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.
Eight companies spanning various sectors, including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros, received information requests from the regulatory agency on Tuesday. The FTC is examining the implications of these pricing practices on privacy, competition, and consumer protection.
These companies utilize data tools, such as AI, to implement a method known as “surveillance pricing” or “dynamic pricing,” where different prices for the same products are offered to consumers based on their specific characteristics or behaviors. Factors influencing these prices can include location, demographics, credit history, and individual shopping patterns.
Many companies that the FTC has contacted provide transaction, sales, and pricing services to some of the largest businesses both in the United States and worldwide. Task Software manages transactions for several major hospitality brands, including McDonald’s and Starbucks. Revionics offers retail price optimization and pricing analytics to various global retailers, including Home Depot. Pros, known for its AI-driven pricing solutions, counts Nestlé, HP, and United Airlines among its clientele and partners with Microsoft for technology development.
The FTC aims to clarify the “opaque market” that allows businesses to profile shoppers and set targeted prices 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 inquiry focuses on four main areas: the types of surveillance pricing products and services each company offers, their data collection methods, customer and sales data, and how these practices impact the prices that consumers pay.