaque market” where consumers are categorized, and targeted prices are set for various products and services. FTC Chair Lina Khan emphasized the potential risks associated with companies collecting personal data. She stated that there is a concern that businesses might exploit this extensive data collection to impose higher prices on consumers. The inquiry seeks to determine if detailed consumer data is indeed being used for surveillance pricing purposes, thereby exposing the underlying dynamics of these pricing practices.
The agency is particularly interested in four main areas: the types of surveillance pricing products offered by each company, their data collection methods, customer and sales information, and the impact of these surveillance practices on consumer pricing.