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 regulatory agency issued orders to eight firms, including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros. The FTC is seeking information regarding the impact of these pricing practices on privacy, competition, and consumer protection.
Companies utilize advanced data tools, including AI, to implement a strategy known as “surveillance pricing,” also referred to as “dynamic pricing.” This approach allows businesses to display varying prices for identical products based on specific consumer attributes like location, demographics, credit history, and browsing or shopping activities.
Many of the firms contacted by the FTC provide transaction, sales, and pricing services to some of the largest corporations both in the U.S. and globally. For instance, Task is the transaction management provider for major hospitality brands, including McDonald’s and Starbucks. Revionics offers retail price optimization software to numerous international retailers, such as Home Depot. Pros, which promotes itself as an AI-powered pricing solutions provider, counts Nestlé, HP, and United Airlines among its clientele and partners with Microsoft for technological development.
The FTC aims to clarify the complexities of this “opaque market,” which categorizes consumers and establishes targeted pricing for different products 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,” stated FTC Chair Lina Khan. “Americans deserve to know whether businesses are using detailed consumer data to deploy surveillance pricing. The FTC’s inquiry will shed light on this shadowy ecosystem of pricing middlemen.”
The FTC is particularly interested in four key areas: the types of surveillance pricing products and services offered by each company, methods of data collection, customer and sales information, and the influence of these surveillance practices on the prices consumers ultimately pay.