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.
Medicare patients stand to save an estimated $1.5 billion on 10 different prescription drugs as a part of this initiative. The FTC has issued orders to eight companies, including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros. The commission is seeking insights into how these pricing strategies affect privacy, competition, and consumer protection.
These companies utilize data-driven tools that implement a practice referred to as “surveillance pricing,” also known as “dynamic pricing,” which adjusts prices for the same products based on various consumer characteristics and behaviors, including location, demographics, credit history, and shopping habits.
Many firms targeted in the FTC’s inquiry provide transaction, sales, and pricing services for major businesses in the U.S. and internationally. Task Software handles transaction management for notable hospitality brands like McDonald’s and Starbucks, while Revionics offers retail price optimization software for global companies, including Home Depot. Pros, which provides AI-driven pricing solutions, counts Nestlé, HP, and United Airlines as clients and collaborates with Microsoft on technology development.
The FTC aims to clarify the complexities of this “opaque market” that profiles consumers and establishes tailored pricing models. FTC Chair Lina Khan emphasized the importance of transparency regarding the use of personal data, stating, “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.” The inquiry seeks to illuminate the intricate web of pricing mechanisms employed by these businesses.
The agency is focused on four primary areas: the types of surveillance pricing products and services provided by each company, data collection methods, customer and sales information, and how these practices ultimately affect the pricing consumers pay.