FTC Launches Probe into Surveillance Pricing Practices Targeting Eight Major Firms

Editor’s Note: In an era where data is the new oil, the Federal Trade Commission (FTC) has taken a significant step to address the potentially exploitative practice known as “surveillance pricing.” By investigating how eight major firms utilize consumer data to set individualized prices, the FTC aims to shed light on the intricate and often opaque mechanisms behind dynamic pricing strategies. This inquiry underscores the growing intersection of cybersecurity, information governance, and eDiscovery as companies increasingly leverage sophisticated algorithms and artificial intelligence to influence pricing. For professionals in these fields, understanding the ramifications of this investigation is crucial as it may herald new regulatory landscapes and privacy considerations.

Industry News – Antitrust Beat

FTC Launches Probe into Surveillance Pricing Practices Targeting Eight Major Firms

ComplexDiscovery Staff

The Federal Trade Commission (FTC) has initiated a comprehensive investigation into the practice known as “surveillance pricing.” This action comes in response to growing concerns about how companies utilize consumer data, algorithms, and artificial intelligence to set individualized prices for goods and services. The FTC’s probe targets eight major firms across various industries, including financial services, technology, and consultancy. The companies under scrutiny are Mastercard, JPMorgan Chase, Accenture, Task Software, McKinsey & Co., Revionics, Bloomreach, and Pros.

FTC Chair Lina M. Khan explained the motivation behind the investigation, stating, “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. 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.”

Surveillance pricing, sometimes also referred to as “dynamic pricing,” involves using consumer data to tailor prices based on individual characteristics and behaviors such as location, demographics, and browsing history. This practice is not entirely new but has been gaining traction due to advancements in machine learning and AI. For example, a case from 2012 revealed that the travel website Orbitz directed users on Mac computers to higher-priced hotels, based on their higher purchasing power.

The FTC’s investigation aims to uncover how widespread surveillance pricing practices have become, the methods of data collection used by these companies, and the impacts on consumers. An FTC official emphasized, “Advancements in machine learning make it cheaper for these systems to collect and process large volumes of personal data, which can open the door for price changes based on information like your precise location, your shopping habits, or your web browsing history.”

Companies such as Task Software, which serves clients like McDonald’s and Starbucks, and Revionics, known for providing price optimization software to Home Depot, are among those being scrutinized. The FTC is concerned about potential privacy violations and the possibility of unfair pricing practices that discriminate against certain consumers based on their personal data.

George Slover, senior counsel for competition policy at the Center for Democracy & Technology, raised concerns about the fairness of surveillance pricing. He said, “The seller knows everything about the buyer, and what they are likely, willing, and able to pay, while keeping the buyer in the dark about what the seller is charging everyone else.” This situation, he argues, inverts the traditional assumptions of a free market.

A bipartisan interest in exploring the implications of surveillance pricing is evident, as the FTC’s commissioners voted unanimously to issue the orders for information. Stephanie Nguyen, FTC Chief Technology Officer, noted the agency’s commitment to understanding the extent of data collection and pricing practices, without accusing the companies of any wrongdoing at this stage.

The commission’s inquiries focus on four primary areas: the types of surveillance pricing products and services offered, methods of consumer data collection, customer usage of these services, and the consequences on consumer pricing. This investigation marks a crucial step in regulating an increasingly data-driven market, where personalized pricing could become widespread.

The FTC’s probe highlights the necessity for transparency in pricing practices to ensure fair competition and consumer protection. Lindsay Owens, executive director of Groundwork Collaborative, emphasized the importance of public prices for ensuring transparency and predictability in the market. As the FTC delves deeper into these practices, businesses and consumers alike will be closely observing the outcomes of this significant investigation.

News Source

• The FTC is probing Mastercard, JPMorgan, and others for using customer data to charge higher prices
• The FTC is investigating surveillance pricing. What is it?
• FTC launches probe into ‘surveillance pricing’ 
• The FTC is investigating AI-powered surveillance pricing
• FTC probe: Do companies use consumer surveillance to hike prices?

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Source: ComplexDiscovery OÜ