FTC Investigates 'Surveillance Pricing'; AI-Driven Personalized Pricing Raises Consumer Protection Concerns
July 24, 2024The US Federal Trade Commission (FTC) is investigating 'surveillance pricing,' where algorithms and personal data are used to set prices based on individual circumstances.
Revionics denies using individual consumer data for pricing and emphasizes reliance on market-level factors.
A study is underway to explore the use of consumer data and technology like AI to customize prices for individuals without accusing specific companies of misconduct.
Companies can set different prices for the same product for different customers through personalized pricing practices.
Stock reactions showed JPMorgan Chase rising 0.1%, Mastercard falling 0.6%, and Accenture slipping 0.4%.
Uber's revelation years ago that customers are more likely to accept surge pricing when their phone batteries are low contributed to the concept of 'surveillance pricing.'
The FTC's inquiry falls under a 6(b) probe allowing broad investigations into companies' business models, potentially preceding enforcement actions.
The FTC has not taken a stance on banning surveillance pricing, and the investigation's outcomes could lead to public disclosure and further actions.
Mastercard confirmed receiving the FTC's request and pledged cooperation, while other companies are yet to respond.
The FTC's investigation, authorized under section 6(b), focuses on gathering information without immediate legal actions, but potential consequences may follow if illegal activities are found.
Companies employ 'surveillance pricing' using AI tools to adjust prices based on consumer characteristics like location, demographics, and browsing behavior.
Consultancies are promoting surveillance pricing models across various sectors, raising concerns about potential harm to specific communities like women and rural consumers.
FTC Chair Lina M. Khan stresses the need for transparency in consumer data usage for pricing strategies.
Summary based on 11 sources
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Sources
TechCrunch • Jul 23, 2024
FTC is investigating how companies are using AI to base pricing on consumer behavior | TechCrunchThe Verge • Jul 23, 2024
Are you being exploited by AI-powered surveillance pricing?Quartz • Jul 23, 2024
What is surveillance pricing? And why is the FTC investigating it?Quartz • Jul 23, 2024
McDonald's and Starbucks partner is being investigated for using AI to set prices