The Federal Trade Commission (FTC) has initiated an investigation into several major companies regarding their practices related to the use of customer data, algorithms, and artificial intelligence for personalized pricing strategies.
On Tuesday, the FTC issued orders to eight firms across various sectors, including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros. The agency is seeking information about how these pricing strategies affect consumer privacy, competition, and protection.
Companies are utilizing data-driven tools, such as AI, to implement a system known as “surveillance pricing” or “dynamic pricing.” This approach allows companies to offer different prices to consumers for the same products based on various factors, such as location, demographics, credit history, and previous shopping behavior.
Many of the firms being scrutinized by the FTC provide essential transaction, sales, and pricing services to some of the largest businesses in the United States and around the globe. Task Software manages transactions for major hospitality brands like McDonald’s and Starbucks. Revionics offers retail price optimization software to several international retailers, including Home Depot. Pros, recognized for its AI-driven pricing solutions, serves major clients such as Nestlé, HP, and United Airlines, and also collaborates with Microsoft as a technology partner.
The FTC aims to investigate the “opaque market” that utilizes consumer data to classify shoppers and set targeted prices.
FTC Chair Lina Khan stated, “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. 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 outlined four primary areas of focus for its investigation: the types of surveillance pricing products and services offered by each company, methods of data collection, customer and sales information, and how these surveillance practices affect the prices that consumers ultimately pay.