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The Federal Trade Commission (FTC) launched an investigation into a handful of major companies over how they use customer data, algorithms, and artificial intelligence to individually tailor pricing.
Eight firms across industries — Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros — received orders from the regulatory agency Tuesday, looking for information on the impact of this pricing practice on privacy, competition, and consumer protection.
Using data tools, like AI, companies employ a practice known as “surveillance pricing” (sometimes called “dynamic pricing”) to show different prices to consumers for the same products based on their characteristics or behaviors. These can include location, demographics, credit history, and browsing or shopping history.
Many of the companies contacted by the FTC provide transaction, sales, and pricing services to some of the biggest firms in the U.S. and globally. Task is the transaction management firm behind several major hospitality companies, including McDonald’s and Starbucks. Revionics provides retail price optimization software and pricing analytics to several global chains, including Home Depot. Pros, a software company that touts itself as a provider of AI-powered solutions for pricing, counts Nestlé, HP, and United Airlines among its clients. It’s also a technology development partner of Microsoft.
The FTC is looking to get to the bottom of this “opaque market” that categorizes shoppers and sets targeted prices for 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,” said FTC Chair Lina Khan in a statement. “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 said it’s looking for information in four key areas: the types of surveillance pricing products and services each company offers; how they are collecting data; customer and sales information; and how these surveillance practices influence the prices customers end up paying.