The Federal Trade Commission (FTC) has launched a significant investigation into the use of artificial intelligence (AI) by major companies to implement individualized pricing strategies, a practice the agency refers to as “surveillance pricing.” This initiative seeks to determine if these practices exploit consumer data to the detriment of fair market competition and consumer privacy.
The FTC has sent detailed requests for information to several prominent companies, including Mastercard, Revionics, Bloomreach, JPMorgan Chase, Task Software, Pros Holdings, Accenture, and McKinsey. These companies are known to provide products and services that help businesses set prices for consumers using AI-driven tools. The requested information includes specifics about the technology behind these products, the types of data they use, how this data is collected, the expected use by third parties, and the anticipated impact on consumer pricing. The FTC describes the market for these AI tools as “opaque” and aims to shed light on their operations and their implications for consumers.
The services under scrutiny analyze a wide range of customer data—such as purchase history, demographics, and credit history—through sophisticated algorithms to determine personalized pricing. This can lead to different customers being charged different prices for the same product based on their personal information. While dynamic pricing, which adjusts prices based on market demand, is becoming increasingly common, surveillance pricing goes a step further by potentially exploiting detailed consumer data to maximize profits.
FTC Chair Lina Khan expressed serious concerns about the implications of this practice. “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,” Khan said in a press release. “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 investigation also focuses on whether these AI tools facilitate price discrimination, enable unfair competition, or pose significant privacy risks to consumers. By studying “the middlemen enabling firms to algorithmically tweak and target their prices,” the FTC aims to understand how these products might impact market dynamics and consumer rights. The companies have been given 45 days to comply with the FTC’s requests, which includes providing detailed information about their AI technologies and data usage practices.
This move by the FTC underscores a growing concern about the ethical and legal implications of AI and data analytics in commerce. As businesses increasingly rely on AI to optimize pricing and boost profits, there is a pressing need to ensure that these technologies are used responsibly and transparently. The investigation seeks to address these concerns by bringing greater clarity and accountability to the use of AI in pricing strategies.
The broader goal of the FTC’s inquiry is to protect consumers and ensure fair competition in the marketplace. By scrutinizing the use of AI and data analytics in pricing, the agency aims to prevent potential abuses that could harm consumers and undermine trust in digital commerce. This investigation represents a critical step in regulating the intersection of technology and commerce, ensuring that innovation benefits consumers without compromising their privacy or exploiting their personal data.