The Federal Trade Commission (FTC) has initiated an investigation involving several prominent companies regarding their methodologies for utilizing customer data, algorithms, and artificial intelligence to implement personalized pricing strategies.
The FTC has reached out to eight firms, including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros, seeking details on how these pricing approaches affect privacy, competition, and consumer protection.
Companies are utilizing technologies like artificial intelligence for a practice known as “surveillance pricing,” also referred to as “dynamic pricing.” This approach allows them to present varying prices for the same goods based on individual consumer characteristics, including geographical location, demographics, credit history, and shopping or browsing patterns.
Many of the firms contacted by the FTC are integral in providing transaction, sales, and pricing solutions for numerous major corporations both in the U.S. and internationally. Task Software is the transaction management firm for significant hospitality giants, including McDonald’s and Starbucks. Revionics, on the other hand, offers retail price optimization software and pricing analytics to several global retailers like Home Depot. Pros, a software entity renowned for its AI-driven pricing solutions, serves clients such as Nestlé, HP, and United Airlines, and is also a technology partner of Microsoft.
The FTC aims to explore the complexities of this “opaque market,” where consumer categorization leads to tailored pricing for various products and services. FTC Chair Lina Khan emphasized that businesses handling personal data can jeopardize individuals’ privacy and may potentially exploit this data to impose higher prices. 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 agency is seeking insights in four primary areas: the specific surveillance pricing products and services each company provides; their data collection methods; customer and sales information; and the impact of these surveillance tactics on the pricing customers face.