Federal regulators want to know how JPMorgan Chase, Mastercard and other companies may use people’s personal data to sell them a product at a different price to that which other consumers might be seeing. 

The practice is something the Federal Trade Commission (FTC) calls “surveillance pricing,” but is also known as dynamic pricing or price optimization. It has long been used by retailers such as Amazon and Walmart, along with ride-sharing providers, to boost profits. 

More recently, companies have deployed artificial intelligence (AI) and other advanced software tools to collect personal information about consumers, including their location, credit history, device type, and browsing or shopping history, which are then used to individualize prices. 

FTC digs in

“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 Khan said in a statement regarding the agency’s inquiry.

“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,” she added.

The FTC noted in an attendant blog post on the topic that recent media reports indicate a growing number of grocery stores and retailers may be using algorithms to establish targeted prices. 

“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,” the blog post said.

The FTC said it was 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.

Each order seeks information that could inform the agency about the potential impact these practices have on privacy, competition, and consumer protection.

The FTC’s orders were sent to: Mastercard, Revionics, Bloomreach, JPMorgan Chase, Task Software, PROS, Accenture, and McKinsey & Co.

The FTC voted 5-0 to issue the 6(b) orders to the eight companies, with each order seeking information that could inform the agency about the potential impact these practices have on privacy, competition, and consumer protection.

The orders are seeking information on four major areas:

• Types of products and services being offered: The types of surveillance pricing products and services that each company has produced, developed, or licensed to a third party, as well as details about the technical implementation and current and intended uses of this technology.
• Data collection and inputs: Information on the data sources used for each product or service, including the data collection methods for each data source, the platforms and methods that were used to collect such data, and whether that data is collected by other parties (such as other companies or other third parties).
• Customer and sales information: Information about whom the products and services were offered to and what those customers planned to do with those products or services.
• Impacts on consumers and prices: Information on the potential impact of these products and services on surveilled consumers including the prices they pay.

The broader inquiry

Lawmakers have been looking at the impact of dynamic pricing, too. In May, Sen. Sherrod Brown (D-OH), held a hearing examining how such retail technologies may have contributed to the surging inflation we saw during the pandemic. 

Back in March, a New York state lawmaker, Assemblyman Angelo Santabarbara, introduced legislation that aimed to ban dynamic pricing on food items, which was in response to fast-food chain Wendy’s plan at the time to test a system where prices for various items could fluctuate based on demand.

And last May, the Department of Justice sued Live Nation Entertainment for allegedly violating antitrust laws, noting the company’s astronomically rising prices and exorbitant hidden fees.

That led to LiveNation’s wholly-owned subsidiary, Ticketmaster, and other companies agreeing to offer consumers upfront, all-in pricing, which the White House announced at the time as part of its efforts to crack down on so-called junk fees.

President Joe Biden hosted a meeting at the White House of private companies last June – including Live Nation’s Ticketmaster, SeatGeek and Airbnb – which committed to fully disclose fees to consumers upfront. It is part of President Biden’s ongoing efforts to crack down on junk fees imposed by ticket companies, banks, airlines and other industries.

Another 6(b) inquiry in 2024

In January, the FTC issued orders to five companies requiring them to provide information regarding recent investments and partnerships involving generative AI companies and major cloud service providers. That 6(b) inquiry scrutinized corporate partnerships and investments with AI providers, with the FTC saying it it wanted a better understanding of those relationships and their impact on the competitive landscape.  

The compulsory orders were sent to Alphabet, Inc., Amazon.com, Inc., Anthropic PBC, Microsoft Corp., and OpenAI, Inc.