FTC Probes 8 Companies for AI Surveillance Pricing Practices

The FTC is investigating the use of AI-powered surveillance pricing, which could exploit consumers’ personal data to charge them higher prices.

Key aspects of surveillance pricing: Surveillance pricing, also known as dynamic, personalized, or optimized pricing, involves offering individual consumers different prices for the same products based on factors like:

• The device they’re shopping on, location, demographic information, credit history, and browsing/shopping history
• Companies across various sectors are considering implementing or have already implemented surveillance pricing models

FTC’s inquiry into surveillance pricing practices: The Federal Trade Commission has ordered eight companies that offer AI surveillance pricing products and services to provide information on the impact these schemes have on privacy, competition, and consumer protection:

• The companies include Mastercard, Revionics, Bloomreach, Chase, Task, Pros, Accenture, and McKinsey & Co.
• None of the firms have been accused of wrongdoing; the FTC wants to understand opaque practices that could reshape how consumers purchase goods and services
• The extent to which businesses currently use surveillance pricing is unknown, but the FTC believes the practice is likely to grow given the available technology, incentives, and data

Examples of variable pricing experiments: While not quite surveillance pricing, some companies have already experimented with implementing variable pricing models:

• JetBlue implemented “peak” and “off-peak” pricing for checked bag fees
• Walmart plans to bring digital price tags to stores, allowing prices to change based on factors like weather and expiration dates
• Wendy’s announced plans to roll out “dynamic pricing” in 2025
• Amazon had a secret algorithm called Project Nessie to gauge how much it could raise prices before competitors noticed

Analyzing the implications: The FTC’s investigation into surveillance pricing highlights growing concerns about how businesses might exploit vast troves of personal data to the detriment of consumers. While the practice may not be widespread yet, the ingredients are there for it to become more common. The inquiry aims to shed light on this “shadowy ecosystem” and ensure that surveillance pricing doesn’t harm certain communities like women and rural consumers. However, it remains to be seen what regulatory actions, if any, may result from the FTC’s findings. Striking the right balance between consumer protection and allowing businesses to innovate with pricing models in the age of big data and AI will be a key challenge moving forward.