The Federal Trade Commission (FTC) has issued orders to eight companies that offer “surveillance pricing” to explain how they impact consumers’ privacy, as well as competition and consumer protection.
Surveillance pricing is very similar to “personalized pricing,” a subject we’ve covered in recent weeks. The FTC says the eight companies claim to use advanced algorithms, artificial intelligence and other technologies, along with personal information about consumers—such as their location, demographics, credit history, and browsing or shopping history—to categorize individuals and set a targeted price for a product or service.
In other words, the price might not be the same for every consumer. The price may depend on who you are, or who the merchant thinks you are.
“Firms that harvest Americans’ personal data can put people’s privacy at risk, said FTC Chair Lina Khan. “Now, firms could be exploiting this vast trove of personal information to charge people higher prices.”
You may be charged a higher price, depending on your Zip Code, your search history and previous purchases. It’s the same as when a handyman gives you a quote for doing a household job. He might look at your car, your house, your haircut and the way you’re dressed to determine what you might be willing and able to pay.
Is it illegal?
But does any of this violate current regulations? That’s what the FTC wants to find out.
The agency is using its 6(b) authority, which authorizes the Commission to conduct wide-ranging studies that do not have a specific law enforcement purpose, to obtain information from eight firms that advertise their use of AI and other technologies along with historical and real-time customer information to target prices for individual consumers.
The orders were sent to Mastercard, Revionics, Bloomreach, JPMorgan Chase, Task Software, PROS, Accenture, and McKinsey & Co.
“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,” Khan said.