The U.S. Federal Trade Commission (FTC) is looking into how firms are using surveillance pricing to charge different prices to different customers.
Surveillance pricing involves advanced algorithms, artificial intelligence (AI), and other technology, combined with consumers’ personal data such as credit history, location, and browsing history to set prices for individuals.
“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,” FTC Chair Lina M. Khan said.
The orders were sent to Mastercard, Revionics, Bloomreach, JPMorgan Chase, Task Software, PROS, Accenture, and McKinsey & Co. The agency also will assess the effects of the tactics on data privacy and competition.
Tech firm Revionics dismissed allegations that it was using individual consumer data. The company “does not develop software that recommends pricing targeted to specific individuals,” the firm said in an email to The Epoch Times.
Revionics offers AI price optimization software using factors such as historical sales data and competitive prices. The tech doesn’t conduct any operation related to surveilling customers, the company stated.
“We are confident that the FTC will affirm the benefits of Revionics’ AI price optimization software pending its research into this matter.”
The FTC’s orders sought information from the eight companies in four key areas—surveillance pricing products and services they have developed, data sources used for these products, the entities to whom the products were offered, and how the pricing strategy affects surveilled customers.
Tracking Customers for Profit
Tracking consumers to set prices has been occurring for some time. Earlier, consumers were targeted based on their home address or demographic makeup. With the advent of the internet, far more personal data is collected, enabling highly targeted selling based on an individual’s behaviors and purchases.“Many consumers today are not actively aware that their devices constantly gather data about them, and that that data can be used to charge them more money for products and services. An age-old practice of targeted pricing is now giving way to a new frontier of surveillance pricing,” the FTC states.
The agency’s investigation will focus on intermediary firms that enable companies to use algorithms for tweaking and setting targeted prices.
The agency’s latest investigation differs in that it targets any marketing behavior that alters prices based on individual behaviors.
For instance, algorithms could determine that a person has a tendency to buy from an online retailer in the first week of a month, which may be the week that person gets paid. Based on this data, the algorithm could raise prices slightly for that individual during the first week of every month.
In some cases, apps could track a person’s location and determine prices based on how close they are to the store.
“The use of surveillance technology and private data to determine prices is a new frontier, and the Federal Trade Commission looks forward to bringing more information about this practice to light,” the FTC said.
