The Federal Trade Commission (FTC) has initiated an investigation into several major companies regarding their use of customer data, algorithms, and artificial intelligence for personalized pricing strategies.
The investigation could potentially save Medicare patients $1.5 billion on ten prescription drugs.
The companies targeted include Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros, all of which were ordered by the FTC to provide insights into the effects of their pricing tactics on privacy, competition, and consumer protection.
These companies utilize data-driven tools, often referred to as “surveillance pricing” or “dynamic pricing,” presenting different prices for the same product based on consumer traits and behavior, including location, demographics, credit history, and online activity.
Many of the firms involved provide sales, transaction, and pricing services to major corporate players in the U.S. and worldwide. For instance, Task Software manages transactions for prominent hospitality chains like McDonald’s and Starbucks, while Revionics offers pricing optimization software for retailers including Home Depot. Pros is known for AI-driven pricing solutions and serves clients such as Nestlé, HP, and United Airlines, and partners with Microsoft for technology development.
The FTC is keen to scrutinize the “opaque market” where consumer categorization leads to targeted pricing for products and services.
FTC Chair Lina Khan emphasized the risks posed to consumer privacy by companies that collect personal data. She raised concerns that firms may exploit this data to implement discriminatory pricing. The inquiry aims to uncover whether businesses leverage detailed consumer insights for surveillance pricing, shedding light on the intricate web of pricing intermediaries.
The FTC seeks detailed information in four main areas: the specific surveillance pricing products and services offered by the companies, their data collection methods, customer and sales information, and the impact of these practices on final prices consumers pay.