The Federal Trade Commission (FTC) has initiated an investigation into several prominent companies over their use of customer data, algorithms, and artificial intelligence to implement personalized pricing strategies.
On Tuesday, the FTC issued orders to eight firms, including Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros. The agency is seeking details on how these pricing practices affect privacy, competition, and consumer protection.
Companies are utilizing tools like AI to engage in what is termed “surveillance pricing” or “dynamic pricing,” whereby they present different prices to consumers based on various factors such as location, demographics, credit history, and online shopping behavior.
Among those investigated, Task Software manages transactions for major hospitality brands such as McDonald’s and Starbucks. Revionics specializes in retail price optimization software, serving global outlets like Home Depot. Pros, offering AI-driven pricing solutions, counts large corporations like Nestlé, HP, and United Airlines as clients, and also collaborates with Microsoft.
The FTC is aiming to understand the complexities within this “opaque market,” where consumers are categorized for targeted pricing of products and services.
“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,” stated FTC Chair Lina Khan. “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 focusing on four main areas of inquiry: the types of surveillance pricing products and services offered by the companies, their data collection methods, customer and sales data, and the impact of these practices on the prices consumers ultimately pay.