The Federal Trade Commission (FTC) has initiated an investigation into several major corporations regarding their practices of using customer data, algorithms, and artificial intelligence for personalized pricing strategies.
The investigation involves eight companies: Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros. The FTC issued requests for information on how these pricing methods affect privacy, competition, and consumer protection.
These firms utilize data-driven tools, including AI, to implement what is known as “surveillance pricing” or “dynamic pricing,” which allows them to charge different prices for the same products based on consumer characteristics and behaviors such as location, demographics, credit history, and online activity.
Many of the companies targeted by the FTC provide transaction, sales, and pricing services to some of the largest corporations in the U.S. and around the world. For instance, Task Software manages transactions for major hospitality brands like McDonald’s and Starbucks, while Revionics offers retail pricing optimization software to several retailers, including Home Depot. Pros, which provides AI-driven pricing solutions, counts Nestlé, HP, and United Airlines among its clientele and has a partnership with Microsoft for technology development.
The FTC aims to clarify the complexities of the “opaque market” involved in setting targeted prices for consumers. FTC Chair Lina Khan expressed concern over the potential privacy risks associated with the collection of personal data by these firms, stating that there is a possibility that this information is being used to impose higher prices on consumers. She emphasized the need for transparency regarding the use of detailed consumer data for surveillance pricing.
The FTC is particularly interested in four main aspects: the types of surveillance pricing offerings from each company, their data collection methods, customer and sales data, and the overall impact of these practices on customer pricing.