The Federal Trade Commission (FTC) has initiated an investigation into several prominent companies regarding their use of customer data, algorithms, and artificial intelligence to customize pricing on an individual basis.
In a significant move in the industry, Mars, the maker of M&M’s, is set to acquire Kellanova, the company behind Pop-Tarts, marking one of the year’s largest mergers.
The FTC’s inquiry has targeted eight firms across various sectors, including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros. These companies have been ordered to provide details on how their pricing strategies impact privacy, competition, and consumer protection.
These businesses employ a method known as “surveillance pricing,” or “dynamic pricing,” where they display different costs for the same products based on individual consumer characteristics or behaviors. Factors such as location, demographics, credit history, and past shopping behavior can influence these price variations.
The companies involved offer crucial transaction, sales, and pricing services to major retailers and businesses across the United States and around the globe. For instance, Task Software handles transaction management for significant hospitality brands like McDonald’s and Starbucks. Meanwhile, Revionics specializes in retail price optimization software and analytics for numerous global retailers, including Home Depot. Pros, which markets itself as an AI-driven pricing solutions provider, counts Nestlé, HP, and United Airlines among its customers and collaborates with Microsoft in technology development.
The FTC aims to uncover the complexities of this “opaque market,” which categorizes consumers and assigns targeted prices for products and services.
“Companies that collect personal data from Americans could jeopardize their privacy. There is concern that these companies might exploit extensive personal information to impose higher charges,” FTC Chair Lina Khan stated. “Consumers deserve clarity on whether businesses are using detailed data analytics to implement surveillance pricing, and this investigation will illuminate the obscure world of pricing intermediaries.”
The FTC is specifically seeking information in four main areas: the types of surveillance pricing products and services available from each company, data collection methods, customer and sales information, and the effect of these pricing practices on the final prices consumers pay.